The subscription economy has been booming in recent years, mainly due to the pandemic. In the pursuit to increase sales, revenue flow, and profits, a large number of eCommerce businesses have taken to the recurring or subscriptions business model.
Different brands offer different types of subscriptions, depending on their products, industries, and target audience.And, different types of subscription models offer different benefits to merchants and customers.
In this lesson, we will explore the different types of subscription models used by eCommerce businesses and what makes them so popular with customers and retailers.
If you missed Lesson 1 and Lesson 2 on ecommerce subscriptions, don’t forget to read them here.
What is the eCommerce subscription model?
The eCommerce subscription model enables customers to subscribe to products and services they require on a recurring basis. The subscription retailer delivers the products and services at predefined intervals against a recurring fee. For example, subscriptions can be fortnightly, monthly, quarterly, half yearly, or annual.
Some of the best examples of subscriptions are newspaper and magazine deliveries, milk deliveries, vegetable and fruit deliveries, online libraries, among others.
But why are subscription models getting so popular in the eCommerce world? Let’s find out the benefits:
- Subscriptions help increase the customer retention rate as customers sign up for long-term durations
- Subscriptions help online retailers predict their business and revenue flow
- As customers sign up for long-term, it helps boost customer loyalty towards the brand
- Subscriptions bring convenience and ease to recurring shopping
- Subscriptions create more opportunities to upsell and cross-sell products and services
- It makes it easy for retailers to introduce new products to customers
- Subscription models bring flexibility to customers
- Ecommerce subscriptions help brands collect insightful customer behavior data
Why is it critical to understand the different types of subscription models for eCommerce?
When it comes to offering subscriptions, a one-size-fits-all approach does not work! All types of subscription models do not work for all kinds of businesses! To find the best and most suitable model for a product or business, it is a must to first have an understanding of the different subscription model possibilities out there..
Understanding different types of subscription models helps:
- Determine the best subscription model suitable for your product
- Determine which model will be the most beneficial (and hence, most attractive), to your customers
- Decide how to price the subscriptions
- Satisfy your customers’ desire for personalization
- Build customer engagement and thereby, loyalty
Types of ecommerce subscription models
1. Replenishment/ consumables subscription model
Certain products such as groceries, food items, medicines, and health supplements, among others, need to be purchased regularly by consumers. These are items that most people need to purchase on a weekly or monthly basis. These are the items for which a replenishment subscription model works best!
A replenishment subscription model helps to provide products on a regular and recurring basis to customers, without them having to place orders every time. In other words, they can automate purchases through this model. This type of subscription model is also called the ‘subscribe and save’ model (Think, Amazon!).
How does this model benefit consumers?
- Replenishment subscription models are all about convenience for customers. Through this model, the customers can get products delivered on a regular basis with minimal to no effort on their end.
- This model helps customers save the time and hassle of remembering to place orders, or with which brand they placed the order the previous time.
- This model provides cost benefits to customers, through potential discounts for recurring orders placed over a long period.
- Consumers are impatient. When they place an order, they need the delivery as soon as possible. With the replenishment subscription model, customers can get products delivered at the right time, and at desired intervals.
How does it benefit retailers?
- Replenishment subscription model adds a competitive advantage to a brand. Consumers who prefer the convenience of this model would choose your brand over your competitors that don’t offer this model.
- As customers sign up for regular deliveries at predetermined intervals, your brand is ensured a consistent stream of revenue.
- By receiving orders through the replenishment model, you can manage the inventory better, as you can predict the demand and delivery timelines for your products.
- You can forecast demand and align the demand-supply of your products more thoroughly.
- Through this model, you can improve your customer retention rate.
- Improved customer retention rates have a direct positive effect on the customer lifetime value. This also means improved returns on customer acquisition efforts and costs.
2. Curation subscription model
The curation subscription model functions on the element of ‘surprise’. In this model, customers do not know what items they would be receiving in each delivery! In this model, stores put together assorted products, and deliver them to customers at predetermined intervals.
Also known as the ‘curated box’, this type of subscription model has the potential of a high level of personalization. Brands can include products that match customer preference and choice at a segment of one (individual) level.
This model is most commonly used for beverages (liquor, coffee), toys, books, chocolates, condiments, cheese, wine, etc. A key advantage of this model for brands is that they can easily get customers to try new products by simply adding them to the curated box.
How does this model benefit consumers?
- Curated subscription model satisfies customers’ want for personalization. Quite often, when customers sign up, customers are asked to tick or cross out items that they prefer and don’t prefer, respectively, for the brand Managers/AI to understand their preferences and tastes.
- Personalized curated boxes provide a better customer experience to customers – one marked by a feeling of being valued and understood.
- Curated subscription boxes also have an element of surprise and delight, which gives a sense of excitement to customers.
- Through curated boxes, customers can get to try new products, which they would not have bought otherwise.
How does it benefit retailers?
- The curation subscription model offers all the usual benefits that other subscription models offer, such as increased returns on customer acquisition cost, better prediction of revenue and demand, inventory, etc.
- Curated subscription model provides a good opportunity for brands to build and nurture richer relationships with customers.
- Brands can offer highly personalized experiences to customers as they can easily collect information about customers’ preferences.
- One of the best advantages of this model is that satisfied customers help spread the word and bring more customers for brands.
3. Bargain/ access subscription model
Bargain or access subscription model is where customers pay a monthly subscription fee to avail access to new products, products at bargain or discounted prices, or other members-only deals. This subscription model is commonly used for products in the health and wellness, food, and fashion industries.
Through this model, customers are assured of great and exclusive deals on products, and is generally beneficial to those shoppers who are on a budget and purchase volumes.
