{"id":1285,"date":"2022-02-11T11:00:00","date_gmt":"2022-02-11T11:00:00","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/subscription-commerce\/"},"modified":"2026-04-20T17:07:51","modified_gmt":"2026-04-20T17:07:51","slug":"subscription-commerce","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/subscription-commerce\/","title":{"rendered":"Everything Ecommerce Companies Need to Know About Subscription Commerce"},"content":{"rendered":"\n

Table of Contents<\/p>

** Minutes<\/p><\/div><\/div>\n

What is subscription commerce?<\/a><\/p>\n\n\n\n

A brief history of subscription commerce<\/a><\/p>\n\n\n\n

3 different subscription models in ecommerce<\/a><\/p>\n\n\n\n

Opportunities and challenges of subscription commerce<\/a><\/p>\n\n\n\n

Tips for starting a subscription commerce business<\/a><\/p>\n\n\n\n

Personalisation drives subscription commerce and loyalty<\/a><\/p>\n\n\n\n

How ShipBob helps companies dominate subscription commerce<\/a><\/p>\n\n\n\n

Subscription commerce FAQs<\/a><\/p>\n<\/div>\n\n\n\n

As CEO of<\/span>Ordergroove<\/span><\/a>, I often hear the following frustration from subscription commerce companies who approach my team for guidance: <\/span>\u201c<\/span>A third of my customers churned after the second shipment because it didn\u2019t arrive as scheduled. My warehouse wasn\u2019t able to inform my customers of the delay in a timely manner.\u201d<\/span><\/p>\n\n\n\n

Subscriptions are growing in popularity, but many brands who rushed to capitalise on this trend realized too late that it\u2019s often not enough to \u201cset it and forget it.\u201d<\/span><\/p>\n\n\n\n

Statista<\/span> tells us that by 2023, subscription ecommerce revenue will top $38 billion<\/a>, more than double the revenue it generated in 2019.<\/span><\/p>\n\n\n\n

In my decade of working with<\/span>ecommerce subscriptions<\/span><\/a>, I\u2019ve learned that to win subscribers\u2019 loyalty, brands must offer a frictionless end-to-end customer experience. <\/span><\/p>\n\n\n\n

In this article, we\u2019ll cover how to do that \u2014 along with a few subscription commerce basics.<\/span><\/p>\n\n\n\n

What is subscription commerce?<\/h2>\n\n\n\n

Subscription commerce is a business model used to sell products on a recurring basis to maintain customer loyalty and a consistent cash flow. <\/span><\/p>\n\n\n\n

Its business model <\/span>requires the right technology, processes, and systems to ensure that subscriptions are being fulfilled and delivered on time.<\/p>\n\n\n\n

Subscription commerce isn\u2019t the right model for ever product, but it is ideal for items that are replenished often, such as razors, multivitamins, and even food items like energy bars and coffee.<\/span><\/p>\n\n\n\n

A brief history of subscription commerce<\/h2>\n\n\n\n

The rise of subscription commerce goes hand in hand with the explosion of ecommerce. <\/span><\/p>\n\n\n\n

Amazon revolutionized ecommerce in the 1990s, paving the way for<\/span>Dollar Shave Club<\/span> and<\/span>Birchbox<\/span> to introduce the subscription commerce model in the 2010s.<\/span><\/p>\n\n\n\n

To phrase how revolutionary subscriptions were when first introduced, Dollar Shave Club and Birchbox did for personal care items what emerging technologies allowed<\/span>Netflix<\/span> to do for the entertainment industry.<\/span><\/p>\n\n\n\n

The first subscription commerce companies made it to the mainstream by mastering technological, marketing, and<\/span>logistics<\/span> demands. Now, even mega-retailers such as Walmart have introduced<\/span> beauty subscription boxes<\/span><\/a>.<\/span><\/p>\n\n\n\n

Wider adoption of ecommerce<\/h3>\n\n\n\n

Of course, the COVID-19<\/a> pandemic accelerated the adoption of ecommerce and subscription orders<\/a><\/span> by businesses and consumers alike. <\/span><\/p>\n\n\n\n

This growth created as many challenges for businesses as it did opportunities. Consumers\u2019 social media feeds and mobile ads became saturated with offers, making it more difficult for brands to stand out.<\/span><\/p>\n\n\n\n

Businesses fortunate enough to acquire customers had to make sure their online customer experiences were frictionless.<\/span>Zendesk<\/span> reports that a single bad experience is enough to lose 50%<\/a> of a brand\u2019s customers. <\/span><\/p>\n\n\n\n

Subscribers rely on items being delivered on time based on their chosen frequency, so merchants who repeatedly audit their subscription services will see more retention.<\/span><\/p>\n\n\n\n

3 different subscription models in ecommerce<\/h2>\n\n\n\n

Every subscription ecommerce and product-as-a-service<\/a><\/span> merchant charge their customers on a recurring basis, but the way sellers offer their products varies from business to business.<\/span><\/p>\n\n\n\n

Here are the most common subscription models used in ecommerce.<\/p>\n\n\n\n

\u2018Subscribe and Save\u2019<\/h3>\n\n\n\n

With a \u201csubscribe and save\u201d model, the same products are shipped on a recurring basis to subscribers. <\/span><\/p>\n\n\n\n

This model offers convenience and savings for the customer, while the business benefits from a more consistent and predictable sales forecast.<\/span><\/p>\n\n\n\n

Frequently consumed products, such as pet food or personal care items, are good fits for this model. <\/span><\/p>\n\n\n\n

