The rise of e-commerce subscription models

The rise of e-commerce subscription models | 5-minute read

In recent years, e-commerce subscription models have soared in popularity and have transformed the digital marketplace, offering consumers convenience and valuable shopping experiences.

The rise of e-commerce subscription models reflects modern consumer preferences and purchasing behaviour. As consumers prioritise convenience, subscription models continue to grow to meet demand.

For businesses, subscription-based models offer recurring revenue, financial security, and a loyal subscriber base.

What exactly is an e-commerce subscription model and is it a sustainable long-term strategy for success?  This blog will introduce e-commerce subscription models and explore the benefits, types, and challenges for e-commerce businesses and consumers.

What are e-commerce subscription models?

E-commerce subscription models allow customers to subscribe to receive goods, services, or digital content on a regular and recurring basis. These subscriptions can include a range of product offerings such as product boxes, software, entertainment platforms, and more.

This allows customers to automate and receive regularly scheduled deliveries in exchange for a recurring fee. Typically, the consumer will visit the website and select the subscription service that suits their needs and preferences.

This eliminates the need to manually reorder products and automates the replenishment process to ensure a steady supply of essential items. Products and services that prove popular in e-commerce subscription models include:

• Beauty and personal care
• Food and beverage
• Health and wellness
• Entertainment

Benefits for e-commerce businesses

There are many benefits of e-commerce subscription models for businesses. Some ways businesses can benefit from offering an e-commerce subscription model include:

Guaranteed revenue

E-commerce subscription models provide businesses with consistent, recurring, and guaranteed income. With a stable revenue stream, businesses become more financially secure. Whether consumers subscribe on a weekly, monthly, or annual basis, e-commerce stores can better predict their income when compared to single transactions.

Customer loyalty

By creating a subscriber base, businesses can also benefit from increased brand loyalty and better relationships with customers. Subscribers are often committed and invested in the brand and offer continual engagement.

Additionally, the convenience, cost-saving, and customisation of subscription models is likely perceived as great value for subscribers, driving the relationship further.

Improved financial planning

With the ability to predict revenue streams and income, e-commerce subscription models allow businesses to plan for future growth.  It also means that businesses can invest with greater confidence and allocate resources more effectively.

Benefits for customers

E-commerce subscription models also offer a range of benefits to consumers. Some include:

Convenience

Subscription models are above all else convenient for consumers. By becoming a subscriber, consumers can receive regular deliveries of products and services without manually reordering. This saves the consumer time and ensures they never run out of any essential items.

Customisation

Consumers can customise their subscription to suit their needs, preferences, and tastes. They can also choose how regularly they receive these items, based on a timeframe of their choice. For consumers, this enhances the shopping experience by adding a personalised element.

Value

E-commerce subscription models often offer cost-savings and perks to subscribers. For example, they may receive a discounted rate for subscribing for a minimum period. This creates an overwhelming sense of value to subscribers to drive customer loyalty, experience, and satisfaction.

Challenges and considerations

However, there are some challenges associated with e-commerce subscription models

High churn rate

Customer churn is the rate at which subscribers cancel their subscriptions. Not every business or product offering is suited to an e-commerce subscription model, so this is an important point to consider. High churn rates mean businesses may experience reduced revenue.

Balancing value and price

Finding the right balance between value to the customer and the right price point can be tricky. Businesses must find a way to ensure the price point is attractive to customers and profitable for the company.

Technology and infrastructure

E-commerce subscription models require technology and infrastructure to support operations including billing and management software. This can be a big cost to businesses and time-consuming to manage.

Why choose Unicorn Accounting?

Ensure you keep on top of your ecommerce finances and tax obligations by outsourcing to an accountant.

At Unicorn Accounting, we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management, bookkeeping, cash flow statement, and tax filing services to support and scale your business.

Our team of accountants and Xero-certified advisors have experience working with both small start-ups and family-run online stores to large-scale, international retail and e-commerce brands.

If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience, and skills with innovative technologies. To see how we can help you maximise the scalability of your e-commerce brand all year round, get in touch with Unicorn Accounting today. Or click here to get a free quote.

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