skip to Main Content

Understanding eCommerce Subscription Services

Ordering online can be a time consuming process – your payment information may not be saved, you may have forgotten what products you previously ordered, or you may not even remember your account information altogether.

Many online retailers, especially in the consumer packaged goods (CPG) industry, understand these struggles and some of these retailers and brands now offer subscription-based services and fulfillment. This means a consumer can agree to purchase a certain product on a recurring basis (i.e. monthly) and the online retailer will automatically charge their card on file when the specified date arrives.

So what do online retailers need to know about subscription services? Here are a few things…

 

  • Subscriptions services are becoming more popular with young women – Especially in the growing apparel and beauty industries, many young women (ages 13-29) are looking to subscription services to keep their favorite products in-stock at home and to learn about new products through certain subscription offerings. This could result in more online retailers adopting subscription services in the future as this age demographic matures and expects subscription offerings to be more widespread in the online retail industry.

 

  • Pet supplies have thrived with subscription models – The pet supply industry has stood out as a leader in the subscription services industry for many years. Instead of going to the pet store to pick up food, many pet owners have instead opted for the convenience of having pet food and other supplies automatically shipped directly to their door. This has been especially helpful for pet owners living in rural areas or owners who have pets which require specific dietary needs.

 

  • Subscription offerings can help online retailers forecast revenue – One bonus of subscription revenue is that it provides an initial revenue value for online retailers to start from every single month. This revenue is often not prone to promotions or seasonal changes, meaning brands can often focus the profits from these revenues towards operational costs and use the revenue generated from promotions for additional expenses.

 

  • Offering additional perks to subscription services can keep customers happy – Occasionally customers can suffer from what is called “subscription fatigue”, especially when they receive too much of a specific product or become tired of a product. Some CPG companies who offer subscription services will offer variant subscription options (i.e. receive a different type of coffee each month) to help prevent this fatigue. Other brands will offer free samples of new or existing products in hopes of upselling or promoting existing customers to change or create new subscriptions, especially brands that focus exclusively on the subscription services model.

 

  • Keep subscriptions easy to modify for consumers – One of the major reservations of many consumers in engaging with subscription services is the ability to modify or cancel the subscription. Some consumers fear they will receive too much product or they will have to go through a long process to modify or cancel their subscription. It is important for online retailers to build trust with their consumers and make it easy for them to change their subscriptions – not only to keep them as current customers – but so they will create new subscriptions with the brand in the future. Some online retailers are even looking into SMS options to notify consumers that their subscription order has shipped and will allow them to change or cancel their subscription via text message.

 

In conclusion, eCommerce subscription services have existed for several years but still remain an emerging trend in the industry.  More online retailers are looking to launch subscription initiatives for the very first time or are currently seeking options to upgrade and optimize their subscription technology. As more consumers try out subscription services, their initial experiences with the service (product arrival date, ease of setup, product quality, etc.) will be key to determining whether or not they continue to utilize subscription services in the future. Brands can rely on their subscription services for a predictable cornerstone to their online offering if the subscription model is done correctly and meets the expectations of their consumers.

  • Dave

    Matt,

    Very cool article. It came to me via a Google Alert.

    I think subscription eCommerce is defiantly a strong play and the way Ecommere is heading in general.

    I think you’re right about customers wanting to at least have the ability to modify or change the subscription. They value the convenience, but don’t want to be locked down. Having the ability to pause, change or cancel subscriptions is important.

    • mattbrownPFS

      Thanks Dave! Being able to change your subscriptions easily is definitely important – especially with higher-value subscription offerings. Online retailers have become better at this and will likely continue to make customizing subscription services even easier in the future.

  • Rob Karlovetz

    One of the greatest hurdles for eCommerce models is the perceived security (or insecurity) of online payment. It seems that subscription models suffer this to a new and elevated degree, as users have to TRUST the website to not only make the initial purchase, but to also allow the company to CONTINUE storing their payment information in order to bill against it regularly.

    So how do businesses build that trust factor with their would-be clients, and how important do you feel that it is for consumers to have a variety of payment options when subscribing?

    • mattbrownPFS

      Hey Rob, excellent question. Over time the hurdles around online payments, at least in the U.S., have decreased significantly but they do still exist in some capacities. With subscription services in particular, if you are concerned about this it can often be a good practice to include on-site language or images (i.e. PCI compliance standing) to help consumers trust the eCommerce site. Sometimes consumer will do a “test” order or two before subscribing to check fulfillment times and overall quality standards (i.e. package quality, customer care experience) before subscribing.

      Additional payment options are certainly becoming more important as mobile and tablet usage increases – but with these additional payment options often comes implementation time (and money) in multiple departments to make the payment methods successful. Of course putting these in place can boost conversion rates and thus will boost subscription rates, but it’s really up to an organization to look at their metrics and determine whether or not the investment in additional payment options is worthwhile at this point and time over other pressing needs.

      Hope this helped and thanks for reading!