3 Ways Subscriptions Will Help You Thrive in the Age of E-Commerce

The past two years have marked a turning point in modern commerce. Suddenly, retail businesses struggled to cope with a dramatic increase in demand as e-commerce sales soared. But is the rush to online shopping just a temporary side effect of the pandemic? Financial services firm UBS predicts that this “subscription economy” will reach $1.5 trillion by 2025, more than double its current estimate of $650 billion.

To capitalize on and sustain this growth trend, many e-commerce businesses are adding subscriptions to their offerings. However, to be successful, they must keep several factors in mind.

Issues to consider

There are many questions to consider when developing a subscription model. For example:

  • Acquisition: how to convince customers to subscribe to a continuous subscription?
  • CX: How do you create an enjoyable end-to-end customer experience that builds customer loyalty?
  • Payment options: how do you choose the best payment gateways?
  • Growth: how will you expand into new markets and geographies?
  • Pricing: How do you optimize your subscription pricing and package?
  • Inventory: How will you manage demand volatility and ensure sufficient supply?
  • Compliance: How do you ensure that interstate and international sales are tax compliant?

Three Ways Subscriptions Can Future-Proof Your Business

Despite these questions, building a successful subscription e-commerce business is well worth the effort. Continued growth in this area is on the horizon, in part because subscriptions provide merchants with more ways to diversify revenue, improve customer relationships, and extend customer lifetime value (LTV) .

There are three main reasons why subscriptions should be part of your consumer offering and why you should consider them as a way to future-proof your business.

1. Manage volatile supply and demand

E-commerce businesses need to be able to estimate consumer demand and react to ups and downs. Demand forecasting and preparedness will continue to be crucial for the foreseeable future.

Subscriptions can add a level of predictability. For restockable products that consumers buy repeatedly, Amazon is integrating subscriptions into its e-commerce offerings with the “Subscribe and Save” option. Along with infusing its businesses with a steady stream of recurring revenue, this model also helps them forecast future demand.

2. Test and optimize quickly

As the old saying goes, practice makes perfect. And as the new saying goes: you can always improve on perfection. To continually thrive in the face of dynamic consumer behavior, e-commerce businesses must be able to adapt quickly and continuously to make proactive changes to their value proposition, pricing, and packaging.

A subscription model allows companies to offer consumers various pricing and plan options, including monthly and annual subscriptions, curated and defined boxes, Subscribe and Save, and more. E-commerce businesses may choose to perform A/B testing to find out what works best for each customer segment.

3. Foster long-term relationships

Nurturing lasting relationships with customers is more rewarding for brands than one-off interactions. Subscriptions can cultivate customer loyalty and improve retention.

The subscription offer itself can also evolve with customers. Once subscribed, a self-service subscription model can offer consumers a wide variety of choices for their consumption decisions, giving them the ability to change their preferences, pause or skip sends, switch seamlessly between subscription and à la carte offerings…all can encourage long-term customer loyalty.

For subscription boxes, personalization allows businesses to meet consumer needs on their own terms and also adds an element of surprise to each box, keeping customers hooked.

How Technology Fuels Subscription Strategy and Customer Experience

Exceptional customer relationships have always been the best currency in business. This is even more true in the subscription economy. To deliver the best end-to-end customer experience, large-scale workflow automation is now more important than ever, as it saves you time by eliminating workflows and processes with touchpoints manuals.

Pricing and packaging tests also involve time-sensitive decisions. E-commerce businesses need flexibility to experiment and information to quickly learn and iterate. On-premises systems struggle with rapid testing and sophisticated data analysis. These complexities only increase with scale. That’s where automated subscription management and billing can help.

To maintain their business focus and maintain growth without having to expend resources, e-commerce businesses should consider vendors that make automating complex subscription billing processes their sole mission. They also need a reliable and frictionless payment partner.

For front-end operations to run smoothly, your billing system must be robust and scalable. This is rarely the case with subscription management and recurring billing systems. They are rarely built to scale, and their maintenance is expensive and time-consuming. Anytime you need to add more product categories or expand into new geographies, you need to add additional code to stay sales tax compliant and change your operations. As you expand globally, this can be a barrier to rapid growth and flexibility.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.

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