How to Grow Your eCommerce Biz with Subscription Revenue

How to Grow Your eCommerce Biz with Subscription Revenue

Yes, subscription revenue is possible for any ecommerce business—and it might even be necessary for your long-term growth and stability. Subscription sales dramatically increase the ROI on your customer acquisition costs, not just in terms of direct profits generated, but in all sorts of indirect ways, too.

Across verticals, sales from each customer grow in number and in value the longer you keep your customers coming back. Lock them in with a subscription and their lifetime value soars.

Long-term subscription customers are more likely to become brand evangelists, too. They’re more likely to make additional purchases beyond their subscriptions. They provide predictable revenue that can give you the foundation you need to really ramp up your growth efforts. And they can lift you above the ever-growing onslaught of competition in each and every ecommerce niche.

Yes, all this can be yours!

But seriously, recurring revenue from subscription customers can transform your ecommerce business. If you don’t believe us, check out this post  that details the possibilities. When you’re ready to learn how to start generating subscription revenue no matter what ecommerce niche you’re in, come on back—or just scroll on down a bit right now.

Subscription Models for Ecommerce Businesses

Before you can start signing up subscription customers, of course, you’ll need to figure out exactly what you’re going to be providing with each subscription. You may be able to start a successful subscription service using products you already sell as one-time purchases, or you might need to think if parallel/complementary products that work in your niche and have steady value for your customers.

In order to pick the right products, you’ll need to chose a subscription model first. A way of doing things that works for your brand, your customers, and your business.

There might be more than one approach to subscription sales and revenue that could work for you. There’s no reason to avoid multiple subscription revenue streams, either, as long as they don’t force your customers to make complicated decisions (remember: the more choices your customers are required to make, the fewer sales you’ll make).

Don’t get in over your head, though. If this is your first foray into subscription selling, we recommend getting just one of the following subscription offerings off the ground to start. Once your initial subscription setup is generating steadily growing revenue, you can start experimenting with other options.

Recurring Replenishment

This is probably the simplest subscription approach, and it’s great for any type of product that people regularly run out of but always want on hand: food staples, cleaning supplies, hygiene products, and so on.

You send them a new supply each month, and get monthly recurring revenue in exchange.

A solid subscription service is a self-propelling money-making machine.

We aren’t just saying “monthly” because it’s handy, either. A monthly recurring charge is probably the ideal schedule for most subscriptions, in large part because it will mean a regular, once-per-statement charge on your customers’ credit cards. Monthly deliveries should also be enough to keep your brand in your customers’ minds, but aren’t so frequent that you start to become a bother.

Figure out the amount your customers are likely to use each month and build your subscription offers accordingly. Having a few subscription tiers with more savings for larger subscriptions may also be useful to your customers—and they’re a great way to drive conversions, too!

[Blank] of the Month

Keeping with the monthly theme, a “[Blank] of the Month” subscription model is a great way for many ecommerce businesses to not only build recurring revenue, but test new products, drive more repeat sales outside the subscription, and attract new customers.

There are some wildly successful ecommerce businesses built entirely around this subscription strategy, selling everything from gourmet coffee to men’s clothing to beauty products and more. Customers love the novelty of getting something new to try each month, and when they like it they’re likely to buy more!

If you go this route, try sending an email to your subscribers about a week after their packages arrive each month, inviting them to provide feedback and giving them a link with an invitation to purchase more. One study found that 81% of customers who received emails based on previous shopping habits either made another purchase or seriously considered it. With a highly targeted list of currently paying subscription customers, you might see even better results!

When you get a good response to a subscription product, you can make it part of your regular inventory. When results are less than stellar, you get a better idea of what your market wants and can adjust your inventory accordingly.

The Ever-Expanding Set

Toy companies caught onto this model a long time ago, and everything from cassette tapes to commemorative plates has proven that adults are susceptible to the allure of a collectibles subscription, too.

 

Their time has passed, but a Beanie Baby subscription service would have cleaned up a decade ago.

New varieties, different colors, added capabilities—we’re suckers for having it all, so any product line that provides a variety of options and add-ons naturally lends itself to this subscription model.

There’s some overlap here with the “[Blank] of the Month” concept; clothing that arrives as part of a subscription can be seen both as an expanding selection and a once-a-month treat, for example. Chances are framing it one way or the other will resonate better with your consumers and be more effective for your brand, though, so make a clear choice and communicate it well.

Try-and-Buy

Last—and possibly least—there’s the try-and-buy method, which relies on sending a small monthly sample of a product or two and allowing customers to purchase full-size products if and when they want them (there are also free trials that automatically convert into full-sized paid subscriptions, but that’s a trick for getting conversions, not a distinct subscription model).

We put this one at the bottom of the list because, due to their nature, try-and-buy subscriptions aren’t reliable revenue generators. To make the subscription attractive you have to drop the price to the point that it barely covers shipping, in most instances. You only make real money when your subscribers make larger purchases.

That doesn’t mean it isn’t viable, though. Birchbox has built an entire business out of the try-and-buy model, and after less than three years in business was seeing regular full-size purchases from 50% of their monthly trial-box subscribers.

You can drive more purchases with the same email technique described for the “[Blank] of the Month” model, too. For certain brands and niches—beauty and health, organic cleaning supplies, very niche-specific edibles like specialty diet items—a trial subscription can tempt curious buyers and give you an opportunity to talk them into bigger sales.

Next Steps: Starting Your Subscription Research

Hopefully you’ve already had a few ideas for building a subscription component for your ecommerce business. If you’re still stuck—and even if you’re not—do some brainstorming about your products and customers.

What problems do your products solve? What consumables, collectibles, or creative add-ons might solve the same problems and speak to the same audience?

Look into other subscription products that seem to be doing well with your audience, and look at your own sales patterns to generate ideas for recurring purchases your customers will be falling over themselves to sign up for. Start building a list and comparing the logistics—shipping costs, warehousing and distribution, etc.—If you get stuck we’ve got plenty of resources here to help.

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Tanner Larsson
Studly Husband, Super Dad and serial entrepreneur. Tanner is also the Founder of 80/20 Media an ecommerce incubator and the CEO of BuildGrowScale.com.