What is subscription commerce, and how does it work?
Subscription commerce is a category of firm that sells goods on a regular basis in order to retain client loyalty and predictable earnings. GCD’s business model requires adequate technology, processes, and systems in place to ensure that subscriptions are delivered on time.
eCommerce’s growing popularity
Yes, the COVID-19 epidemic hastened the spread of ecommerce and subscription purchases among firms and customers.
As a result of this expansion, businesses faced numerous difficulties as well as benefits. Consumers’ social media feeds and mobile advertising have grown cluttered with ads, making it more difficult for companies to stand out.
Subscribers rely on items being delivered on schedule depending on their preferred frequency, so merchants who routinely audit their subscription services will see greater retention.
In an ecommerce store, you might have 3 distinct subscription levels
Subscriptions ecommerce merchants charge their clients on a recurring basis, however the manner in which merchants sell their items varies from company to company.
‘Subscribe and Save’
With a “subscribe and save” approach, consumers receive the same goods on a regular basis as long as they subscribe.
This scenario benefits the customer while also providing a more consistent and predictable sales projection for the business. Food or personal care products that are frequently consumed, such as pet food or cosmetics, are excellent examples of this type.
Brands provide access to a variety of subscription services with a curation model. According to McKinsey, 55% of all ecommerce subscriptions follow this method.
The concept of instant gratification has been around for a while, with companies including Blue Apron and Stitch Fix giving customers the option to pick the items they want or send out a subscription box with pre-picked items in an attempt to surprise and delighted.
Members pay a fee for special offers, goods, content, or services as part of a membership scheme.
Costco has established the gold standard for membership programs, and ecommerce firms are learning from physical location stores.
Subscription commerce challenges
You may run a successful ecommerce company, but it does not guarantee that a subscription business model will succeed for you.
Before you invest in establishing a subscription commerce business, consider the common problems to determine whether a subscription program is appropriate for your organization.
Challenge #1: High churn rate
In today’s competitive world, subscription commerce is a dogfight. You’ll almost certainly have high rates of churn unless you stay ahead of your consumers’ changing demands.
According to McKinsey, replenishment subscribers tend to remain active for longer, with 45 percent of them keeping their membership for at least a year. Only 35% of curation or access members are able to stay that way.
Challenge #2: Complicated operational logistics
Successful subscription commerce, like ecommerce, necessitates collaboration with third-party platforms such as inventory management, fulfillment, accounting, returns management, and more.
It’s critical to think about your supply chain technology stack before launching a subscription service.
If you’re looking for a 3PL to work with, make sure they have customization and other subscription capabilities. The fulfillment provider should also connect with popular subscription services to create an end-to-end, seamless solution.
Overall , the key to success with subscription commerce is understanding your customers and their needs.
What problem are you solving for them? Are they looking for convenience, customization, or something else? Keep churn in mind and make sure you have a plan to combat it. And finally, choose your technology partners carefully to ensure a smooth operation.