One of the more interesting ecommerce business models that has been made possible by digital technology – particularly online payments – has been products or services delivered by subscription.
From razors to socks, from movies to comic book figurines to farm fresh vegetables – resupplying goods regularly has become big business. Even the most basic needs can be supplied by subscription, for example – drinking water.
There is nothing new about subscriptions – they have been around in the publishing business for a long time, but credit cards and other payment methods make it easier to re-bill the customer and eCommerce based shipping models allow for more efficient business practices. An ecommerce subscription also allows for order volumes to be changed at short notice.
The nice thing about some of these subscription businesses is that they tap into a deep understanding of the customer. For men who shave, buying razors is inevitable. The rate at which a blade goes dull is known. Rather than ‘remembering’ to buy razors, wouldn’t it be better if they just arrived in the mail? Companies like Dollar Shave Club and Glambox provide a service to customers and gain other advantages.
There is a different psychology about a subscription service. There is very little friction in the process. It is easier to keep it going than cancel as long as the quality is fine.The obvious advantage for the merchant is repeat sales. The lifetime value of the customer is significantly increased and loyalty is baked into the process.
Subscription models also work in a B2B environment. Resupplying commodities like printer toner or coffee capsules. The opportunity for B2B E-Commerce is a large one, and those who can adopt some of the more disruptive models from the B2C world will do well.
Is your brand strong enough to support a subscription model?
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