Subscription commerce: How you can use subscription models for your e-commerce

Strong customer loyalty and recurring sales are crucial for success in e-commerce. The concept of subscription commerce is therefore an increasingly popular method for online retailers to expand their business model. From regular deliveries such as consumables to subscription boxes - the possibilities of subscription commerce are diverse and offer retailers the opportunity to build long-term relationships with their customers and increase sales.

In this blog post, we will show you what subscription commerce actually is and why it is worthwhile for your store. We also look at the pitfalls you should avoid and show you how you can implement Shopify Subscriptions in your store.

Subscription commerce definition: What are subscription models?

According to a survey by Capterra, a full 81% of people surveyed in Germany have taken out a subscription - so customers are happy to take advantage of subscription commerce. But how exactly is this form of e-commerce defined?

Subscription models have become an increasingly popular business model in which companies provide services or products to their customers on a regular basis while they pay a fixed amount. This form of e-commerce offers customers the convenience of receiving products or services automatically without having to place manual orders or make payments. Nowadays, subscriptions cover a wide range of products and services, including product boxes or cooking boxes, for example, which consumers can use on a regular or even permanent basis.

Traditional subscription models, which were first adopted by digital products and online services, include software such as music services like Spotify and Apple Music and video platforms like Netflix and Amazon Prime. In recent years, however, other services and products have also started to offer subscriptions, which are referred to as modern subscription models. These include product box subscriptions, regular deliveries of replacement/refill products, online health or fitness platforms and online learning platforms.

The aim of subscription commerce is to retain customers in the long term, with the service effect (convenience) and high-quality consumption (curation) being important drivers. The service continues automatically without the need to place a new order. The application of the subscription model in online retail is referred to as subscription commerce and enables companies to offer their products and services over a wide range.

Advantages of subscription models

Subscription commerce, also known as subscription-based e-commerce, offers numerous advantages for both customers and companies - i.e. the subscription commerce provider.

Advantages for customers:

Convenience and time savings: customers receive products automatically and no longer have to actively take care of reordering them. Automatic dispatch saves time and simplifies the purchasing process considerably.

Financial benefits: Unit prices are often cheaper with a subscription than with individual purchases. Customers can therefore save money in the long term.

Predictable spending: By making regular payments, customers can plan their spending better and have a clearer overview of their monthly costs.

Discovering new products: Customers benefit from the provider's recommendations and have the opportunity to continuously discover and try new products.

Advantages for retailers:

Predictable sales: Subscriptions allow companies to generate regular and recurring revenue, which allows for better financial predictability.

Higher customer lifetime value: Subscription customers generally have a higher customer lifetime value compared to one-time buyers, as they buy regularly over a longer period of time.

Cost savings on new customer acquisition: By retaining customers through subscriptions, companies reduce the need for expensive marketing campaigns to acquire new customers.

Reduced storage costs: A fixed delivery frequency enables more efficient warehousing and reduces the cost of storing goods.

Generation of valuable data: Through the ongoing customer relationship provided by subscriptions, companies collect valuable data about their customers and their consumption behavior, which can be used to optimize offers and marketing measures.

Competitive advantage: Companies that successfully implement subscription models in e-commerce can differentiate themselves from their competitors and retain customers in the long term by providing unique and attractive offers.

The use of subscription commerce offers a win-win situation for both customers and companies. It promotes convenience, financial benefits and long-term customer relationships.

Risks in subscription commerce: you should avoid these pitfalls

The ongoing trend of subscription commerce in online retail offers some opportunities, but there are also risks and challenges associated with it.

In particular, some companies attract new customers with heavily discounted entry-level offers, but many of these customers cancel their subscription after a short time. As a result, the break-even point is not reached in many cases. This may be due to the fact that customers were mainly attracted by the low-cost offer and are less interested in the actual products.

Another common reason for a subscription being canceled quickly is a lack of customer satisfaction with the offer. To build a successful long-term subscription model, it is therefore crucial to understand and meet the needs of customers while offering real added value that goes beyond just a discount.

How can I implement subscription models with Shopify?

