Subscription models: why they work so well

Subscription models: why they work so well

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Subscription purchasing, as compared to traditional choose-stuff-and-pay-for-it consumption, is getting into more and more retail spaces. While subscriptions used to be just for media, like magazines or TV channels, they’re now available for products as varied as toilet paper, coffee, fitness wear and BBQ pork.

It’s still a pretty new way to package up products and services for retail commerce, but it’s becoming huge. There are over 2,000 subscription box services out there as of 2016, and it’s growing.

Some companies have made bank from subscription packaging, like Try the World which grew their customer base 10x, Dollar Shave Club which sold for $1 billion and Blue Apron, valued at $2 billion.

Especially for younger consumers, there is much less of an emphasis on owning a product and more of an emphasis on experiencing it. You can see this trend in less car ownership and more carshare companies, or smaller DVD collections but Netflix, Hulu and HBO subscriptions. Subscriptions take the focus away from ownership and put it on the customer experience.

Subscriptions are a win-win

Subscription services are good for you and your customers. Your customers save time and often money by having something they want regularly, delivered straight to their door.

You get a lot more out of the deal.

We all know that getting your customers to come back is a great investment. Subscriptions bring your customers back again and again, automatically. They’re also a great way to set up loyalty systems, like friend referrals and discounts for bigger purchases. Knowing what your customer is currently willing to spend is a good starting point for upselling them with the next level of subscription.

The other advantage of subscriptions is that - depending on your content - you can often use boxes to test out new products on your customers or move stock off the shelves. If you’ve got a curated box like BirchBox for example, which offers a different selection of cosmetics every month, you can send out samples of new products with incentives for reviews to float their viability. Knowing how many subscribers you have can help you estimate much more accurately how much inventory you need to have on hand. Even with churn, having a solid estimate is helpful to avoiding inventory shortages or overestimates.

What subscribers are looking for

Curation

The best subscription services are highly curated, showing that you’re adding value by doing the selection for the customer. From snackboxes to stylish outfits to vinyl collections, boxes that have a different item every month that’s chosen based on customer preferences are more likely to keep the customer subscribed.

Convenience

One of the biggest draws for customers when it comes to subscription boxes is how convenient they are. They show up at your door right when you expect them. If you can come up with a package that can be fit through a mail slot or doesn’t require someone actually being home, even better. Allowing your customers to choose how often they’d like their subscription fulfilled can help add to the convenient appeal of your products.

Contract-Free

The flexibility to start and stop as you’d like is a must at this point for most subscription services. On the one hand, this is great for the customer and increases the likelihood of conversion in the first place. On the other, it means you’ll have to truly show them every month why they should keep you around. One way to keep your numbers stable is to offer more than one month at a time, at lower prices. Someone can get a flexible one-month subscription, but it will be a better deal for them to buy a four month subscription. That means you’ll know how much inventory to expect while your customer gets a discount.

Gift options

Buying a friend or relative a subscription to something niche that they’d like is a great gift that has a personal touch but doesn’t take too much work for your customer. Offer subscriptions as gifts with time limitations, such as 3 or 6 months, and allow the buyer to enter a different shipping address than billing address. Consider including the option to write a note on behalf of the gift giver. Plus -- if the recipient likes your stuff, you’ve got another recurring customer on the books.

An unboxing experience

An “unboxing experience” means going above and beyond brown envelopes and packing tape. When you create a memorable experience for your customers, they’re more likely to stay loyal to your brand, recommend you to others, and keep coming back for more. Consider choosing nicer packaging that you can buy in bulk from companies such as Uline, Any Box Today or Yebo.

Part of the mix, or subscription-only services?

13% of subscription services have already started and stopped since 2010. It’s risky starting any business, but because subscriptions are often based on very particular niches and take a lot of logistics, they can be particularly hard to get off the ground.

One way to hedge your bets is to offer a subscription service alongside the traditional buy-by-product model. Many large companies like Amazon, Walmart and Target are now starting to offer spin-off subscription boxes in addition to their full stores. Music services like Spotify and 8Tracks allow premium subscribers unlimited access to music, while their regular users have more limited options.

The question is down to branding and feasibility. Many subscription box services focus their branding directly on the fact that they are subscription-only. Having a great product and marketing scheme, and leaving no option but to subscribe, means your customers are automatically coming back. Still, it’s not always feasible - especially for new businesses who are finding their market.

How do I start offering subscriptions with my Shopify store?

Shopify doesn’t currently have the capabilities to offer subscriptions within its native pricing structure - however you can still do it with the right app.

We recommend Recharge. It allows you to set up subscription availability for any or all of your items. It also allows your customers to buy a cart with a mix of subscription and non-subscription products without charging any extra.

The next thing to consider is packaging and shipping. Subscription services often include some form of curation or personalised touch, so design a package that makes someone feel as if they’re getting a gift delivered every month. Be sure to keep it as small and light as possible for what you’re selling - too heavy on the packaging and you’re paying too much for shipping. Take a look at Shopify’s guide to shipping and fulfilment for more ideas. You can also check out this blog on how to choose what to put in your box.

Here are 100 examples of existing subscription boxes. Got the next big subscription idea? Contact us today to help set up and grow a successful e-commerce business using Shopify.

*image via BirchBox

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