Did you know the subscription e-commerce market would reach $473 billion by 2025? From grocery deliveries to streaming services, subscription-based business models are everywhere. There has been a drastic shift in the business model, where customers buy “as-needed,” to one where they sign up to receive the product or service on a regular basis. These days, customers try to save time by eliminating items from their to-do lists with easy auto-renewals.
As long as the businesses continue to deliver value through their subscriptions, businesses can expect stable revenue and increased levels of client engagement.
Today, more than 50% of internet shoppers use a subscription service for e-commerce. There has never been a better time to launch a subscription model for your business.
E-commerce subscription is a business model that allow customers to continuously receive a product or service for a fixed period of time for a certain amount. With subscription services, you and your customer have an ongoing contract in which they agree to pay for access to your goods or services on a regular basis, such as once a month or once a year.
Examples of subscription-based businesses are Netflix, Amazon Prime, Disney Plus, Shopify, NetSuite, Azure, AWS, Mailchimp, etc.
Types of Subscription E-commerce
There are 2 types of subscription e-commerce models; B2B e-commerce subscription and B2C e-commerce subscription.
- B2B subscription models allow companies to sell to other businesses on a recurring, automated basis — and popularity is on the rise.
- B2C subscription models enable the end consumers and customers to avail themselves of the subscription and take full advantage of the goods and services that the company has to offer.
Benefits of the Subscription E-commerce
A subscription e-commerce business offers customers a practical, individualized, and more cost-effective option to routinely purchase what they need.
However, the benefits don’t simply apply to customers. A subscription service has various advantages for your e-commerce store as well.
A steady and predictable revenue stream
Regular e-commerce shops have significant monthly variations; however, a subscription business model enables you to predict exactly how much money will be generated each month.
Additionally, being able to foresee your money stream will improve your ability to plan your finances and make wiser business decisions.
Easier inventory management
Inventory management can make or break e-commerce firms, as you undoubtedly already know.
However, since you sell subscriptions, you are aware of exactly how many customers you have and how much inventory you will require.
Higher probability of positive cash flow
The time between spending money on customer acquisition and the point at which these costs have been covered by sales is one of the most stressful periods for e-commerce business owners.
However, with a subscription model, you will typically receive the full amount up front, increasing the likelihood of a positive cash flow and decreasing the likelihood of stress brought on by cash flow.
Lower customer acquisition costs
A pay-per-product pricing structure necessitates ongoing marketing and sales expenditures in order to draw in new clients.
However, keeping an existing customer is five times less expensive than finding new ones.
Additionally, as long as you maintain customer satisfaction, you may significantly lower your customer turnover and new client acquisition expenses while experiencing continued growth in your profit margins.
Establishes a highly loyal customer base
Customers who return spend 67% more than those who don’t. That’s not all, either.
They are also 5x more likely to repurchase, 5x more likely to forgive, 4x more likely to refer, and 7x more likely to test a new service, according to a Temkin Group analysis.
Their lifetime worth to your company will be high, and since customers already make regular purchases from you, your marketing spend to keep them will likewise be modest.
Brings more opportunities to build relationships & expand revenue
A steady stream of orders makes it possible to get to know your clients better.
Knowing how to use can help you continually improve the shopping experience and attract new customers.
A subscription-based business model also makes it easier to interact with customers continuously across channels. Customers are considerably more open to your promoted up-sells and cross-sell as a result of the relationship you build with them.
Conclusion
The e-commerce sector will continue to be dominated by subscription experiences. If you decide that subscriptions are the appropriate choice for your brand, consider which subscription business model best suits your goals as a company and if you should create your own subscription experience or collaborate with an existing subscription platform. This will guarantee that you get started quickly and that your program is successful right away.
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