E-commerce Subscription Model: Definition and How to Choose

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E-commerce Subscription Model

One of the best things that has come out of the evolution of the e-commerce industry over the recent years is a rise in unique and interesting sales techniques to boost online commerce. Regardless of how big or small an e-commerce store is, maintaining profit margins is the primary goal you are looking to achieve.

Many platforms and marketplaces such as Amazon and Walmart have been using advanced technologies for various functions, and are actively enhancing their retail experience with Generative AI. Another interesting way to boost your profitability and customer experience is by offering e-commerce subscription plans aligned with the products and services of your brand. 

For now, let’s start with understanding what e-commerce subscriptions are.

What is an E-commerce Subscription?

An e-commerce subscription model makes it possible for customers to buy products or services on a recurring basis. This is often achieved with the help of order fulfillment and recurring payment solutions, which automate regular order placement and money charges.

Subscription-based e-commerce works similarly to other kinds of subscription services you may have chosen at some point in your life such as newspaper/magazine subscriptions or milk deliveries. The global e-commerce subscription market is predicted to grow from $199.4 billion in 2023 to $330.5 billion in 2024, indicating a substantial CAGR of over 65%.

E-commerce Subscription Types

While this is the definition of an e-commerce subscription model, here are the primary types of subscription models you should know about:

1. Replenishment Subscription

Replenishment subscriptions are used for delivering products that are needed regularly. Think about groceries or grooming products that you buy quite frequently and need to refill often. This is also the basis behind the “Subscribe and Save” option offered by Amazon, which is focused on delivering such products to customers before they run out.

2. Curation Subscription

Curation subscription is the most popular subscription model available in the market and has gained a lot of momentum over the past decade. Curation subscription primarily refers to a box of curated products sent to customers by retailers. These products can be makeup products, snacks, or kits that stick to a specific theme. Birchbox and The Big Book Box are popular examples of brands utilizing this model.

3. Access Subscription

Access subscriptions are utilized specifically to offer membership or accessibility to special benefits and features to customers. Think about streaming services like Netflix or any product that has multiple levels of accessibility. Retailers generally grant customers access to specific features and content based on their subscription plan.

As is evident with the types of subscriptions listed above, they are classified based on the products and services you are selling to customers. Regardless of the subscription model you choose, you need to ensure that you deploy regular e-commerce error resolution processes so that you can ensure that it works properly.

How to Choose the Right E-commerce Subscription Model?

If you have decided to go ahead and implement subscription-based e-commerce, there are plenty of advantages that you can leverage. However, it is more important to understand the right e-commerce subscription model to choose for your products and services. 

Here are the factors that you should consider in the process of making this decision:

Customer Value Proposition

At the outset, you want to narrow down the value that your customers are likely to receive from the subscription model. Your customer value proposition could be in the form of exclusive discounts, products, additional convenience, or other perks that will make your subscription more lucrative for customers.

Logistics and Fulfillment

For any kind of subscription model to run as planned and effectively, you will need the right order fulfillment technology and logistic processes backing your effort. Doing so will ensure that your shipment reaches customers correctly and on time. You will want to partner with reliable shipping carriers and inventory management systems to ensure that you don’t have to deal with any kind of errors and delays in the process. Having a strong logistics and fulfillment strategy will help you maintain subscriber loyalty, satisfaction, and retention.

Selection of Products

When deciding on an e-commerce subscription model, you also want to determine the exact products you think are suitable for subscription from your catalog. Retailers typically go for products with a higher purchase frequency, consumables, or ones that can be bundled together easily. Ensure that you figure out a way to understand the needs and preferences of your customers before you go ahead with product selection.

Pricing Strategy

Any subscription revenue model in e-commerce requires the perfect balance between profitability and customer satisfaction. Consider product prices, frequency of deliveries in the subscription, and perceived value before deciding on a subscription plan price. Ideally, you should have multiple pricing tiers so that customers can choose one that is more convenient for them.

Subscription Frequency

Once you have shortlisted the products you want to offer as a part of your subscription plan and clarified the pricing associated with them, you need to think about the subscription frequency. Subscriptions can be monthly, quarterly, fortnightly, or even weekly depending on the plans you design and promote. Your subscription deliveries should align with your customers’ consumption patterns and the nature of the products.

Customer Experience

When choosing which e-commerce subscription model you want to implement, you want to consider the kind of experience you will provide to customers. Aim at delivering a seamless experience right from the time your customers sign up till the time their order is fulfilled. Ensure clear communication about the status of their subscribed product or service, as well as necessary customer support during their association with your brand.

Concluding Remarks

For any e-commerce retailer, choosing the right subscription model to offer your customers is an important undertaking. What’s even more important, is to come up with the right e-commerce subscription plan based on the right model considering your products and customer needs. Utilize the factors that we have discussed in this article to come up with the right subscription plan for your customers.

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