Subcription Commerce What is it? Definition & advantages

What Is Subscription Commerce and How Does It Work?

In the modern business world, many global companies are increasingly relying on subscriptions for their products and services. Instead of selling a product or service once, an ongoing contract is used. Both parties are therefore consciously entering into a medium- to long-term business relationship.

The term and price are usually freely definable, but monthly and annual terms are the most common. As long as the customer has the subscription and pays, the company guarantees the agreed services – whether it is access to systems, locations and services or regular product deliveries.

Nowadays, there is a whole range of different types (more on this later):

• Product or goods subscriptions

• Service subscriptions

• Access-based subscriptions

• Curated subscriptions

• Renewable subscriptions

• Community or membership subscriptions

• Hybrid subscriptions

Thanks to the increasing importance of digitalization and e-commerce, there have been many new subscription offers, especially in the digital sector. Streaming, software and cloud services are typical new services that people now consume as subscriptions.

What Advantages Does Subscription Commerce Offer Retailers?

The triumph of this business model is no coincidence, but it is based on numerous advantages for retailers and customers. On one side, subscription commerce means stable sales and greater loyalty, while the other benefits from manageable costs and a high level of convenience.

Predictable Sales

In times of high competitive pressure and rising interest rates, stable, predictable sales can be decisive for the success of a product or company. The risk of total failure is drastically reduced because subscription commerce relies on low ongoing contributions instead of demanding high and risky one-off payments from customers.

A typical example of this is the introduction of a new software version, which in the past was often associated with a great deal of risk. How many existing customers will accept a new purchase price to make the switch? A subscription, on the other hand, only requires low ongoing contributions, which means better predictability for everyone involved.

Stronger Customer Loyalty

In addition, customer loyalty is typically stronger because customers are kept loyal by low ongoing costs, but also because they no longer have to take any action themselves once they have taken out a subscription. It continues to run automatically in the background and direct debits generally do not require any additional authorization.

In addition, companies have much better opportunities to position related products or services with attractive discounts. Anyone with a subscription usually pays less for other company services. Personalized additional offers are also much easier because important customer data is already available.

Higher Customer Value

All of this is ultimately reflected in higher customer value or customer lifetime value (CLV). Business relationships based on subscription commerce are simply more profitable. In particular, the often high costs of customer acquisition are less significant with subscriptions, which is due to better customer loyalty (see above).

But even the level of long-term sales is higher as a whole because significantly more customers can be acquired. If you also compare the average order value (AOV), retailers with subscriptions achieve significantly better values. An important aspect here is the valuable customer data that can be collected over time.

What Types of Subscription Commerce Are There?

Today, practically all services are also available as subscriptions, as most companies have recognized the benefits of subscription commerce. Stable and higher sales, as well as strong customer loyalty, speak for themselves.

Product or Goods Subscriptions

With such e-commerce subscription services, customers receive regular product deliveries as part of their subscription. Many start-ups are currently trying to establish themselves as long-term partners, as high margins are attractive once customers have been successfully acquired. This is why we are currently seeing a lot of marketing in this area. Classic examples are cooking boxes, beauty boxes and, increasingly, even clothing boxes.

Service Subscriptions

Some of the best-known and most popular subscriptions relate to services. In the past, this was typically a gym membership, but due to digitalization, this now applies to practically all streaming services and numerous cloud software offerings. A subscription commerce platform offers paying customers access to the desired services to an agreed-upon extent.

Access-Based Subscriptions

Another type of subscription is used in the entertainment and education sectors in particular: the access-based subscription. Instead of buying individual products such as books and articles, customers receive access to an entire platform for online courses or a digital library. Most recently, game subscriptions from Big Tech, which also rely on a comprehensive library, have become more popular as well.

Curated Subscriptions

This subscription model aims to win people over thanks to personalized services and products that are created with their preferences in mind. The market for this is still generally considered to be very new and untapped, but the willingness to pay seems to be there. Individual fashion boxes, book recommendations, and personalized gifts are intended to simplify decision-making processes and provide surprises.

Renewable Subscriptions

Of course, all subscriptions are initially renewable, but in this case, the focus is on the customer's needs. We are talking about products and services that are regularly needed and need to be renewed. These could be household goods, contact lenses or shaving products, for example. Subscription commerce aims to provide customers with a carefree everyday life thanks to automatic replenishment.

Community or Membership Subscriptions

Another model with increasingly attractive growth figures is community or membership subscriptions. This gives a paying member access to a community or group with special benefits. In most cases, exclusive content is only available there. Examples include premium memberships in online communities, exclusive clubs and supporter subscriptions for artists, content creators or influencers.

Hybrid Subscriptions

Occasionally, the boundaries between physical and digital offers and services become blurred. Bundle offers from different product categories ensure even stronger customer loyalty. This requires appropriate resources and can usually only be realized with a Big Commerce subscription, such as Amazon Prime. Customers then have access to many digital services as well as discounted products and deliveries.

Who Is Subscription Commerce Suitable For?

The various types of subscription models show that subscription commerce can be profitable for most companies. What was once the preserve of just a few sectors can now be implemented practically everywhere thanks to digitalization and e-commerce.

What is particularly important here is strong web application development to be able to provide products and services in line with demand. Retailers should therefore rely on a reliable partner in advance to set up a successful subscription commerce platform.

Numerous benefits can be achieved with sustainable subscription models:

• Higher and more stable sales

• Better customer retention and loyalty

• Lower customer acquisition costs

• Important customer and product data

• Sustainable business growth

It is therefore hardly surprising that sales in the subscription economy have increased steadily in recent years. Attractive growth opportunities can also be expected in the future, meaning that hardly any company should forego the advantages of this business model.

Conclusion – The Future Belongs to the Subscription Model

Although subscriptions have been around for decades, new subscription models are increasingly gaining momentum due to digitalization and e-commerce. The growth opportunities cannot be denied, which is why all global giants are increasingly focusing on subscription commerce – whether it is Apple, Google, Amazon or Microsoft.

But with the right partner at your side, even smaller companies can benefit from the advantages of a subscription model. We are your reliable partner for professional web application development, so you can set up a successful subscription commerce platform in no time.