Running an online store is hard work.
You not only have to build an impressive storefront for your customers to make purchases from, but also ensure your products are meeting the current demands of the target market. And then there is the problem of returning customers (read, consistent sales).
The number of returning customers to your site can make or break your business. But as the competition kicks in, getting these return customers is becoming increasingly hard.
As with any problem, there is a solution to this puzzle, which, in this case, comes in the form of eCommerce subscriptions on Shopify. Let’s tell you all about it.
What is the eCommerce subscription model on Shopify?
An eCommerce subscription model is a business model in which a company provides continuous service or a set of defined products to a customer in exchange for regular payments, at regular intervals.
For instance, Dollar Shave club is not just famous for its infamous ad. They are a prime example of how to run a successful eCommerce subscription business as well. For a few dollars every month, Dollar Shave Club delivers high quality razors straight to your doorstep. This is a cost-effective solution to buying razors from retail stores. But at the same time, it is a model that gets them as a business secured recurring sales!
And if you have a store on Shopify, you can set up eCommerce subscriptions even more easily. But before that, let’s walk you through the different types of models you can set up.
Types of eCommerce subscription models you should know of
Based on the industry, the target audience and a few other factors, there are broadly 3 types of subscription models that you should be aware of. These include:
1. Access subscription service
The business model of access subscription service is pretty simple. You pay a small fee for access to the warehouse or storage of a particular product that is held by the company.
Think Costco in the US or Metro stores in India. The business model is increasingly becoming popular, especially among the millennials who don’t mind shelling a few extra bucks to get access to products which they otherwise would have had to buy in bulk.
A key aspect of these access based subscription services is the hefty discount that is offered while being a member of these services. This hefty discount makes membership to the access subscription model worth the small subscription fee, making it popular among customers of all shapes and sizes.
2. Curation subscription service
Next up, we have the curation subscription model, where the customer receives a curated list of items tailored to their personal needs and preferences, on a regular basis.
This subscription model is highly successful because it plays off one of the most intimate desires of any shopper - personalization. Getting a set of products tailored to a customer’s personal taste has an innate quality that makes the customer feel a part of the brand, valued as a part of the business and connected as an important entity of the business. Businesses also have the option of promoting their newer products by placing product samples in the customer’s list of items.
3. Replenishment subscription service
When customers need to automate the receipt of certain goods in their list of commodity items that need to be replenished, they go with a replenishment model. This model is gaining popularity in the food and drinks, grooming and health and wellness industries.
The one commodity that every consumer seems to be running out of is time, and with the replenishment subscription service, customers can save time they usually spend ordering repetitive items. This automation, which enables the customers to be done shopping in a matter of a few clicks, is the ultimate in convenience for the average consumer.
Why should your Shopify store consider a subscription model?
1. Easier for the customers
Ask customers one reason they opt for a subscription model and they will have the answer in two words: hassle-free. Customers no longer have to worry about things like coordination, ordering the same item again, guiding the delivery team, etc. and can ensure themselves a hassle free service with a few simple clicks. As a business, you only have to deal with lesser customer complaints, so the subscription model works as a win-win for both.
2. Easier customer relationship management
Customer retention and acquisition of new customers is a task that all new businesses have difficulty with, and the subscription model actively helps you tackle both these problems at once. As long as you provide value to the customer, you can trust the subscription model to keep them engaged so that you can focus on the more important task of growing your business.
3. Regular customer engagement
Want to know who is the best brand ambassador for your business? Your customer. If you provide a product or a service that is satisfactory and leaves your customers happy, your business, and your bottom lines, will automatically improve. A subscription based model gives you the chance to continuously engage with your customer and build a good relationship. You can keep your customers engaged by offering them exclusive offers, educating them about your new products, asking for their feedback, etc.
4. Increased customer retention
Retaining an existing customer is far easier than gaining a new customer, and a subscription based model makes it easier to retain existing customers. Customers expect a greater value add as time progresses, and if you, as a business, can provide this value add through your subscription, then customer retention becomes that much easier.
