A must-have guide to Shopify subscriptions
The global ecommerce subscription market is expected to increase by $784 billion by 2026! That’s a sharp rise at breakneck speed.
A subscription business is a new model for many industries and Shopify stores. And that’s why it requires more understanding and effort from brands. If not done right, it could fail badly.
A study backed by McKinsey & Co. reveals that 40% of subscribers cancel within three months.
With such a high churn rate, brands must understand the basics and nitty-gritty of this business model.
And that’s what we’ll cover in this article — all the basics for running your subscription business with confidence.
Ecommerce subscription model basics: what they are and what brands they’re best for
Ecommerce subscription is a business model through which customers receive products and services on a recurring basis for a predefined period (usually a long duration). They work best for products and services that customers need repeatedly. For example, groceries, health supplements, internet services, software tools, etc.
With subscription models, customers do not necessarily have to place orders repeatedly. Their recurring orders are placed automatically and delivered to them at a pre-selected date/time.
Subscription duration can vary; for example, one month, one quarter, six months, annually, etc. Amazing Cosmetics, for example, delivers its FLAWLESS ME Subscription Box every 30, 60, 90 or 120 days.
Various industries can benefit from offering a subscription plan:
- Beauty and wellness. People stick to beauty and wellness brands and products that work for them. Plus, products have expiry dates, meaning periodic replenishment is necessary.
- Health and fitness. Subscriptions come not only in the form of physical products, but software, apps, and online services. Online fitness training, exercise, and food and nutrition plans are a few examples.
- Pet industry. Pet parents want the best products plus convenience. Let’s face the fact – pets require a lot of time. Given everyone’s busy schedules, subscriptions are one less thing to worry about.
- Groceries and food. Groceries and eatables are one of the most recurring purchases made by consumers. Subscriptions provide the ease of regular deliveries, one-time upfront payment, no delivery charges (one of the most common benefits), and discounts.
- Fashion and lifestyle. Both brands and consumers are open to trying new business models. Some standard formats in this industry: curated boxes, rentals and best bargains (for designer wear).
Benefits of the subscription model
Subscription models provide multiple perks to both Shopify businesses and consumers.
On the business side, they:
- Generate consistent revenue and contribute to a steady flow of income, critical aspects behind profitability
- Make it easy to predict revenue, and therefore improve decision-making and management of elements such as inventory
- Help increase customer retention and foster long-term customer-brand relationships
- Improve company value to investors and increase company stability
- Boost customer engagement because of regular communication opportunities, such as delivery updates, newsletters, offers, announcements, new products, etc.
- Boost business scalability, as businesses that increase customers and cash flow (subscription customers spend more per month and purchase more frequently) are in a better position to introduce different plans and pricing for a broader customer base
On the other hand, consumers:
- Eliminate constant reorders for recurring purchases, as they make a one-time payment and set delivery dates and times upfront
- Receive more benefits, better discounts and prices than one-time customers; 62% of customers sign up because subscriptions are good value for the money they pay
- Are introduced to what’s new in the market, as they are often the first to hear about and try new products through samples
- Build a stronger connection with the brand; 64% of subscribers feel more connected to brands with whom they have a subscription versus those from whom they make one-off transactions
5 ecommerce subscription model businesses for inspiration
So what can a subscription model look like? We’ve rounded up five examples to provide a glimpse.
1. Box of Style: curated subscription box (fashion)
Customers love this subscription box, as it takes personalization to the next level with features such as an onboarding survey that helps the brand identify its customers’ needs.
2. Chewy: auto-ship subscription (pet supplies)
The pet supplies subscription business offers significant discounts on all pet supplies, which helps pet parents save a lot over the long term.
3. Sephora: Luxe Box (beauty)
This beauty subscription box by Sephora keeps customers interested and engaged with elements of surprise by adding new products every once in a while.
4. Bluum: curated box subscription (baby products)
Bluum’s baby products curated subscription box helps busy moms discover new products for themselves and their babies.
5. MuscleBox & Miss MuscleBox (fitness)
MuscleBox offers subscription boxes for both men and women. The deliveries include workout gear, gym clothes, protein snacks, and supplements.
