Last Updated on January 21, 2022

In the last few years, we have seen the rise of the subscription era. It originated as an effective business model for the apps or websites offering Software-as-a-Service (SaaS) – such as Netflix, Amazon Prime, Spotify, etc. But now, the pool of subscription services has become wider to capture other industries such as food, fashion, beauty, fitness, to name a few.

Why Implement A Subscription Feature In Your Magento Store

You may be wondering whether this business is useful for your store or not. To help you decide, we will go through all the different aspects of the e-commerce subscription services in this article.

Subscription-Based E-commerce Business Model:

In the subscription-based e-commerce business model, a customer will be charged a recurring fee, generally monthly, quarterly, or yearly, for the service or product in return. Popular examples include Swiggy Super which allows customers to get free delivery up to a certain number of orders. In Paytm First, the customers get free vouchers from popular brands and many other benefits. Zomato Pro (earlier known as Gold) offered 1+1 on food and 2+2 on drinks while dining in.
These e-commerce subscription services provide a convenient, personalized, and cost-friendly way for the customers. The subscription facility in e-commerce includes delivery frequencies such as weekly, fortnightly, monthly or quarterly and also the feature of “skip” if the customers want to miss a delivery.

However, this is just the scrape of the surface of the subscription services in e-commerce. If you go deeper, these services build longer and stronger customer relationships. Subscriptions can help you turn your customers into consistent sources of revenue, and since you have to win customers only one time, the repeated purchases will increase your business.

Generally, these methodologies are used to entice customers for a subscription service

  • First-month fee
  • XX% of first XX months
  • Gift with purchase upon sign up
  • Refer a friend for XX% off your next box

Market Growth Of E-commerce Subscriptions

Market Growth Of E-commerce Subscriptions
Source:get.fuelbymckinsey

There is no qualm over the fact that there has been a tremendous growth of subscriptions in the e-commerce industry in the last few years. Nearly 15% of the online customers have subscribed to some form of e-commerce subscription service. Along with this, the subscription market can grow at a CAGR of 68% percent until 2025 to reach the estimated valuation of $478.2 billion.

The buying behavior of customers is inclining towards hassle-free shopping experiences. A subscription in the e-commerce store facilitates this better buying experience. Also, the recent global coronavirus pandemic has fromCustomersacted as a catalyst in the surge of e-commerce subscriptions. The customers were buying goods regularly from e-commerce stores as the shops were closed, and thus they went for more subscriptions. An e-commerce based subscription service can act as a lifeline for your business and manage the inventory more effectively.

Are There Any Con Of The Subscription Model?

While discussing the so many benefits of the subscription model, we should also consider the cons of the subscription model

  • High turnover of customers due to cancellations
  • Being aware of and realistic about demand fluctuations
  • A portion of customers can misuse offers by sharing the offers with multiple users
  • If you are a luxury brand, then you may lose the exclusive feel as it can cheapen the products
  • Issues of coping with logistics and inventory challenges

To know whether this is the right option for you, we will go through the different types of subscription-based e-commerce models in the market.

Types Of E-commerce Subscription Models:

A. Curation

In this type of subscription model, the customers will get a curated collection of items. E.g., it could be any collection or a gift hamper of food, drinks products, beauty box, etc. There are two types of curation subscription models – surprise products and select products.

1. Surprise Products

The customers who subscribe to the surprise products love that they will have a new collection of something to try every month. Surprise product subscription evokes a sense of product discovery.

Unfortunately, it is also possible that the customers may not like the products they receive. It implies that this subscription model has higher cancellation risks and causes lower customer retention rates.

It also risks an influx of customer complaints even though the customers have agreed to receive any product in the subscription category. If they receive a product they don’t like, or of a lower value, they can raise customer support and social media complaints. This can damage the reputation of your brand.

Thus, to eliminate any such scenarios, you must ask your customers for feedback for the products you send. Make this service more of your community by bringing your customers into the conversation. Thus, you can learn about the products that people don’t like, improving your offerings, and fewer complaints.

2. Select Products

In this subscription service, the customers can choose the product they want to receive each month based onE.g. the options. If they don’t opt for any option,s the brand will send the surprise products instead.

This model is best suited for food and drink brands that offer recipe boxes like Simply Cook. In Simply Cook, the customers can choose four recipes per week or fortnight, or month with the option of ordering a one-off box. In the beauty brands, customers within the subscription can log to their account and select the defined number of items to be delivered for a set price.

The best benefit of this model is that the customers can order what they love repeatedly and not need to go through the other options. Businesses that have a huge number of products can utilize this model. Customers will choose their desired products without going into a negative situation of not liking a product, as in the surprise subscription model. Therefore, this model results in higher customer retention rates in comparison to the surprise model.

The only drawback of this model is that it can be expensive and time-consuming for the business. The brands have to identify which products are the most popular among the customers and manage the inventory accordingly.

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B. Replenishment

The value of the replenishment subscription model comes down to convenience. In this approach, the customers can choose a product and select the frequency of delivery – it saves time for consumers who lead a busy life. With additional benefits of lower-cost products and free delivery, the customers will never get out of products. It is a huge benefit for the shoppers, especially in lockdowns.

This model is ideal for medicines e-commerce stores app or stores that sell pet food, ink cartridges, vitamins, fitness food, etc. In this approach, no product discovery is involved and effectively attracts long-term subscribers with more customer retention.

C. Access

In the access subscription model, the customers get a membership by which they can access exclusive perks, products, and services. Many businesses already offer some form of a loyalty program. Combining this with a subscription service can increase the revenue while offering your customers a unique and exclusive shopping experience.

How To Cope With Canceled Subscriptions?

It is common for users to subscribe for the services and then cancel within the first month before even delivering the first package. There can be many reasons for that, generally due to a change of heart on their investment.

If a customer cancels the subscription after the billing date, then you should send their final box and cancel the subscription from the following month. But still, many customers expect an immediate refund and cancellation, which causes more complaints, and it should be handled properly.

How To Implement Subscription Functionality In A Magento 2 Store?

As a top-notch Magento development company, we recommend implementing the subscription functionality using a 3rd party extension. A 3rd party extension is a pre-built set of codes designed for a particular feature. It will not just save the cost of the development of an eCommerce store from scratch but also the time as well. There are many reputed extensions available on the Magento marketplace. If you want to develop a custom extension with a unique set of features, we can help you—We have expertise in developing custom extensions.

Is An eCommerce Subscription Service Right For You?

There is a good increase of the customers subscribing to the products and services initially not offered as a subscription (just a few years ago). With this rapid growth of the subscription market, we don’t see slowing down any time soon.

The market is thriving with opportunities for online merchants to use subscription services in their business strategy. However, it is up to brands to choose a subscription by which they can increase the sales, revenue, customer retention rates, and satiate the customers.

Combining the powerful features of Magento 2 with a dedicated and experienced Magento Development Company, you can reap the benefits of an effective subscription strategy. Our certified Magneto developers know Magento 2 inside and out. But it is our client services that set us apart. We will understand your requirements properly and will come up with the best solution. Let us know your requirements.

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Author

CTO at Emizentech and a member of the Forbes technology council, Amit Samsukha, is acknowledged by the Indian tech world as an innovator and community builder. He has a well-established vocation with 12+ years of progressive experience in the technology industry. He directs all product initiatives, worldwide sales and marketing, and business enablement. He has spearheaded the journey in the e-commerce landscape for various businesses in India and the U.S.

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