5. Consistent revenue
As a business, cash flow is an element that is at the top of your head, and a positive cash flow will ensure that you can focus your energies on the other aspects of your business. A subscription based approach can help your online business create a loyal customer base by helping you focus, and also helps ensure stability in your business.
How to get started with a subscription model on Shopify?
1. Define your subscription-focussed target persona
This is the standard first step in any form of business. Who are you selling your products to? You need to come up with a target persona after thorough research, before you can effectively engage and sell to them. Understanding who they are, what their pain points are, and why they are looking for a solution that you are offering goes a long way in defining your target persona.
Answer a few basic questions such as:
- Do your customers subscribe to any other subscription services?
- How much do they spend on subscription services?
2. Fill in the blanks
Finding out what exactly your customer is lacking is the key to running a successful eCommerce subscription business. In the field of marketing, there is this concept of an Ideal Customer - someone whom you are focussing all your marketing efforts towards. Finding out what this ideal customer wants, and, if he is willing to pay a subscription fee to keep your services engaged, will define if your subscription based business model will succeed or not.
3. Define what makes you stand apart
As with any kind of business that operates in the real world, your subscription based eCommerce business will come across the one thing that makes it all the more fun to operate - competition. To really make it big in this industry, you must define what makes your business different from all the other subscription based models out there. Ask a few simple questions such as:
- Is your product or service revolutionary? Does it change the way consumers perceive your line of business?
- Do you have a clear USP that sets you apart from the competition?
- Do you do something different, like offer greater discounts or ensure faster delivery?
You need to ensure that you evolve constantly as a service provider, introducing newer products or greater levels of personalization that will make your customers keep coming back for more.
4. Choose the right subscription model for your business
Now that you have defined your target persona, your niche and your USP, the next logical step is to nail down the type of subscription service that you will offer. Since you have already gotten down to defining your ideal customer and the niche you want to operate in, the “choice” of the subscription model would have already been made for you, and all you have to do is check the viability of the business plan.
Using the example of the Dollar Shave Club, if you have already chosen the target customers ( men who can’t be bothered with buying blades every month), the only viable option as a business model is to offer a replenishment subscription service.
5. Add a subscription model to your existing business
If you have an already established eCommerce business, then adding a subscription model is totally viable, provided there is no dip in the quality of services that you provide. In other words, your “main” offering should remain as it is, with the subscription model acting as a value add to your business. You not only need to create this additional value, but you need to communicate it clearly to your customers as well.
Examples of subscription based business models
Huel began with a simple business model. “A perfectly balanced and nutritionally complete meal”, one bottle at a time. When they found out that people loved their product, they decided to go with the subscription model. They began by giving full control to the subscriber - the subscriber could buy 12 bottle multiples shipped anywhere weekly to every 8 weeks. Huel could now focus on producing a quality product without worrying if their subscribers would run out of their product.
Native is arguably one of the biggest names when it comes to personal care products today, and is committed to provide environmentally safe products. Nature offers a subscription based ordering service for its DNVB (Digitally Native Vertical Brand) where the product is designed around being sold online. Native has a best in class desktop and mobile website, and a clean customer portal for managing subscriptions, meaning the customers are always left satisfied.
3. Freshly picked
Freshly picked sells matching mom and daughter clothes, bags, moccasins among other things, and have perfected the membership subscription model. They bring in the aspect of exclusivity to their subscribers by offering a first access available only to the subscribers, 20% off on all products, free shipping and a $10 monthly store credit. Subscribers can apply stored monthly credit to any of their purchases using a loyalty solution that is built into the customer portal.
4. John’s Crazy Socks
Started by an entrepreneur with Down’s syndrome, John’s crazy socks is a prime example of a subscription model that became a success by offering a high level of personalization to their customers. John Cronin created a business where the socks were spontaneous in their design, sometimes accompanied by a handwritten note by John himself. John also delivers some of the subscription boxes personally, when he gets the time.
5. Family Dinner
Food delivery websites have shown explosive growth over the past decade, but what about ensuring that your food is locally sourced? It was this challenge that Family Dinner decided to tackle, and, with their Community supported agriculture (CSA) farm share service. With this service, Family Dinner ensures that all of their products, including meat, fish and dairy, is sourced from local farms. Customers just have to choose their category and share size, fill out delivery instructions, if any, and then hit the checkout button.
