A subscription business model can be a very profitable idea for your company. Especially in a time when people are more open to personalized service and want to stray away from the burden of discovering new businesses. 

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In 2020 alone, more than 38% of people tried a subscription service for the first time in their life. This isn't exactly a new thing for India. Milkmen (Doodwalas) have been operating on a monthly subscription model long before anyone even dreamed of the internet. 

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The subscription ecommerce market is expected to grow to reach a whopping $478.2 billion by 2025. As more and more industries experiment with the subscription business model, the scope and reach expand. 

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What exactly is subscription ecommerce and how does it work?

You are aware of old-school subscription models in the form of magazines, doodwalas, newspaper salesmen etc.  When the same thing is applied to an online model it becomes subscription ecommerce. The magic of a subscription business is in the compounding nature of the customer-brand relationship. 

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You acquire a customer, charge them periodically and as long as the customer agrees on the value, they will continue to pay for the service for a very long time. 

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This recurring nature of the transaction makes it easy for brands to retain customers and spend all of their attention in perfecting the product/service and getting new people on board. 

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Low cost - High Output solution

As an organization acquiring more customers is the first and the most crucial task of building a stable company. The subscription model saves tremendous costs to the company.

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Did you know that the customer acquisition cost (CAC) has increased more than 60% in the past few years alone? Why is that? We already know that Facebook's algorithm has changed in the past few years, the organic reach of brands has gone down and there is a not-so-discreet push to move to paid ads. 

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Now also factor in the growing competition, India is witnessing a startup explosion, many startups come barging in, ready to splurge on ads and increase consumer base. 

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This increase in competition and the price of running ads has spiked the cost of acquisition substantially. A subscription model evades this cost by creating a steady stream of income. Once the customer is acquired, there is little effort in re-acquisition. Human beings are creatures of habit, if the product/service is sound, people don't switch easily. 

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Brands that pivoted to subscription ecommerce

When faced with stiff competition, even big brands made the switch to the subscription model. Innovation always seeps in, no matter the business or the magnitude of a rigid structure. 

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A big part of this recurring model is convenience. That's what keeps the customers hooked to your brand and loyal in the face of competition. Big brands like Gillette, Microsoft, Adobe and GoPro, all switched to a subscription model to make their product more accessible and to create a lasting relationship with the customers. 

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Even FMCG brands like Zomato (Zomato Gold), Swiggy (Swiggy Super), Bakebox, The Gourmet Box all offer subscriptions to customers that come with more features and premium access. 

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The 3 types of subscription models you should know about 

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1) Replenishment subscription service

This subscription model provides regular delivery of a particular product after a pre-defined interval. The process is automated for the convenience of the customer. People usually buy into a replenishment model because of the relatively low cost at which companies sell the subscription.
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Brands that operate on this model: BBDaily, Supr Daily, Dollar Shave Club. 

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2) Curation subscription service 

This model is focused on sending curated products to subscribers. These products are personalized to fit each individual's taste and preference. “77% of both millennials and Gen-Z say they are interested in curated subscriptions to products or services” ~ According to a study by Accenture.

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Curated boxes have worked well for fashion, beauty, and apparel. They are personalized and offer something fresh to people every month, these mystery boxes add an element of surprise and it makes for a thrilling experience for subscribers.  With these subscription boxes, people get access to stylized, personalized, and coordinated clothing/accessories curated by experts. 

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Brands that operate on this model: Sugar Box, Krate, Lady Raga.

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3) Access-based subscriptions 

This model works on giving subscribers special perks and lower prices. Many brands don't want to switch completely to the subscription model and risk losing out on a larger customer base. 

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They go for an access-based subscription model. Zomato is a free-to-use app for everybody, so they introduced Zomato Gold that works on a subscription and offers discounts on food & restaurants, faster delivery, and more. 

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Brands that operate on this model: Zomato, Swiggy, Furlenco

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How to start your subscription ecommerce?

When you are thinking of starting a subscription business, you need one platform that: 

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• Manages your orders in one place

• Assist you in customizing your offering

• Automate customer communication & is easy to use. 

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Fynd Platform is one such platform that effectively checks all the boxes and also allows you to expand as and when your business grows.  You can start your business within 30 minutes or less, add products, get access to payment gateways and customizable options to make your business vision come to life with an interactive and beautiful website. It is important to note that Fynd Platform is a very affordable service to make your brand a reality. 

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Tips for a profitable subscription business

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1) Evaluate your product/service

The first and the most important step in starting your subscription business is finding a product/market fit. Doing an industry-wise analysis will act as a litmus test to know the viability of your idea in the real world. 

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2) Focus on personalization 

The secret to subscription success is personalization. When customers are paying you regularly, they expect you to know what they want. Invest in technology to map your customer's journey and understand what your target audience is really looking for. 

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More personalization = More customer loyalty

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3) Smarter Retention Strategies 

When you are starting off, you need to simultaneously focus on acquiring new customers and retaining the ones you acquire, but in the long run, retention is your primary objective. 

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Smarter retention strategies are crucial here. Put more emphasis on customer's lifetime value or CLV, when your subscribers stick around that's when you start making more money. Innovate and incentivize to ensure retention in your subscription ecommerce. 

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4) Analyze your churn

The biggest threat to the existence of a subscription business is churn. You need to analyze and understand the reason people opt out of subscriptions, so you can plug that leak. 

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The best ecommerce strategy for a subscription company is to analyze everything that you are doing and ensure that your loyal customers don't move out of your system. 

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Subscription ecommerce is all about knowing your customers

One size fits all approach isn't working in the world of hyper-personalized selling. Subscription ecommerce is gaining momentum because it challenges the orthodox approach, recognizes individual needs, and makes it cheaper for consumers to access premium goods/services.

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Businesses gain a loyal customer base, recurring revenue, and lower expense. A win-win situation for everyone. If you want to become a successful subscription business, then you must keep note of the slightest change in consumer behaviour and preferences.

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When your business is largely dependent on your existing customer base then knowing them intimately will give you key insights to improve experience and strategically expand your customer base.