One of the most popular subscription brands formed back in 2010. Birchbox changed the beauty scene with curated cosmetic subscription boxes.
Fast forward to 2022, and many industries, like pets, kids, coffee—even plants—are hopping on the subscription model trend.
And who can blame these companies? Brands like Hello Fresh and Stitch Fix are in high demand. So, why not start try the subscription model yourself?
Of course, there’s more to running a subscription biz than a brilliant idea. You’ve got to streamline the nitty-gritty stuff, too!
This article will show you how to launch a subscription model for your business, as well as:
- How profitable subscriptions are and why
- Three different subscription models and which one you should choose
Let’s get started!
How profitable is a subscription business?
Subscriptions are profitable for both new and experienced subscription-based businesses. Recharge found that new merchants grew their customer base by 24 percent while experienced merchants grew by 78 percent by launching a subscription model!
The data is clear. Subscription conversions are climbing through the roof. But why do customers love this eCommerce model so much?
1. It’s convenient: Subscriptions eliminate “running errands” by sending items to your door. No more spending hours running around town!
2. It saves money: Most eCommerce subscriptions offer a dollar discount for subscribers. Adding “subscribe and save” to your product detail page (PDP), perhaps in a different color or with an attractive image, can be a conversion tactic to lead to more traffic subscribing instead of making a one-time purchase.
3. It’s predictable: Customers can project their monthly spending with subscriptions. And you, the eCommerce owner, can predict your monthly and yearly revenue! It’s a win-win for both sides.
Now that you know why subscription boxes are profitable, let’s explore six ways to start your eCommerce subscription business.
6 Steps to Starting an eCommerce Subscription Business
1. Understand eCommerce subscription model options
There isn’t a one-size-fits-all approach to running a subscription box business. Most go by one of the following subscription models.
We talk in more detail about each model here. Below is an overview of each option:
1. Replenishment subscription model
This “subscribe and save” approach is when users sign up for a recurring delivery every month, three months, and so on. Popular brands like Dollar Shave Club use a replenishment model.
This method is great when selling necessary items, like household products, food, vitamins or supplements.
2. Access subscription model
Also known as a membership model, users pay a monthly membership to access a brand’s products. Members get exclusive perks, like discounts, shipping rates, and sometimes store credit!
Access subscriptions work best with a highly engaged audience. Brands with a “cult” following, like Peloton or Costco, thrive with this model.
3. Curation subscription model
A curation subscription “curates” a box of products based on your customers’ preferences.
Take Hungryroot, a grocery service. Customers share the type of food they like, and Hungryroot sends weekly groceries based on their taste buds.
So, how do you know what your customers want?
Interactive surveys usually do the trick. When someone signs up, send them a quiz and use those answers to personalize their subscription box!
Along with a quiz, lean on Sendlane’s multivariable segmentation to customize your boxes even more! Sendlane segments your audience based on purchases, opens, and clicks.
So, which subscription model is right for business?
It depends on your products.
Do you already sell essential items, like bath products or supplements? Go for a replenishment model.
Or, perhaps you want users to exclusively shop at your store. In that case, build an access model.
As for curation, can you bundle products into a creative experience? Or, do you sell premium items people want to try? Then curation is for you.
And if you’re spankin’ new to subscription boxes, head back to this step later and brainstorm ideas first!
2. Brainstorm eCommerce subscription box ideas
A sustainable subscription business starts with a niche. A niche encourages your target audience to buy from you.
Just look at Harry and David’s fruit and cheese subscription:
Do you think just anyone would invest hundreds of dollars in fruit and cheese?
Heck no! And that’s the point. Henry and David target a specific audience—one that values premium artisan foods.
With that in mind, there are two questions to ask yourself when choosing a niche:
1. Who are you targeting?
Hammering down on your audience’s demographics is key to understanding their desires.
Take a look at Adults and Crafts.
This curated subscription targets a specific demographic:
- Age: 25+
- Gender: Primarily women
- Income: Middle class (high enough to invest in crafts)
- Desires: Working on creative projects solo or with friends.
- Struggles: Figuring out what type of crafts to create
- Values: Craves quality experiences outside of work and off of a screen
Take action: Chat with your target audience and gather these details. Then, use your findings to niche down and sell a product!
2. What are people getting out of your subscription?
Subscription boxes work best when you focus on your customer’s wants and needs.
eCommerce brands achieve this by selling essential products, novelty items, or something in between.
A. Essential items
Honest diapers solve the “frantically running to the store for diapers” dilemma with a diaper subscription service.
You can bet that parents will stay on this plan for as long as their kids need diapers—simply because they’re necessary for babies.
Plus, parents can now skip the store and focus on better things, like quality time or just relish avoiding the hassle of making a trip with a cranky little one!
B. Novelty items
Owl Crate reaches out to book lovers with a curated monthly book box.
Think of this subscription idea as a monthly gift for dedicated readers. It isn’t a necessity, but the right audience will indulge in these unique items.
C. Somewhere between essential and novel
Cure Crate relieves physical pain and anxiety with CBD wellness oils.
This brand integrates both essential and novelty by targeting people who value natural pain relief AND a box of goodies.
Take action: Decide if you want to sell essential items, novel items, or something in between. And make sure your decision is making lives easier, not harder!
Now that you’re buzzing with subscription box ideas, let’s put them into action with a reliable subscription platform.
3. Choose a subscription provider
Subscription platforms get your ideas off the ground and into action!
