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How to grow your subscription e-commerce business

February 2022

Subscription e-commerce is a business model in which customers make regular (often monthly) payments to receive goods or services. At the Whistl Group, we work with subscription retailers in a diverse range of industries (such as Graze and the eco-toilet roll company Who Gives a Crap), giving us a more unique perspective on which strategies and tactics the best-performing retailers implement to maximise their subscription sales.

When you are looking to optimise your subscription business processes, elements within this article will support your organisation with the best strategies and tactics to help you drive growth.

How big is the subscription market and what is its growth rate?

Reaching a value of US$ 18.8 Billion in 2020, the global subscription e-commerce market size has grown over 435% in the last 9 years, and this uptick is predicted to accelerate further still, reaching nearly half a trillion $USD by 2025 with a compound annual growth rate of 68%.

Furthermore, there is a rising trend in the concept of the ‘End of Ownership’, in which consumers are migrating away from keeping products and switching to variants on a periodical basis. Both of these trends mean online shoppers are becoming comfortable with being a subscriber.

Why do e-commerce businesses adopt a subscription business model?

Customer acquisition via digital and direct channels is becoming increasingly expensive. Rising 60% in the last five years, this surge is corroding retailers’ profit margins and, therefore, their abilities to scale. Adopting a subscription business model has become popular because it helps retailers overcome high acquisition costs by driving customer retention, maximising customer lifetime value.

The benefits of a subscription business model for e-commerce

  • Subscription services are more convenient for retailers because they can tailor their offerings to their customers’ preferences and behaviours.
  • Subscription e-commerce is more convenient for consumers because they can control the frequency of their purchases, usually, pause the plan at any time and in some instances subscription retailers can offer personal shopping services.
  • Subscription online stores have more time to build relationships with consumers and can use them as a sounding board to help inform new product development.
  • Subscription retailers can gather more detailed customer feedback, more quickly. For example, subscription food snack retailer, and Whistl client Graze, receives more than 15,000 ratings per hour during peak periods, on the content of their health food snack boxes, allowing them to evolve their offering and more accurately match consumers’ ever-changing demands and tastes.

The 3 main e-commerce subscription business models

The three most common types of subscription business models are

  1. The curation model - Subscribers receive a unique selection of items regularly, tailored to their personal needs and preferences.
  2. The replenishment model - Consumers can automate the purchase of commodity items so that they receive replenishment deliveries regularly.
  3. The access model - Subscribers pay a regular fee to obtain attractive member-only perks such as exclusive discounts or early access to new products.

Which business model is right for my subscription box business?

Choosing the right subscription business model depends on your offering. The curation model is ideal if you are providing a personal shopping service, whereas the replenishment model is best suited to health and wellness goods such as toiletries and cosmetics. The access model is popular in the fashion, apparel and premium food verticals.

The best strategies to drive subscription growth

In the early stages of any e-commerce business, driving ‘top of funnel’ brand awareness to your ideal target customers is one of the most impactful and cost-effective methods to generate new customer revenue.

Equipped with a $4,500 budget and one day to shoot, Dollar Shave Club created this advert back in 2012 and has since racked up over 27 million views:

While the dream for any business is to achieve global recognition, at the Whistl Group we find that the best-performing subscription retailers focus on getting their business processes right. Furthermore, Whistl offers advertising services to help subscription retailers acquire and retain customers more cost-effectively. Then as their brand awareness increases, they can be confident that they are working with a specialist that has the experience, expertise and resources to help their business grow, starting with the supply chain.

How can online retailers streamline their subscription supply chain?

According to research by Parcelhub, the top reasons why consumers said they would stop doing business with a brand include poor product quality (71%), high delivery costs (62%), poor customer support (58%) and missing or wrong items delivered (54%). It is, therefore, crucial to get each of these elements right to help you realise your subscription business’s growth potential.

While acquiring and retaining customers profitably is a core element of growing your e-commerce subscription business, so too is the effective procurement, storage, fulfilment and distribution of your physical goods. Streamlining your supply chain means going over every order management process with a fine toothcomb to identify inefficiencies and gaps in service quality.

Optimising your supply chain starts with procuring the most sustainable, reliable and cost-effective components for your physical goods (or services), be they raw materials, manufactured goods or your packaging.

Outsourced subscription order fulfilment

Once you have enhanced your procurement and product offering, deciding whether to outsource fulfilment, keep it in-house or adopt a hybrid fulfilment setup is a next step. If you do decide that outsourcing fulfilment, for complete management of your inventory, picking and packing is the right move for your subscription business, then ensure you are working with a provider that is experienced dealing with subscription retailers.

Fulfilment houses will typically offer a wide range of carrier options, helping you tailor a portfolio of delivery services to suit your customers’ levels of urgency, your product diversity, value, dimensions, weight and the destinations of your current and future ideal customers.

In-house subscription order fulfilment

Subscription retailers who carry out in-house fulfilment often work with a carrier management specialist so they can access preferential rates, more in-flight options, accelerate their label production and benefit from more flexible collection times.

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Finding the best technology for your e-commerce subscription business

Whether you outsource your subscription retail business processes or do this in-house, getting your technology, or ‘tech stack’ right is essential, such as your

These systems can help you better manage and synchronise your sales channels such as marketplaces and your website, and your customer communications such as live chat, social media, email and contact centre, each through a single platform.

How can Whistl help me grow my subscription business?

When looking to scale your subscription business, it’s critical to ensure you are working with the most appropriate partners to suit your business model and long-term goals.

At the Whistl Group, we offer a unique portfolio of solutions to support the end-to-end logistics process, helping with all aspects of the customer journey including the delivery management of orders, complete fulfilment solutions and even ongoing customer service, Whistl is here to help.

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