Best practices to follow while running an eCommerce subscription business
Now that we have gotten your eCommerce business off the ground, here are a few best practices that will ensure that your business will thrive.
1. Tie business model and price to business goals
You need to ensure that the subscription model you choose for your eCommerce business “makes sense” to your audience and is aligned to your value proposition. Always keep the customer in mind while branching out into a subscription service, making sure that the additional service you provide is of some value-add to the customer. You also want to know how adding this subscription service will help your own business grow in the short, and long term.
2. Make auto-renewals and advance payments attractive to your customers
Getting your customers on to your landing page, and then getting them agreeing to sign up for a one-month subscription, is far easier than, say, getting them to sign up for six months. But this is where incentives come in. If you make auto-renewals more attractive by offering hefty discounts on your half-yearly or yearly plans. Sometimes, these discounts can add up to almost two months of service, but they do make it worthwhile since you don’t have to spend that money acquiring a new customer.
3. Approach customers through different channels
You need to provide value to your customers for the entire duration of their subscription period, and the easiest way to do this is to adopt an omnichannel approach. An omnichannel approach to marketing involves figuring out where your customers spend the maximum amount of time, both online and offline, and then finding ways to engage them there.
The goal is to inject your brand into the customer’s psyche at any juncture where you can add value to their lives. Good business is always about providing positive customer experiences, and the more of these you provide, the greater are your chances of having a continued engagement with the customer.
4. Keep track of KPIs and customer data
As the owner of a subscription based eCommerce business, a few of the metrics you absolutely need to keep track of include:
- Monthly recurring revenue
- Churn rate
- Monthly recurring revenue
- Customer Acquisition cost
- Acquisition Recovery time
When you analyze the above in addition to your business goals and pricing options, they will give you a clear idea if you are on the right track. You need to study both qualitative and quantitative data to track your customer’s satisfaction levels as they interact with your brand over a period of time. This will help you create tailored customer experiences, which is what a subscription based business model should ultimately aim towards.
5. Choose the right eCommerce platform
You need to choose an eCommerce platform that best suits your subscription business, and, based on the sheer amount of eCommerce platforms available out there, there are a few things to keep in mind before zeroing in on one platform. Some of these factors include:
- Simple to set-up
- Easy to scale
- Provides in-depth reporting and analytics
- Enhanced security
- The option to choose the preferred payment gateway
- Scheduled payment options for customers
- Seamless integration with current and future tech stack
Best Subscription apps for your Shopify store
We have hand picked these 5 apps based on their App Store ratings, the number of reviews, and the top features that consumers expect from a subscription app. They are:
Subscriptions by ReCharge
With this app, you can customize the consumer path and create an interface personalized to it, streamline the subscription business with the most robust set of integrations, and have tools that make selling easier. The app starts at $60 a month.
Recurring Order and Subscription by Spurr IT
This app provides flexibility in payment options where the customers can choose to pay at irregular intervals or on a monthly basis. It also provides subscription boxes and payments replicated for all sorts of business. This is a free app.
AAA Membership + Subscription by AAAeCommerce Inc
With this app, you can make participation plans easily with one- time and repeating installments. You can also choose to show or hide member’s content and set up recurring orders with ease. Starts at $9.99 a month.
Seal Subscriptions by Seal Subscriptions
This app is deeply integrated with Shopify, gives the option to use vouchers for getting customer’s recurring income, and does not require a registration.The app is free to use.
Bold subscriptions by Bold
This app is best used for recurring purchases, since it is easily incorporated with the Shopify app. The app also helps keep customers subscribed by delivering versatility, giving access to users that they always wanted, including the ability to edit, skip, pause and handle orders. The app starts at $39.99/month.
We hope we have been able to address some of the most common questions that you might have regarding an eCommerce subscription model of business. It is imperative that you do thorough research and get to know all the pros and cons before making a decision to go with a particular eCommerce solutions provider.
If you want to explore subscriptions or have trouble setting them up, you can always reach out to us at XgenTech.