Curation<\/h3>\n\n\n\n

With a curation model, brands offer access to different subscription products. McKinsey estimates that 55%<\/a> of available ecommerce subscriptions follow this model. <\/span><\/p>\n\n\n\n

Brands like Blue Apron and Stitch Fix offer customers the choice of selecting the items they want or send out a subscription box with pre-selected products that aim to surprise and delight.<\/span><\/p>\n\n\n\n

Membership<\/h3>\n\n\n\n

With a membership model<\/a>, members pay a fee for exclusive discounts, products, content, or services. <\/span><\/p>\n\n\n\n

In the world of brick-and-mortar retail, Costco has set the bar for the membership model and ecommerce businesses are taking note from physical membership stores. <\/span><\/p>\n\n\n\n

Opportunities and challenges of subscription commerce<\/h2>\n\n\n\n

You may run a solid ecommerce business, but that doesn\u2019t guarantee that a subscription model will work for your company.<\/span><\/p>\n\n\n\n

Before you invest in building a subscription commerce business, be sure to weigh the opportunities and common challenges to decide if a subscription service makes sense for your business.<\/span><\/p>\n\n\n\n

Opportunity #1: More predictable revenue and inventory<\/h3>\n\n\n\n

If you have 150 customers subscribed to receive coffee on a monthly basis, you can reliably forecast inventory<\/a> and and more accurately predict revenue thanks to a consistent cash flow. <\/span><\/p>\n\n\n\n

If you know your average monthly rate of subscriber churn, you can also predict revenue<\/a> more precisely.<\/span><\/p>\n\n\n\n

Opportunity #2: Better customer data<\/h3>\n\n\n\n

Because subscribers purchase from you so often, you have the opportunity to collect rich data on their behaviour and preferences. <\/span><\/p>\n\n\n\n

You can use this data to drive more personalised shopping experiences, which then drives customer loyalty.<\/span><\/p>\n\n\n\n

For example, if a health and beauty<\/a> subscriber routinely buys the same shade of lipstick, offer them a surprise discount on that shade when a shipment coincides with their birthday month.<\/span><\/p>\n\n\n\n

Challenge #1: High churn rate<\/h3>\n\n\n\n

Subscription commerce is a competitive space. Unless you stay ahead of your customers\u2019 evolving needs, you\u2019ll likely see high rates of churn. <\/span><\/p>\n\n\n\n

Replenishment subscribers tend to hang on longer, according to<\/span>McKinsey<\/span>, with 45%<\/a> of them maintaining enrollment for at least one year. Only 35% of curation or access subscribers last that long.<\/span><\/p>\n\n\n\n

Challenge #2: Complicated operational logistics<\/h3>\n\n\n\n

Like ecommerce, successful subscription commerce requires integration with third-party solutions, including inventory management<\/a>, fulfilment, accounting, returns management<\/a>, and more. <\/span><\/p>\n\n\n\n

Before launching a subscription service, it\u2019s important to think through your supply chain technology<\/a> stack first. <\/span><\/p>\n\n\n\n

For example, if you\u2019re looking for a 3PL<\/a> to partner with, make sure they offer customisation and other subscription capabilities. The fulfilment provider should also offer integrations with leading subscription solutions to establish an end-to-end, seamless solution.<\/span><\/p>\n\n\n\n

Tips for starting a subscription commerce business<\/h2>\n\n\n\n

If subscription commerce makes sense for your business, it\u2019s time to lay the groundwork for your subscription launch.<\/span><\/p>\n\n\n\n

1. Find your niche<\/h3>\n\n\n\n

If you already have an established ecommerce business, you probably have a product niche<\/a>. <\/span><\/p>\n\n\n\n

If you\u2019re starting from scratch, you\u2019ll want to find a category where there\u2019s sufficient demand for your consumable product. There also needs to be enough room in the niche for your chosen subscription model.<\/span><\/p>\n\n\n\n

Be careful not to rush the process of finding your niche. According to <\/span>Gartner<\/span>, up to 75%<\/a> of ecommerce brands will offer subscriptions by 2023, so you must remain competitive within your niche but also be open to expand your product catalogue if necessary.<\/span><\/p>\n\n\n\n

2. Define your value proposition<\/h3>\n\n\n\n

You\u2019ll have competition in your niche, so what will set your subscription apart? <\/span>Is your plan to keep your subscribers engaged by simply offering the best pricing?<\/p>\n\n\n\n

T<\/span>hat might work in the short term, but a competitor might find a way to undercut you. Consider alternatives, such as supplementing a discount with exclusive educational content or offering a loyalty program. <\/span><\/p>\n\n\n\n

A<\/span>lways be asking how you can provide more value for your subscribers so they stay engaged. <\/span><\/p>\n\n\n\n

3. Source high-quality products<\/h3>\n\n\n\n

If your products are inferior, a brilliant value proposition won\u2019t save your subscription. Take time to source high-quality products.<\/span><\/p>\n\n\n\n

Product sourcing<\/span><\/a> starts with online research, attending trade shows, and requesting product samples.<\/span><\/p>\n\n\n\n

If you can find only one supplier for your product, you may need to rethink your subscription. Multiple suppliers means you have more chances to test products and negotiate pricing, plus it can help you build a more resilient supply chain<\/a> in case of a manufacturing disruption.<\/span><\/p>\n\n\n\n

4. Focus on retention and the customer experience<\/h3>\n\n\n\n

Your marketing strategy must touch the entire subscription experience, including the time prior to signing up and even moments of churn. <\/span><\/p>\n\n\n\n

Here are some ways to stand out:<\/span><\/p>\n\n\n\n