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Why you should sell subscription eCommerce products

Subscription eCommerce products increase revenue and lifetime customer value. Here are the four key reasons to adopt a subscription model.

If you are selling anything online, you should consider selling subscription eCommerce products. Despite what you may think, almost anything can be turned into a subscription product — if you adopt the right mindset and plan well. 

In this guide, we will explore some ideas for subscription eCommerce products. Then we will explain why you should be selling subscription eCommerce products.

What products can be sold with subscriptions? 

Many familiar products work well with subscriptions, like software licenses that need a renewal on an annual or monthly recurring basis. Think Adobe Creative Cloud or any number of software-as-a-service platforms. 

But can physical products be sold with subscriptions?

Yes, they can. Here are just a few examples: 

  • Pet Food — Pets owners are a big market grossing over $36.9 billion per year in the US alone. Selling pet food through weekly or monthly subscriptions in bulk is a sure-fire way to start bringing in customers. 
  • Grooming and Beauty Products — Subscription boxes are a huge business. They are becoming very common, thanks to household names like Harpers Bazaar. It's easy to start with cosmetics, skincare, and grooming products because they are readily available from wholesalers. You could even begin by buying discount products in-store to round out your subscription boxes. 
  • Clothing and Fashion — Another model for subscription boxes is to let customers pick their favorite brands and styles, and then you send out new clothes that suit them every month. The Menlo Club is an example of this approach pioneered by the Trunk Club.
  • Family and Kids' Activities — My kids get a subscription activity box every month. They received it as a Christmas present, and it is great! Built from really simple materials and printed guides, it's a low-cost product that a family like mine can keep for years. I'm not surprised there are so many subscription boxes for kids' crafts and games.

Almost any consumer item that needs periodic replacement is attractive to buy as a subscription-based eCommerce product. Even Amazon got in the act not long ago by allowing customers to subscribe to grocery and household products such as dishwashing detergent tablets, vitamins, and other items commonly purchased again and again. 

Where is the value in selling subscription eCommerce products? 

Why should you even consider selling subscription eCommerce products? There are four solid reasons.

1: Increase your per-customer revenue

Customer acquisition is not cheap! After all, you have marketing costs such as your website, the cost of advertising, your web hosting, and maybe a mailing list — it all adds up. Suppose your average customer costs you $20 to acquire, and the product they buy costs you $20 to provide. If you sell it for $45, you make only a $5 profit on every sale. 

But what if those customers become subscribers? Once you have acquired them, your profit per sale is $25 — a fivefold increase. So, instead of selling a single product for $45 here and there to different people, you sell a $45 product every month to the same customers. If the customer stays subscribed for 12 months, you will make $280 in profit. You also will have a well-defined customer base you can communicate with directly to get their valuable feedback, monitor and manage their concerns, make them special offers, and gain loyal fans for your business.

2: Lower shipping costs

By selling subscription products that you ship monthly, you will always have a fixed number of parcels to mail. That gives you a negotiating tool with couriers and shipping carriers all over the world.

Most shipping companies to enter a conversation with you about special rates will want to guarantee a minimum number of parcels, and some will charge you for that number even if your sales do not meet it. That is why selling subscription eCommerce products puts you in a strong business position. 

3: Easier to manage inventory 

When you manage an eCommerce business based on physical goods, managing your stock can be challenging. If you carry too much product, your cash flow goes out the window. If your inventory is too small to meet sales, you risk losing customers and damaging your business reputation by making them wait. 

That is why subscription eCommerce products can be so attractive. Subscription management is simple. If you have 100 subscribers when the time comes to buy new stock, you know you need a minimum of 100 units. You might overstock by 10% in case you make extra sales. 

That is far better than trying to guess if you need to order ten units or 10,000 units. You are freeing up cash flow so you can build your business up. 

4: Recurring revenue 

What is the secret to all those multi-million software businesses? Recurring revenue. It works much the same way compound interest does — it starts small and grows over time. 

For example, imagine that you get ten new customers subscribing every month, so by the end of the year, you have 120 customers. In the first month, you only get ten payments. In the second month, you get 20. Finally, you have 120 people paying you in the twelfth month. 

Also, your customer acquisition cost is much lower. Once a customer has signed up for a recurring payment, you do not have to spend more money to maintain the same revenue from new customers.

What to be aware of when selling subscription eCommerce products?

While there are many upsides to selling subscription eCommerce products, there are some downsides too.

The primary downside is customer churn. 

Churn happens when a subscriber cancels. Some customers may subscribe for years and never cancel. Some customers may subscribe for three moÎnths, cancel — and then return later in the year. Others may cancel after the first month. 

Like anything in business, there is no certainty. Until you have a payment, you cannot assume the customer will remain subscribed the following month. 

That said, you can cope with fluctuations in active customers if your cash flow benefits from the lower costs of an inventory matched more closely to your customer base. 

Wrapping up

Subscription eCommerce products are a great way to grow your business and improve your cash flow. They may also improve your business health and prospects in these uncertain times. 

Thanks to the ever-growing demand for everyday products to be delivered to our doors, you could not be starting at a better time. While subscription-based sales are not without their challenges, there is little downside to it.

Have you run an eCommerce subscription product? Maybe you run a subscription box business? Or perhaps you have subscribed to subscription box businesses before? What worked well, and what failed? Let us know what your thoughts are in the Commerce Journey Facebook group.

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