Do you remember the time before the video streaming services of Netflix or the music offerings of Spotify? You had to browse through the individual products and spend a lot of time analysing them to find the right one for you. Each film or TV series had to be bought individually on DVD. Online shops were still in their infancy.
Since then, the world has changed a lot. E-commerce has slowly transformed the face of online shopping - with 2.14 billion people making purchases online every day with a few mouse clicks. Today, a trendier phenomenon is gaining popularity - the subscription model is taking the market by storm and revolutionising modern e-commerce by making online shopping more profitable for both customers and entrepreneurs.
The subscription business is clearly booming, from SaaS companies to subscription boxes and other consumer products offered by online stores.
Let us explore subscription e-commerce and take a look at the big picture of the subscription model, how it works, and what it can do.
How does subscription-based ecommerce work?
What exactly is an e-commerce subscription? A subscription service is where a company receives regular payments for products or services that it delivers at regular intervals.
E-commerce subscriptions are items or services sold online and cover a wide range of goods, from the most popular, like grocery and cosmetics subscriptions, to streaming offerings like the Netflix platform, to curiosities like hobby boxes. Another popular box content involves coffee, beer or gift supplies.
This sales strategy is age-old - remember those regular home deliveries of ice cream or milk, or the newspaper subscription that was delivered to your door every month? Membership eCommerce takes this strategy to another level by digitizing the process and focusing on retaining and finding loyal customers online in a big way.
And apparently, it's working because according to a survey conducted by Shopblocks, demand for gift subscriptions has more than doubled in the last four years. Truth be told, in the UK alone, one in ten people are already subscribers to at least one subscription box service. Impressive, is not it? And we are about to tell you why.
Types of Membership Ecommerce
Before we analyse why subscription e-commerce is becoming so prevalent, we should first understand the different forms that can be found in the market. Today, you can choose from a variety of subscription offers. It all depends on the type and nature of your service and product offering. Done right, membership ecommerce can significantly increase the growth of any business. We show you possible models to get started with.
Subscription boxes are an evolution of product-based memberships and allow customers to sign up for a selection of products such as magazines, books, meal packs, cosmetics or combinations of different brands. They can allow the customer to choose a specific billing frequency, one per week, one month, 3 months, as well as the quantity of products. Worth mentioning here are LipMonthly, which sends 4-5 deluxe full-size lip products per month, or NatureBox, which offers a monthly supply of healthy snacks and functional foods with the option to try them for free. These sets can be put together by the customer in advance or they are customised surprise boxes.
Content and Access Subscriptions
Customers who sign up for this type of membership have access to special online content and benefits on the web or via an app that are only available to them, such as the premium versions of Duolingo, Amazon, or LinkedIn. Paying a monthly fee gives the customer more options - extra lessons, bonuses, discounts or one-off events or products - one item is free - and the same goes for streaming services where people pay a monthly fee to access a collection of movies and TV series. This strengthens the bond with the brand and gives the feeling of being part of something unique. Every customer wants to feel special, and this type of subscription e-commerce capitalises on that need.
Various Subscription Types
Who says subscription shops only sell cosmetics or food? Today, even Uber offers subscription clubs with perks and special tips for riders, or you can come across lottery subscriptions where the ticket is automatically bought on your behalf by the retailer at regular intervals. In terms of subscription plans, besides the traditional regular fees, there are also pay-as-you-go plans, where the customer pays for additional services (such as maintenance for hardware or spa for beauty products) when they need them, or freemium plans, where the company offers a free product or service such as a self-help book or snack in exchange for the customer's contact details.
Here's Why Subscription Businesses Are Getting More Popular
What exactly is the catch? Customers appreciate the flexibility that subscription-based e-commerce offers, and marketers can grow their business. Customers do not have to reconsider their decision to use the service and both parties are satisfied. This concept has already proven useful during a pandemic and is still relevant.
However, to fully understand the reason for the profitability of the electronic membership business, we need to dig deeper.
We now turn to the US market. Imagine a young woman with a university degree, a steady job and a decent income. She lives with a husband and probably a young child or two. What does she have to do with subscription e-commerce? According to Hitwise, you have just met the bulk of the 5.7 million subscription customers in the United States. The target audience is young, ambitious and expects creative offerings. It's not enough to simply offer trendy and popular merchandise - you need to do it in an interactive and unexpected way. For this reason, subscriptions are ideal here. They respond to consumers' changing views, tastes and increasingly frequent access to apps and technology.
Now that you know the reasons behind consumers' shift to subscription shopping, let us look at how this form of e-commerce will be profitable for your business.
Membership ecommerce boosts retention
By upselling relevant products, you can retain a large number of customers, increasing your income with a subscription e-commerce business model. Higher customer retention leads to a more stable business and a solid customer base. Giving your subscribers the ability to control their own subscriptions and tailor them to their needs (e.g., a personalized delivery process, communication, and the ability to return the product) will build trust in the business and keep customers coming back.
Membership ecommerce takes Your business plan to another level
The architecture of a subscription business reduces the unpredictability factor as opposed to a one-time payment approach. You can see exactly what goods, in what quantity, and how often they need to be reordered. Aspects of this subscription business model, such as stored payment data and periodic sales, create a predictable income stream. Economic forecasts could become smoother and more accurate as a result. With this kind of reliable information, it is much easier to plan business plans and the development of your business.
Membership ecommerce grows Your brand
Subscription businesses are best for building a solid brand ecosystem. When you have the ability to monitor buying habits and product reception over the long term, it's easier to address the needs of the brand community and build loyalty and reputation. In addition, active community enthusiasts who post positive comments and participate in social media can help brands attract new customers - if you like a particular meal subscription restaurant, you are more likely to recommend it to your friends and family. This drives brand engagement, value, and positive feedback.
Membership e-commerce makes buying frictionless for the client
It's one of the easiest and most intuitive ways for your customers to make regular purchases. When they sign up for a subscription, they can change or cancel it at any time. This ability to manage streaming or grocery services is the future of online shopping, as it can be done from the comfort of your home. Who would not rather order a monthly meal package with just a few clicks than drive to a restaurant every day? With the subscription concept for services and products, customers get what they want. And your business gains more satisfied customers who are more likely to stay and do not need traditional marketing methods.
Additional advantages of e-commerce memberships – why is it the Future?
- A constant flow of sales.
- Learning about purchasing patterns (types of products, frequency, common dates, etc.).
- Customizing email campaigns and newsletters.
- Setting expectations by providing early or exclusive access to deals and goods.
- A sensation of exclusivity (terms like club or VIP member).
Membership Ecommerce is the Answer
As you can see, almost any firm may use a subscription-based eCommerce model to sell almost any goods or services. When implemented properly, it has shown to be advantageous and speeds up the process of scaling your company.
Need help developing a profitable subscription business using the advice we have provided? Nordic Tech House will be happy to help you.