Some eCommerce platforms offer subscriptions, including:
More commonly, merchants turn to dedicated subscription payments apps like:
- Bold Subscriptions
At Sendlane, our preferred subscription partner is Recharge. BigCommerce, Shopify, and WooCommerce merchants who also use Recharge can integrate with Sendlane and:
- Segment email lists by subscription type
- Update your contact profiles with Recharge’s data
- Trigger automations based on Recharge’s events
Now you can run a subscription-based business AND start a strong marketing campaign.
4. Run a dynamic marketing campaign
You don’t need complicated marketing to sell subscriptions. Most eCommerce brands simply explain what’s in the box, the benefit of each item, and what it all looks like.
Along with your box, tell your audience how your subscription works.
Most brands dumb it down to three steps—figuring out the customer’s preferences, sending the goodies, and repeating the process!
Oh, and we can’t forget about the price tag!
The key to getting people on board with your price is explaining the value behind your subscription.
How many items come in a box? How long does it last? Do you offer other incentives, like exclusive access to events? These are questions your audience wants to know before swiping a credit card!
To recap: Be straightforward and describe your subscription, the process, and pricing. State the benefits and use images to sell your value.
You’ve got your website down. The next step is using an omnichannel approach to engage with leads AND buyers. Multiple touch points keep users in the loop with their subscription—lowering your churn rate and increasing brand awareness!
One touchpoint we love is social media—your go-to tool for cultivating a community.
Posting product after product gets boring, fast. Instead, eCommerce subscriptions are connecting with followers via:
- Product launches
Pro tip: Post actual humans on your feed by filming your team, founder, or customers. Your followers will love seeing others chat about your brand.
Overall, social media can lead to a more engaged community and greater lifetime value.
To get onboard with these benefits, your social media efforts should get as much traction as possible.
Here’s an idea—direct users to your social channels with email marketing!
Pink Blush shares a “Mama of the month” across marketing channels.
There’s a lot to love about this feature:
- It includes real people who wear Pink Blush
- Pink Blush can promote its maternity brand
- It opens opportunities to working with influencers
- Other mamas will feel confident in wearing Pink Blush’s clothing
Sendlane can tag readers who click on your social channels from their inbox. These metrics will show how much social media traction you’re getting from email!
5. Provide tip-top customer service
Lack of customer support can lead to failed payments, lost items, and dissatisfying purchases. No wonder why customer service is a priority for subscription-based industries!
Top-notch service should start as soon as someone visits your site.
As we mentioned in the last step, use a simple diagram and describe how your subscription service works.
You can also add subscription options throughout your product pages. This way, customers can sign up as they browse!
And while you’re at it, flaunt your subscription perks across all channels. Ujii, a matcha brand, rewards its biggest fans in major cities with free two-hour delivery.
This brand goes even further and offers one free matcha powder to new subscribers.
Notice how they add more benefits at the bottom of the email—exclusive pricing, free to join, and effortless to adjust. Are you as convinced to buy as we are?
Get started: “Wow-worthy” customer service is more than free shipping. Brainstorm unique ways to make your customers’ lives easier. Dig into your customers’ pain points and promote your solutions as benefits!
We can’t conclude this section without discussing cancellations. Members cancel subscriptions for many reasons, like:
- An expired credit card on file
- Wanting to skip shipments but they don’t know how
- Can no longer afford your box
Lucky for you, subscription platforms like Recharge let customers manage their subscriptions through SMS messaging. Handing the reins over to your subscribers puts them in control of their spending.
Using SMS, customers can:
- Swap products
- Pause or skip a shipment
- Update shipping details (address, credit card, etc.)
- Add more items to shipment
Sendlane will update this information throughout your contact profiles!
See? Customer service isn’t just about collecting support tickets. Clear messaging, email marketing, and SMS texts make subscribing easy in the long run.
6. Track essential eCommerce subscription metrics
You won’t know if your subscription model is working without tracking a few essential metrics.
Here are five benchmarks to look out for when analyzing your business:
1. Churn rate
Understanding how many people cancel ytheir subscription per month helps you target and solve weak points across your business.
The first step is figuring out why people are leaving. Check in with subscribers regularly and gather product feedback.
And be mindful of failed payments! Up to 48% of subscription customer churn is caused by failed payments, also known as indirect churn.
2. Customer lifetime value (LTV)
Customer LTV identifies your highest-paying subscribers. Use this data to tweak your buyer personas, marketing strategies, and outreach toward your biggest fans.
3. Monthly Recurring Revenue (MRR)
MRR predicts your annual recurring revenue (ARR) and determines if your revenue is stable. These numbers contribute to long-term financial decisions and projections.
4. Customer acquisition cost (CAC)
Your CAC calculates how much you’re spending to attract and retain customers. Compare this number with your overall return on investmen (ROI) and see if you’re getting enough revenue in return.
5. Email marketing metrics
Tracking how many people open your subscription-based emails—shipping updates, product updates, and promos—tells you if subscribers are engaged with your product.
Here are a few metrics Sendlane can track for you:
- Open-rate: How many users open your emails? Focus more on email subject lines if this percentage is low.
- Click-through rate: How many users click on links provided in your email? This number can affect the growth of your promotions and organic content.
- Cold subscribers: Find your least engaged customers and see who isn’t interacting with your emails at all.
- List growth rate: How fast is your email list growing? Does this number align with your subscription growth?
Using the Recharge and Sendlane integration, you no longer have to chase these metrics down on various platforms. We’ll showcase your analytics on one dashboard!
Ready to start or add-on a subscription model?
Now that you know how to start a subscription business, there’s nothing stopping you from getting started!
All you need is a powerful subscription platform to take some tasks off your plate, like payments, subscription management, and personalized messaging.
Schedule a free tour of the platform and see how Sendlane can jumpstart your subscription business.