Analyzing the Benefits of a Subscription E-Commerce Business Model

29.04.21

Subscription-based businesses are more prevalent than ever. From Netflix and HelloFresh to Google Workspace and Amazon Prime, this e-commerce business model is taking over every industry. The subscription box market alone is worth at least $10 billion— up over 30% since 2018.

This explosion of successful subscription services makes it clear: With this business model comes opportunity. With subscription pricing becoming a convenient norm in the e-commerce world, many consumers are now gravitating toward these services.

If you’re looking for a way to better attract your target audience, you may want to consider a subscription model, too. In this article, we’ll analyze the benefits of a subscription e-commerce business model, so you can decide if it’s the right path for you.

Why Consumers Love Subscription Commerce

Subscription e-commerce is often a win-win for both consumers and businesses. For consumers, it brings three key benefits: lower costs, more convenience, and a better customer experience.

One of the main reasons why subscription commerce is so enticing is because it allows buyers to get more for less. Many subscription plans are a lot like fast food combos, offering buyers greater overall value when they purchase everything at once— and consumers don’t want to miss out on a good deal.

Even when they’re not scoring a major deal, subscription commerce helps buyers better plan their budgets by giving them an expected monthly cost. This leads us to the convenience of subscription services. With a subscription, consumers always get some form of added convenience. This may include automated monthly payments, curated bundles for less decision fatigue, or products shipped straight to their doors—no checkout needed.

Consumers no longer have to browse pages upon pages on a clothing retail website, worry about their toilet paper running out, or even pull out their credit cards after the first purchase. Together, all of this creates the stress-free customer experience that modern consumers crave.

So how exactly does the subscription e-commerce business model help businesses succeed? Let’s take a look at three benefits.

Subscription Models Drive Up Customer Retention

A major struggle that e-commerce businesses face is the rising frequency of abandoned carts. In 2018, the average abandoned cart rate was over 75%— a percentage that had been increasing for years.

Though subscription-based brands do face these struggles too, this business model helps reduce customer turnover once the initial purchase is made. When people subscribe to a product or service, many view it as part of their identity. Many others simply never get around to cancelling.

Though having subscribers don’t always guarantee customer retention and revenue in the long term, it does offer additional benefits for businesses. You’ll be better able to forecast your growth, as well as what inventory you need each month.

Subscription-Based Businesses Attract Global Attention

Subscription-based businesses aren’t just finding success in their home markets. They’re also expanding internationally, as almost 90% of brands that offer subscriptions make a portion of their sales abroad.

The subscription e-commerce business model can help you attract the attention you need to expand outside within and outside of the United Kingdom, now or in the future. Think about it: A consumer may be able to find beauty products at any local drugstore, but only a beauty subscription box like Birchbox can offer curated, delivered, and highly discounted bundles.

Even if you’re located across the world, a subscription model can turn your business into a stand-out option. When you’re targeting highly niche audiences— which are often receptive to subscription options— having this ability to expand outside your market is crucial for maximizing your growth potential.

Subscriptions Make Relationship-Building Easier

When customers are subscribed to your product or service, they’re constantly engaging with your brand. This means you have more opportunities to engage back and develop strong relationships.

As consumers continue to use your subscription service over time, you’ll also learn more about them— perhaps based on how they’re using your SaaS platform, what cuisines they’re choosing for their meal kits, or what music they’re listening to on your streaming app. They may even be willing to provide feedback directly.

This enables your business to provide more personalized services that improve the customer experience. Ultimately, this can lead to greater customer loyalty over time.

Of course, keep in mind that, in order to succeed in subscription commerce, it is important to understand how to collect and use this data effectively. Strong personalization is key to setting yourself apart from other e-commerce brands.

Final Thoughts

Subscription e-commerce is a rapidly rising business model that’s helping more brands succeed every single year. It naturally creates an improved customer experience for all your buyers and helps increase loyalty to your brand.

The subscription model can be beneficial for brands of any industry— especially if you have a niche offering and your eyes set on global expansion. Consider this business model for your next venture, or to add an attractive service to your current one.

Contact us at Grizzly to learn how we can help you with your website.

Got a project in mind?

Let’s talk