Should Your Ecommerce Brand Offer a Subscription Service?
Not too long ago, subscriptions only ever applied to magazines and newspapers. These days, however, you can throw a rock in any direction and hit a DTC subscription service (and yes, there are subscription services for rocks).
They’re pretty popular with consumers, too. According to a survey by Clutch, over 54% of online shoppers say that they’re a member of at least one subscription service.
That’s a lot of subscriptions.
So what about you? Are you missing out on a golden opportunity by not offering a subscription service for your ecommerce brand? Does your #FOMO mean you should drastically change your business model?
The answer, as always, is “it depends.”
We can’t peer into your warehouse to see whether your products fit a subscription model. So we’re going to explain the basic concepts and considerations for offering a subscription service, and you can judge for yourself whether it’s right for you.
What subscription services are
A subscription service is a DTC offering where an ecommerce brand (you) sends a box of products to a consumer on a regular basis - usually monthly. The contents of this box are either chosen at random or pre-selected by the consumer or brand.
What subscription services are not
Subscription services are NOT:
- Memberships. It’s possible to be a member of a DTC brand, but not all brands that require membership also offer subscription boxes. Think Costco or Netflix.
- Bundles. Bundled products are not subscription boxes, because while they are a packaged collection of products, they’re bought individually and not shipped regularly to the consumer as part of a subscription.
Some brands blur the line by selling bundles and subscriptions at the same time, but at the end of the day, they’re still two distinct offerings under the same brand.
How do subscriptions benefit the business?
Subscriptions are a lot of work. (We’ll go into how much later, but trust me, it’s a lot.) So why would you consider this a viable option for your business? Well, there are a few benefits to consider:
Heightened customer delight
Subscription boxes are popular with consumers because they’re exciting. It’s like getting a birthday present every month. They bask in the anticipation of their next box and get a spike of joy when it contains something cool. Even the act of unboxing is such a phenomenon that it’s sparked its own genre of videos.
With subscriptions, you don’t have to wonder how much money is going to be coming in. Every subscriber represents money you can count on to be there during the next month.
Increased customer retention
In a traditional ecommerce setup, consumer relationships are come-and-go. They pop into your store, drop some money, and disappear until the next time they need something - if they come back at all. Subscriptions, however, are more likely to keep them around long-term.
What kinds of subscription services are there?
There are generally three kinds of subscription services according to McKinsey:
Let’s briefly go into the details of each.
Curation is by far the most popular type of subscription service in today’s market - 55% according to McKinsey.
Curation services fill the box with a variety of products. These are either products you make yourself or ones that are sourced from third-party suppliers. In an ideal situation, you would assemble the boxes based on consumer preferences to really give it that “wow” factor.
Examples of curation-type services include:
As the name suggests, replenishment subscription services focus on restocking items that a consumer would use on a regular basis. These can be food, laundry soap, or even gasoline.
Replenishment services make up 32% of the overall subscription market and are a great way for consumers to save money and time.
Examples of replenishment-type services include:
Access-type subscriptions are the smallest group of all, covering only 13% of all subscription services. These focus on providing consumers access to perks, discounts, and deals not available anywhere else.
Examples of access-type services include:
What does running a subscription box service involve?
You can’t expect to just flip a switch and instantly have a subscription service ready to go. There are some important considerations you have to make before offering subscription products.
Consider this: what would you rather have: a box of typical supermarket stock? Or a curated box of 100% grass-fed, free-range meat?
The more niche your product is, the better it will perform as a subscription offering. When consumers sign up for a subscription offering, they’re expecting items they wouldn’t be able to find on their own. If your products don’t fit those criteria, they may not be right for a subscription.
You should also consider whether there is enough variety in your service offerings. Variety helps in a few ways:
- It widens the appeal of your subscription service to accommodate people with different tastes
- It helps maintain consumer interest so that subscribers don’t get bored of the same items/offerings over and over
The more variety you can introduce, the greater the effect of the advantages above.
Variety also applies to shipment, pricing, or membership arrangements–offering flexibility to consumers in different situations. Say you have a HelloFresh subscriber who is going on vacation for a month. Having the option to “pause” a subscription helps prevent shipments from rotting on their doorstep because nobody is around to receive it.
Before jumping on to the subscription bandwagon, you should first establish whether or not it's something your consumers want. Are they even interested? If they are, are they interested enough to pay the price point you want? How long will they stick around?
Consider running a test program with a few of your best customers to see whether this idea has legs.
Subscription boxes don’t assemble themselves. Someone is gonna have to order all the stock, collect orders, assemble the boxes, ship them out, and so on and so forth. Compare the costs of hiring more people to run this subscription box program versus the impact on your existing operations if you assign your current staff to take it on.
Also consider the additional overhead for:
- Marketing the new subscription service
- More stock of subscription products
- Expanded warehouse space
- Packaging for the subscription boxes
All this, and we haven’t even touched shipping yet.
As an ecommerce entrepreneur, you already know that shipping costs a mint - whether its for yourself or the consumer. And that’s for your regular items. A subscription box is likely to cost even more than that thanks to the larger dimensions and weight that shipping a box of multiple products will involve.
Timing is also important - especially for replenishment services - because you want the consumer to get their box before the previous one runs out. If its late, and they go to CVS to restock instead of waiting for you, then you’ve already lost them as a customer.
So should I or shouldn’t I?
Your decision to open a subscription service should be based on the considerations that were mentioned above. For your convenience, we’ve made it into a handy subscription checklist that you can fill out.
How to use: The more ticks there are in the “no” column, the more you should really think about whether a subscription box is right for you.
How to make an amazing subscription service
Know your customers
The best subscription services delight consumers because the brand knows them so well. It knows what products the consumer likes, what they would like, and when exactly they want it. Underneath the fancy packaging lies a deep understanding of consumer taste and behavior that sets the best subscription offers apart from the rest.
Invest in logistics
While the income from a subscription service is reliable and predictable, the consumer’s loyalty is not. Subscribers will stay loyal to your brand until you mess up one too many times. The package could arrive late, or it could arrive broken, or you might not have stock of the item they want.
Offer subscribers flexibility
Yes, the point of a subscription service is that you’re in control of what the consumer gets, but it would also be nice to give the consumer some level of choice. Maybe you let them choose a portion of what they receive, or you allow them to pick the timing for the delivery. Or even the option to pause deliveries until a more convenient time - like when the consumer is actually able to use up what they got in the previous box.
That’s what Rodeo is all about: giving consumers the freedom to enjoy subscription services in a pressure-free environment. We prioritize giving the consumer the best and most relaxing experience possible and, in the process, help brands build more loyalty and goodwill with their subscribers.
Reach out if you want to learn more about how Rodeo is upgrading the subscription service industry.