The bargain subscription model works on the element of exclusivity as well.. Customers feel special or exclusive when they have access to new products, discounted products, and products that come with special deals.
How does this model benefit consumers?
- Through the bargain subscription model, customers can avail discounts and deals on products and services.
- This type of subscription model usually allows customers easy cancellation whenever they want.
- Customers who are on a budget can maximize the benefits of this type of subscription model.
How does this model benefit retailers?
- Through this model, retailers can ensure consistent revenue of all types of products in their inventory.
- Brands can offer multiple pricing models within this model.
4. Fixed subscription model
In the fixed subscription model, retailers offer a fixed set of products for a fixed price for a predefined duration. This type of subscription model is most commonly seen in SaaS (Software as a Service) products. SaaS companies offer a fixed number of features for a fixed price for a specific duration. Once the usage crosses a certain threshold, any extra cost gets active.
How does this model benefit consumers?
- It is the most hassle-free subscription model, where everything is fixed.
- This subscription model is straightforward and hence easy for customers to understand and make purchase decisions.
- Customers can keep a track of how much of their usage, to determine the balance (within their plan), and when the extra costs will kick in.
How does this model benefit retailers?
- Retailers can predict their revenue and accordingly make business decisions.
- Retailers can ensure recurring and consistent revenue.
- This model helps brands build long-term relationships with customers that can help them deliver personalized products/services.
5. Unlimited subscription model
An unlimited subscription model is not very common in eCommerce businesses. In this model, customers pay a certain amount and are allowed unlimited usage of a product. For example, some pubs charge a fixed entry fee and provide unlimited drinks! However, depending onthe product, and customer’s general use case of the product, unlimited subscriptions can be a workable type. For example, Newspaper subscriptions, which allow unlimited access to news and article content for a fixed monthly price! Or, Netflix, which allows unlimited access to their streaming content, for a monthly fee, is also a successful example of this model type.
How does this model benefit consumers?
- Customers get an unlimited supply of a specified product under this subscription model.
- Customers have to pay a predetermined amount, which keeps the pricing straightforward and makes it easy for customers to make a purchase decision.
How does this model benefit retailers?
- This type of subscription model attracts many customers, hence retailers can ensure higher revenue.
6. Pay as you go subscription model
Pay-as-you-go is a usage-based subscription model. Customers pay on the basis of how much of a product or service they use. A lot of smaller companies use this subscription model to get started when they first launch a product or the company. This model of subscription is most commonly used by telecom and internet companies.
How does this model benefit consumers?
- Customers have to pay only for the amount of products/services they use, and hence are assured that they don’t have to pay anything extra.
How does this model benefit retailers?
- This subscription model makes it easy for brands to launch new products.
- It helps brands assess the response to new products.
7. Premium member subscription model
In this subscription model, customers pay a fee to access premium services, or to use products. This model works on the principle of making customers feel exclusive and special. A good example of this subscription model is Amazon Prime. This subscription model is popular in various industries such as eCommerce,, food and restaurant, clothing and lifestyle, etc.
How does this model benefit consumers?
- Consumers get exclusive benefits. Exclusivity makes them feel special and valued.
How does this model benefit retailers?
- Brands can build strong, long-term relationships with customers.
- Brands can offer personalized experiences to customers via this model.
8. Build your own box/DIY subscription box
Build a box or DIY subscription model allows customers to DIY (do it yourself) their preferred subscription box. Here, customers choose the products they want in their subscription box, which is delivered to them at predefined intervals.
Build your box subscriptions are popular for items such as meal kits or meal boxes, wellness products, toys and books, beauty and selfcare, among others.
How does this model benefit customers?
- Customers get to choose the products, the quantity, and the price options
- Customers get freedom and flexibility and they are in control of their subscription box
How does this model benefit retailers?
- eCommerce stores that have a smaller catalog of products can use this model so customers don’t feel like they aren’t getting variety in their boxes. For example, brands offering a niche group of products can use this model
- Customers get to choose, which gives them freedom and flexibility. This helps ensure customer satisfaction
Example: BarkBox is a monthly subscription box for pet products
Conclusion
Whether you’re offering a monthly curated box of makeup products, or delivering medicines on a monthly repeat subscription model, or bringing together the best deals on fashion and apparel for your exclusive members, it’s safe to say that subscriptions are everywhere! Customers want subscription models. Brands don’t want to be left behind in the subscription economy.
As we’ve seen above, the subscription model that’s right for you will depend on your product/service, industry, business, and target customer persona.
At Appstle, we know the ins and outs of different types of subscription models! We’ve comprehensively and robustly built platforms and functionalities that help ecommerce businesses explore the different types of subscription models, to choose the ones that align with their business goals.
Subscribe to our blog, to be notified of new updates. Do not miss out on the insights!
Looking to get started with ecommerce subscriptions? Click the links below:
Frequently asked questions
How do I create a subscription model on Shopify?
To create a subscription model on your Shopify website, install a smart Shopify subscription app that will help you integrate the model into your online business. One of the most preferred apps is Appstle Subscriptions and Loyalty app, preferred by hundreds of Shopify merchants.
Which is the best shopify subscriptions app?
The best Shopify subscription app is Appstle. It allows customization, flexible billing options, bundling, automation, loyalty features, easy management via a comprehensive dashboard, quick checkout and easy integrations, making it easy for online stores to manage subscriptions.
Which is the best subscription model for ecommerce?
There are different types of subscription models—replenishment, curation, build a box, bargain, fixed, unlimited, pay as you go, and premium member models. The type that you must choose would depend on your Shopify business, customer preference, industry and market trends.
Additional reads
There are many different types of subscription models—each has different requirements and is applicable to different industries and products. Here’s an industry wise list of guides to help you understand and create a subscription business model for your Shopify store.
