Over recent years, subscription-based business models have surged across the e-commerce scene. Whether it's content, services, or products, it's safe to say that a significant majority of internet users and shoppers have at least one active subscription.
In this article, you'll learn about subscription-based products and the necessary steps for logistics and fulfilment. From core reasons and challenges to expert advice, we've got it all covered.
What is a Subscription-Based Product?
If you're an online retailer or a D2C brand, you might have pondered over selling subscription-based products to enhance your marketing or boost your sales. But what exactly are they? Let's begin by understanding the business model.
Subscription-Based Business Models
Ever wondered about the origins of the subscription business model? It dates back to the 17th century when authors sold books, stories, or newspapers. Today's image of someone tuning into their favourite Spotify podcast while sipping on a multivitamin shake and heading to work on an e-scooter (bird, not byrd) is a far cry from those times!
A subscription-based business model charges customers a recurring fee, be it weekly, monthly, or annually, to access a product or service. The beauty of this model lies in its revenue growth. Every new subscriber directly and positively impacts your revenue. Ultimately, the aim for a thriving subscription-based firm is to onboard new subscribers at a pace faster than losing them – prioritising acquisition over churn.
Source: Price Intelligently
The Three Types of Subscription-Based Businesses
Which businesses employ subscription models? In theory, any business can. However, within the e-commerce realm, it's typically best suited for:
Subscription to content
Brands offering access to content like videos, music, books, etc., in return for a subscription fee.
Main examples: Netflix, Spotify, Amazon, Sky
Subscription to services
Remember buying the yearly Microsoft Office license? Traditional one-off software sales have now been replaced by subscription models. This shift aids brands in retaining customers and enhancing user experience. Today, SaaS, utilities, insurance, leasing, and many others sell services via subscriptions.
Main examples: Shopify, Office 365, Adobe Creative
Subscription to products
Many merchants now offer their products for a recurring fee, often monthly. This not only offers convenience but also enhances the customer experience with curated product selections.
Main examples: Cosmetics, vitamins and supplements, convenience goods
Why Online Retailers Should Opt for Subscription-Based Products
Subscription models benefit both customers and merchants. Customers get an attractive, convenient offer at a seemingly low price. Simultaneously, online retailers can confidently expand their business and foster closer ties with their clientele.
Key Advantages:
Subscription-Based Products Ensure Recurring Revenues
Subscription models guarantee steady revenues that grow over time. Regular, smaller payments make subscriptions more appealing and affordable than one-off purchases. This model retains customers longer, increasing their lifetime value.
Cross-Selling and Upselling Opportunities
These are potent strategies to expand your business. It's often simpler to generate more revenue from existing, loyal customers. For instance, if you offer a vitamin subscription, you could cross-sell a storage box. For upselling, consider creating varied subscription tiers at different price points.
Emphasis on Customer Experience and Retention
Retaining customers and avoiding churn is every company's daily battle. With subscription-based models, it’s even more important because your model relies on the fact that your customers are staying. The more customers you gain, the more profitable your business is.
This necessitates a stellar purchase and post-purchase experience, including the fulfillment process With a good customer experience, you ensure satisfaction and loyalty, and so retention, which in the end increases the value of your customer.
To sum it up, there’s a thin balance to find between acquiring new customers (to grow your sales) and retaining existing ones (to grow their value).
Logistics and Fulfilment Challenges for Subscription-Based Products
While selling subscription-based products is strategically sound, it comes with its set of logistics and fulfilment challenges:
Lot Tracking and Expiry Date
Maintaining an accurate inventory is vital for any e-commerce business aiming to enhance its stock turnover rates and capital utilisation. Whether dealing with batches, bundles, or subscription boxes, it's imperative to monitor the stock levels of each product and oversee the entire fulfilment procedure.
This is particularly pertinent for items with a shelf life. For instance, if your subscription-based offerings include food and beverages, which are rapidly gaining traction in the e-commerce sector.
With subscription-based products, the primary benefit is the predictability. You're aware an order is imminent, its timing, and its contents. Sounds straightforward, doesn't it? However, an efficient and adaptable logistics system is essential to ensure the correct products are dispatched promptly to the intended recipient:
- Employ the FIFO (First In, First Out) approach to prioritise items nearing their expiry.
- Monitor stock levels using LOT tracking and barcodes.
- Choose a logistics partner with Bio-certification, adept at handling organic products.
Product Bundles and Subscription Boxes
As previously mentioned, with subscription-based products, the customer experience takes centre stage. Digital retailers have fewer interaction points compared to their brick-and-mortar counterparts. The convenience of online shopping might sometimes overshadow the tangible, pre-purchase interaction with a product. Hence, it's crucial to maximise the available touchpoints to craft a memorable brand journey for customers and stand out from the crowd.
For subscription-based items, given that your customers will regularly receive packages from you, ensuring a consistent and memorable unboxing experience becomes paramount. Consider ways to elevate your packaging branding and additional elements to enrich the unboxing process. Here are a few suggestions:
- Branded packaging
- Tissue paper
- Filler
- Stickers
- Promo material and special offers
- Adhesive branded tape
- Gift
- Sneak-peak of the next subscription box
While the possibilities are vast, the real challenge lies in maintaining consistency in enhancing the customer experience. Ensuring ample stock is vital. Collaborating with logistics specialists equipped with comprehensive tools is advisable for an optimal logistics workflow.
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Delivery Time Sensitivity
Another primary concern revolves around delivery durations. Owing to giants like Amazon and others, customers now anticipate their orders to arrive within a mere 1-2 days post-purchase online.
The essence of subscription-based items lies in their regularity and repetition. Deliveries are often pre-scheduled with set dates. Consequently, it's imperative that your logistics system is streamlined and automated to:
- Ensure seamless integration between your sales platform and CRM with your logistics framework.
- Foresee potential hurdles, be it inventory shortages or delivery hold-ups stemming from internal or external factors.
- Continuously monitor the fulfilment progression.
- Collaborate with one or multiple delivery services to guarantee timely product delivery while securing competitive rates.
Furthermore, as subscription-based models inherently aim for growth, there will be a surge in both customer count and order volume, possibly expanding to new regions or nations. By distributing your stock and selecting diverse locations for your fulfilment hubs, you ensure timely deliveries to every patron.
Elevate Your Subscription-Based Product Fulfilment with a 3PL Partner
Subscription-based products are a promising business avenue, especially with the rise of online sales. However, their logistics and fulfilment can be challenging. With a 3PL provider like byrd, you can elevate your fulfilment process and monitor everything via our comprehensive logistics software.
Not convinced yet? Check out YourSuper success story, one of our customers that excels in selling subscription-based products!