Rising Trend of Subscription Model in eCommerce [2024]

The subscription commerce market is growing exponentially. Several successful businesses have already expanded significantly through it. Some of the best examples of subscription-based business models are Dollar Shave Club, Blue Apron meal kits, and many more that have proliferated in the last few years.

According to one Statistics, it has been surveyed that around 16% of north American and European eCommerce companies planned to introduce subscription services in 2021. With the rise of eCommerce, the number of online shoppers has even escalated. In 2021, the number of online shoppers across the globe increased to 2.14 billion.

The subscription universe has gained the market that either is an e-learning subscription, seasonal product subscription, or on-demand content subscription. It is one of the most popular models used by many and facilitates growing and scaling up your business effectively if used appropriately.

Through this blog, get deep insights into how subscription commerce works, its types, the reason behind its rising trend, how you can start your subscription business with Magento, and how to turn any product subscription-based. This blog will help you better understand the rising trend of the subscription model in eCommerce.

Table of Contents

• What is Subscription Model in eCommerce?
• How Does the eCommerce Subscription Model Work?
• Top Leading Brands Using Subscription-Based Model
• Types of Subscription Commerce Business Models
• Classification of Subscription Models
• Reasons Why Subscription Business Model is Rising
• Advantages of Starting a Subscription Business Model
  • Promotes Up-selling and Cross-selling
  • No Competition
  • Financial Forecasting
  • Good Client Relationships
  • Inventory Control
  • Convenience
• How to Start a Subscription Business Model with Magento?
• Tips to Start Subscription-Based eCommerce Business Model
• Profit-Making Business Ideas
• Conclusion

What is Subscription Model in eCommerce?

A subscription-based eCommerce can be defined as the business model that facilitates customers to subscribe for products or services they need repeatedly. Subscriptions can be provided either weekly, monthly, yearly, or as preferred by the customer.

This model has even proved beneficial and acts as a lifeline when huge difficulties are observed in the market or during times of the pandemic. This recurring revenue enables companies to manage their orders and inventory effectively.

Subscription-based eCommerce provides customers with all the flexibility they deserve and offers merchants to uplift their business. The customers don’t need to think again once they opt for the service, and they will receive the service without thinking about it. It acts as a contract between the customer and the merchants. Thus, this model has proved beneficial during a lockdown or certain restricted areas.

How Does the eCommerce Subscription Model Work?

A subscription model aims to get recurring revenue from customers on specific products and services, and the revenue generated can be termed subscription revenue. In such models, more attention is paid to regular customers.

These models aid in converting long-term customers from onetime purchases to recurring purchases by offering a product or service as and when required. Hence, customer retention and customer lifetime value play a central role for any subscription-based business.

The merchants assure to pay for a specific time frame for a product or service, and the business carries out that offer for a long time until the customers make the recurring payments. On completion of the contract, the customer can either renew or cancel the subscription.

Top Leading Brands Using Subscription-Based Model

The Subscription-based eCommerce market has augmented almost worldwide. Buying habits of the customers constantly keeps changing. And they tend to have a hassle-free experience with minimal effort, free delivery, and utmost entertainment. Thus, the subscription model satisfies all the purposes and offers excellent business opportunities.

So, some examples of subscription-based revenue models are:

Dollar Shave Club

Dollar Shave Club is a California-based company that provides grooming products to its customers. This business model is subscription-based and one of the most popular subscription model-based businesses that are ruling the men’s grooming industry.

Thus, this company has made a place in the market with mind-blowing products and relatable positioning that has helped attract customers from the market leaders like Gillette and Schick.

Amazon

Amazon is one of the best examples of a subscription-based business model that offers to “Subscribe and Save.” This service includes delivery of recurring household needs, grooming products, healthcare products automatically every month.

Amazon even provides a 15% discount to subscribe and buy five or more products monthly. They also offer free shipping and can even cancel their subscription whenever they wish to.

Spotify

Spotify, a subscription-based eCommerce model, has brought about a significant change and added a new life to the music industry. It mainly offers two subscriptions, one is paid, and the other is free, which is ad-supported. In a monthly subscription, the users can access songs they want from various artists when needed. As per the research carried out by Statista, the premium subscribers of Spotify have increased from 144 million to 172 million in 2021.