Steps for getting started with subscriptions
As mentioned, setting up subscriptions requires effort. Following the steps below will set you up for success.
Step #1 Identify your target audience
Knowing your customers is critical. When you identify your target customers, you can offer relevant products and services that align with their needs.
Here are some questions to ask yourself:
- What are the different segments of your customers?
- What are the problems that you could solve via a subscription?
- How much would your target customers be willing to pay?
- Do they want a subscription to your products/services?
Need more direction? Check out a masterclass on identifying the subscription target audience and demand.
Step #2 Identify your unique selling proposition (USP)
Your Shopify store might have many products and services. But does it mean you should offer all of them on a subscription basis? Not really. You will have to identify what makes sense to provide via subscription.
Here’s what you should do:
- Identify products/services from your store that are a recurring need for customers
- Use data from the past to analyze which products/services have the highest reorders
- Identify products for which you could offer services on a subscription model
- Look for products that have a potential for innovation and growth so that you can grow your subscription model
Find more guidance through a masterclass about choosing the right products for your subscription model
Step #3 Understand the different types of subscription models
There are different subscription models and you need to choose one that fits your product or service category, industry, and customer needs.
Popular subscription models include:
- Replenish subscription model: works best for consumable items that need regular replenishment, such as groceries, medicines, health supplements and pet food
- Curated box subscription model: customers don’t know what they’ll receive for their box of curated products; best for products such as clothing, books, shoes, jewelry, food and wine
- Bargain or access subscription model: customers pay a monthly fee for access to new products at discounted prices or subscribers-only deals; works best for fashion, designer goods, health and wellness
Step #4 Set KPIs and performance metrics
Setting a goal and knowing the factors that will help you achieve them go a long way in staying on track. So once you determine your goals, establish affiliated key performance indicators (KPIs) and performance metrics for each.
Here are some metrics to measure:
- Number of new members
- Number of cancellations
- Average duration of members
- The perks usage
- Customer lifetime value
- Monthly recurring revenue
Read this blog article to understand subscription business KPIs and metrics in detail
Step #5 Install a subscriptions app
There’s a lot that goes on in a subscription business. While you might be able to do everything manually initially, it would be difficult to continue as your business scales.
That’s why it’s a must for subscription businesses to install an efficient subscription app. Here are some tips for choosing the best subscription app for your Shopify store. The app should:
- Be easy to set up
- Have detailed how-to guides and onboarding help
- Be GDPR and data-privacy compliant
- Offer seamless migration from other apps
- Support 2.0 themes
- Offer customization features, such as pricing and development
- Provide 24/7 efficient customer support
Step #6 Set up communications
Your Shopify store subscribers are your most loyal customers. They’ve entered into a long-term relationship with your brand. And you must ensure there’s no glitch in your communication plan for them.
A subscription business model entails different types of communication, such as updates on delivery, due date reminders, and announcements for new products or offers.
The more you stay in touch with your subscribers, the stronger customer relationships you build. Automation — whether through email, SMS, Messenger, or some other platform — ensures you never miss sending notifications.
New to email automations? We cover the FAQs.
Step #7 Go live, monitor, optimize
We discussed the steps to launch your subscription and how to monitor performance earlier in this blog. The next step would be to optimize.
Here’s what to do:
- Monitor the different aspects of your business
- Identify what’s working and what’s not
- Tweak and change what’s not working to make it better
- Repeat this process continually
Ready to get started with your Shopify subscription business?
It’s imperative for Shopify merchants across all industries to explore and build new revenue streams alongside traditional ecommerce. The need has never been stronger.
A subscription model may be a big step for you into the unknown. And hence, you should test out what works, what doesn’t, and optimize. And to help you with all the explorations and challenges mentioned in this guide to ecommerce subscriptions, it’s best to rely on an efficient subscription app.
Vanhishikha Bhargava is the Content Marketer at Appstle, a company focused on building apps for customer retention for Shopify stores. Appstle currently has two leading 5-star apps on Shopify, Appstle Subscriptions and Appstle Memberships. She is also the founder of Contensify, which helps ecommerce SaaS businesses establish an organic audience.
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