Adding subscription models to your Shopify store is a relatively simple process that allows you to implement recurring orders or even create subscription boxes from scratch. In general, there are two approaches available for Shopify Subscriptions: you can add a Shopify app to your store or create a customized solution.

In the Shopify App Store, you can find a few apps that will help you implement your subscription strategy. Let's take a closer look at two of them.

1. Shopify Subscription App:

Price: Free of charge

The Shopify Subscription App, which was recently released in the Shopify Winter Editions, allows you to offer your customers subscriptions for their favorite products. You can either sell all your products as subscriptions or only selected products. With this Shopify Subscriptions app, customers can pause and skip orders and update payment and shipping details directly from their account. Key features include:

• Automatic billing for subscriptions

• Options for customers to cancel, skip or pause subscriptions

• Customizable email templates for order confirmations or payment reminders

• Reports to analyze the performance of subscriptions in your store

• Seamless transfer of existing subscription contracts to the Shopify Subscription App

The best way to use the Shopify Subscription App is as follows:

1. Install the app from the Shopify App Store.

2. Create a subscription plan, select the price advantage and delivery interval.

3. Add the relevant products to your plan.

2. Recharge subscriptions:

Price: From $99/month, with a 30-day free trial

Recharge Subscriptions for Shopify is an app that helps you maximize the value of your customers by driving customer lifetime value growth. With this platform, you can implement a variety of subscription models, including subscriptions, loyalty programs, product bundles, and personalized customer journeys. Key features include:

• Customer portal customization for a seamless shopping experience

• Personalization of the customer journey through individual flows

• Robust and flexible API for complete customization of your subscription experience

• Sale of curated product bundles or customized packages

• Unified checkout process for a smooth customer experience, regardless of cart content

The decision between the Shopify Subscription App and Recharge Subscriptions depends on the specific needs of your business and your budget. Both options offer extensive features for implementing subscription models in your Shopify store and can help you strengthen your customer loyalty and increase your sales.

Subscription commerce examples: These retailers successfully use subscriptions for their customers

A subscription model can be a sensible solution for generating recurring sales in many sectors. This model is a convenient alternative for customers, especially in the food sector, but also for other everyday goods.

Many retailers have already recognized these advantages and are using subscription commerce in their business. We take a closer look at some of them in this section.

Latori customer BODYSHAKE relies on subscription models

One example of successful subscription commerce is our customer BODYSHAKE, which has cleverly integrated its subscription model into its store. BODYSHAKE's practical subscription models give its customers continuous access to healthy nutrition. The company relies on digital app-supported networking, which enables customers to feel part of a community and receive attractive rewards. These subscription models are not only convenient for customers, but also create long-term relationships and promote customer loyalty.

The cooking box from HelloFresh

HelloFresh offers its customers portion-sized ingredients and recipes for preparing meals as part of a subscription. The cooking box is designed to take the pressure off consumers by relieving them of their weekly grocery shopping and offering new ideas for a balanced diet. Customers can choose between ten different categories. This allows the company to reach different target groups and offer a wide range of products for its subscription models.

Product subscriptions via Amazon

The e-commerce giant Amazon also offers its customers a subscription model for many products. If customers opt for this model, they have the advantage of automatic delivery at freely selectable intervals and a percentage saving on the product price. Consumers can manage, interrupt or postpone their subscriptions directly in their customer account and thus benefit flexibly from the advantages.

Beauty boxes by subscription

There are now many providers such as GLOSSYBOX or GOODIEBOX on the German market. These subscription boxes usually contain products for skin, hair and body care. The difference to other subscriptions is that customers are usually surprised by the contents of the box each month and do not know which products they will receive. The advantage for customers is that they can discover new products every month - and at a low special price.

Conclusion

Subscription commerce has become an indispensable part of many e-commerce business models as it offers numerous benefits for both customers and companies. From convenience and time savings for customers to predictable sales and cost savings for businesses, implementing subscription models can lead to long-term customer relationships and increased sales.

When using Shopify as an e-commerce platform, there are various options available to you to implement subscription models in your store. From using Shopify apps such as the Shopify Subscription App to integrating Recharge Subscriptions, Shopify offers a variety of tools and options to optimize your store for recurring orders.