Porsche

It would be great driving the car, Porsche of your dreams, just by paying a monthly subscription fee. It even facilitates changing the model after a certain period. Even other popular brands like BMW are thinking of having a subscription service.

Even Cadillac offers a subscription system where customers can rent up to 18 various cars per year and charge fees accordingly. The fees may include insurance, maintenance, 24/7 customer service, and other additional services.

Thus, with increased use of the internet, it is likely that the subscription market will grow in the future. These were some of the examples of how subscription has shifted the way companies carry out their businesses in the market.

Types of Subscription Commerce Business Models

Subscription commerce businesses totally depend on the products and services you offer you can go with. So, here is a list of various types of subscription commerce business models, which are:

Service Subscription

By using this model, a user can easily subscribe to a service they need regularly. It is one of the most popular models used by leading brands like WordPress.com, MailChimp, and Statista. The value-based pricing plan facilitates only paying for what you need offers a flexible pricing structure and extra benefits to the customers.

Subscription boxes are product-based subscriptions and the way customers treat themselves. The customers can easily subscribe to a selected product based on their preferences. This could be a meal box or a self-help box that you love the most. These services include Stitch Fix, Birchbox, and many more.

For example, Birchbox sends cosmetic products, skincare, perfumes monthly to their subscribers. And, Manscaped, a men’s lifestyle brand, sells grooming kits using subscriptions. Hence, subscription plays a crucial factor that helps drive your business’s growth.

Digital Content Subscription

With the increased internet usage, many leading brands have provided digital content subscription services. This type of subscription aids customers in accessing online content easily.

Some giants like Netflix, Spotify, Amazon Prime are leading companies that provide subscription services. The users subscribing to such services can avail themselves of the additional benefits that make them feel special and, as a result, increase brand loyalty.

Other Subscription Examples

It is possible to establish a subscription-based business with any product of your choice. For example, a subscription plan was launched by Uber, a ‘Uber Ride Pass’ that helps customers to save money.

Another example of subscription eCommerce is Zomato Gold, which provides exclusive benefits such as free meals, additional discounts, and free delivery to its gold customers.

Classification of Subscription Models

Subscription models are divided into three categories:

Replenishment Models

The replenishment subscription model facilitates customers to automate purchasing commodity items such as healthcare, baby care products, or more. An example of a replenishment model is Amazon Subscribe and Save.

Curation Models

The curation model is also known as the discovery model. This model is specially designed to surprise and delight the customers by providing new or customized items like beauty products, food, etc. An example of such a model is Birchbox.

Premium Access Models

Here, the subscribers need to pay a monthly fee to access content or a premium service like free shipping. Netflix, Amazon Prime are some of the best examples of premium access models.

Thus, the curation model is the most popular model that suggests a strong desire for personalized products.

Reasons Why Subscription Business Model is Rising

Research by PaySafe has found that 27% of consumers increase their subscription services use. The subscription eCommerce market is sprouting very quickly, and there are several reasons behind its rising trend, which are:

Increased Customer Retention Ratio

As very well said, acquiring new customers is much more complex than retaining an existing one. So, the subscription model eliminates the need of developing a new customer.

By using these models, it is possible keeping old customers and eventually increase revenue by up-selling or cross-selling the relevant products. Thus, a high customer ratio helps to build brand recognition and attracts more loyal customers.

Business Consistency

With the subscription-based model, consistency is maintained, and as a result, consistent revenue is generated. Knowing the number of subscribers makes it easy to calculate the turnover. Instead of focusing more on inventory and payments, you can acquire new customers.

Thus, the inventory can be managed easily and facilitates which items need to be refilled, the quantity required, and how frequently. Even it allows knowing how much investment you can make for the growth of your business.

Future of eCommerce

Customers have adopted subscriptions ranging from entertainment to health and beauty products. It is the preferred choice of many because of the flexibility and convenience.

This subscription model helps to increase the revenue and increases customer satisfaction and loyalty. Instead, it helps increase the customer base, alluring customers who otherwise would not be interested.

Advantages of Starting a Subscription Business Model

Subscription eCommerce businesses are a great boon for online buyers. The customers are provided with flexible, customized, and most affordable ways to purchase exactly what they want. These products or services are offered consistently to the customers. Thus, it is even beneficial for the business to generate monthly recurring revenue. Here are some benefits of starting a subscription model, which are:

Promotes Up-selling and Cross-selling

With the help of a subscription model, the businesses can gain supplementary benefits. By constantly communicating with the customers, it helps to build a strong relationship with them. As a result, the customers are much aware of your quality service, making it easy to sell other related products.

