DTC 384: Are You Using Subscriptions In Your Ecommerce Store?

Acquisition costs are skyrocketing and we all know it’s not as easy to grow or gain traction as it was a few years ago. 😰

Once you have customers on your site, your list, and in the door, strengthening their lifetime value should be at the top of your to do list.

One way to ensure you’re protecting your month-over-month bottom line? Subscriptions in your ecommerce store.

Benefits of Subscriptions for eCommerce

1. Predictable Revenue Stream: Subscriptions can help keep your cash flows healthy even in times of market fluctuation.

2. Easier Inventory Management: Since businesses already know how many subscribers they have, procuring and stocking a precise amount becomes more efficient.

3. Reduced Customer Acquisition Costs: As the famous statistic goes, it’s five times cheaper to retain an existing customer than acquire a new one.

4. Customer Base: Subscriptions are an opportunity to build long-term relationships with customers and also present opportunities to expand revenue by up-sells and cross-sells.

5. Brand Strengthening Opportunities: Regularly delivering products to subscribers creates several touchpoints and opportunities to strengthen your brand association and improve advocacy.

Let’s dive into the different types of Subscription Models

Replenishment Business Model: 

A replenishment subscription allows customers to buy essentials and consumables on repeat. Categories that benefit from this model include toiletries, groceries, pet food, vitamins, etc.

Dollar Shave Club is an excellent example of this model. 

Since this model puts replenishables on autopilot, it has the advantage of higher retention rates. 

However, making these subscriptions valuable to consumers means giving a lot of discounts, resulting in lower profit margins. But the higher volumes often offset lower margins.

Curation Business Model: 

The curation model is probably the most well-known application of subscriptions in the DTC and ecommerce world. 

It includes providing a collection of products and services personalized to the customer’s preferences. 

Birchbox is a great example. Customers receive a handpicked collection of products in categories selected by them.

Subscribers look for highly personalized product curation, and they’re prepared to pay a premium price.

However, retaining customers can be a challenge and a brand should be prepared for additional expenses with creative packaging and personalized touches.

Access Business Model: 

Just as the name suggests, subscribers pay a membership fee for access to an exclusive community or early access to products.

NatureBox sells organic and healthy food options and follows this model. Notice the “member discount” on each item 👇

If subscriptions is a topic you’re interested in learning more about, reply to this email and let us know! 

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