No Competition

This model facilitates to save sellers from fighting against competitors to gain customer loyalty and even get recurring business. Thus, there are high chances that the customers may opt to subscribe if they are comfortable with the product or service provided earlier.

Financial Forecasting

Using a subscription model, it is possible to get a clear idea of the revenue generated. It makes it easy for the sellers to make proper calculations and determine to invest further for business growth. Thus, a fixed income is projected for subscription-based businesses, whereas it may vary drastically depending on the month, day, or season. Knowing the packages for that month makes it easy to calculate the revenue and shipping costs associated with it.

Good Client Relationships

The customers satisfied with the subscription models will further opt to have a subscription. If they are not happy enough, they will cancel their submission. The customers establish a strong relationship with the brand and its flexibility with the subscription model.

Inventory Control

Inventory management becomes more accessible with the subscription-based eCommerce business. Facilitates to have a better idea about the inventory and can easily manage as per demand and supply. Each shipment may contain the same products for the subscription plan. It helps to regulate stock levels and even calculate reorder points precisely. As a result, it reduces wastage and avoids storage issues.

Convenience

There are various subscription packages available that offer convenience to the customers. It facilitates customers by subscribing once, instead of making tiring visits to markets every day.

How to Start a Subscription Business Model with Magento?

To start an online business, you need to invest in Magento store development to establish an online presence. And if you already have a Magento store, the only thing you need is to get started with a subscription to a reliable extension.

Magento market is changing. And, so to fulfill the customers’ demand for better service and quality products, the industry is switching to a subscription-based model for Magento extensions.

You only need to install and configure the extension; this will help you sell products repeatedly. The extension can help you in the following ways:

• Facilitates to capture payments automatically
• Provide you with subscription options on your catalog
• Can even generate product subscription report

Tips to Start Subscription-Based eCommerce Business Model

Some of the basic steps for starting a subscription-based business model are as below:

Discover a Specific Niche

To have a successful subscription business, it is necessary to be very specific about the niche. Having a vague idea may lead you nowhere. Being very particular about the niche may help you enhance the customer experience. Customers more often prefer to have specialized products instead of generalized products. Thus, it largely depends on the niche you choose from your business.

Should Offer that Differentiates You from Others?

After defining the niche, the next step is to determine what you would offer? Once you have decided about what you are going to offer, say it be clothes or accessories. But it is equally essential to differentiate your business from others that help you stand apart from the competition.

Subscription commerce is about curating products that might surprise the customers and should add meaning to their lives. Hence, it is advisable to rethink once before investing.

Identify the Products

Now, after determining what you will offer to your clients, it is time to procure the products at the right time as you might not want your customers getting disappointed as the effects might not be available. Getting your inventory ready at the right time is an equally crucial step in the subscription business.

Profit-Making Business Ideas

It is possible to start a subscription business with any product or service of your choice, but we have listed out a few steps that can help you out!

Online Course Subscription

You can offer online course subscriptions of various classes, whether it may be a music class or digital marketing training. It can subscribe monthly or yearly, and Udemy is one of the best examples of media subscription services.

Travel Subscription Service

Travel Subscription Service can be offered to the customers who love to travel. This business could indeed be profitable by providing travel passes to the customers. Hence, the subscribers can travel easily to either of the travel tiers provided by the company.

Newsletter Subscription Service

If you have gained expertise in creating content, you can even create information-rich content for your subscribers. The readers can even be provided with a paid subscription. Blogs, courses, video tutorials, etc., can be offered to your premium subscribers. Manage Newsletter Subscriptions to capture customers’ attention using informational and product-focused content.

Conclusion

A subscription business model has proved beneficial if appropriately used, and it helps scale your business in less time and with minimal effort. The module has proved helpful for both sellers and customers because of its convenience, flexibility, and recurring revenue generated.

However, a subscription-based eCommerce model can offer almost any business, nearly any product or service. Throughout this blog, we have covered what, why, and the subscription model that will help you a guide.

Now, get ready to develop a successful subscription business with the help of the tips and tactics shared here. You will surely end up in a highly profitable subscription business.

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