How To Start A Subscription Business

Every ecommerce owner understands the importance of repeat customers. In fact, research has shown that improving customer retention by just 5% can increase profits by 25%. 

But what if there was a way to guarantee a customer returns rather than being just a one-time purchaser? 

A subscription-based business might just be the solution. 

Subscription services have grown in popularity in recent years. Netflix, Prime, Spotify—the list goes on. You’re probably subscribed to at least one of these yourself.

But entertainment isn’t the only avenue for subscriptions. There are numerous subscription-based business ideas in the ecommerce industry. These ideas can generate a consistent flow of income to support the growth of your business.

In this guide, we will learn about subscription services. We will discuss the advantages, types of subscriptions, and how to start a subscription business on ShopWired. 

Ready? Let’s go. 

What Is an Ecommerce Subscription Business Model?

In an e-commerce subscription model, customers pay a recurring fee for access to products or services.

The subscription model is popular for many industries because it is effective for different products and services. It can work for physical items, digital products or exclusive content.

Recently, more merchants are using subscription-based services to gain steady revenue and build strong customer relationships. 

Understanding Different Types of Subscription Business Models

Subscription business models can be broadly categorised into three types: 

• Curation 
• Replenishment 
• Access 

The subscription model you choose for your business will depend on what you sell and who you sell it to.

1. Curation Subscription Model

The curation model provides personalised experiences by curating products that align with the customer's tastes and interests. Curated subscriptions often come in the form of subscription boxes. These boxes deliver a selection of themed items designed to surprise subscribers each cycle

A good example of a subscription box business is FabFitFun. Every 3 months, subscribers get a box with 6 trendy lifestyle items for each season: Spring, Summer, Autumn, Winter. FabFitFun’s products encompass fashion, beauty, wellness, home, tech and fitness. Subscribers can pay for an annual subscription at $54.99 per box. 

This model helps FabFitFun make more money by taking advantage of the appeal of finding new and surprising items. Customers may not want to buy 6 separate products regularly. However, a curated box makes it more attractive. This encourages them to subscribe.

Curation Subscription Model Pros

Enhanced customer engagement: Curated boxes create a sense of excitement, making each delivery an event in itself. This can increase customer satisfaction and loyalty.

Higher perceived value: Adding special items to a box can make it seem more valuable than just the contents inside.

Marketing through word-of-mouth: Happy customers are more likely to share their experiences on social media. This could help attract more subscribers.

Curation Subscription Model Cons

Subscription fatigue: Receiving curated items is exciting. However, customers may feel overwhelmed by the abundance of items over time, which could lead to cancellation. 

Variable customer satisfaction: Not every item will meet every subscriber's taste. This could lead to dissatisfaction and potential returns.

What type of business is it good for? 

Curation models thrive on the "surprise and delight" factor. This subscription model is well-suited to sectors like fashion, beauty and food, where personal taste and discovery are key drivers of customer satisfaction.

2. Replenishment Subscription Model 

Designed for convenience, the replenishment model ensures customers never run out of necessary supplies. In this model, subscribers receive products on a regular, predetermined schedule, eliminating the need to remember to reorder. It is particularly effective for everyday items like toiletries, groceries or pet food.

One example of the replenishment model is Dollar Shave Club. They send razors and grooming products to subscribers regularly so they always have enough supplies. 

Blue Apron delivers meal kits with ingredients and recipes weekly. This service allows customers to easily cook fresh, chef-designed meals at home. It eliminates the need to plan and shop for groceries, reducing stress. 

The replenishment model helps prevent customers from turning to competitors when they need a quick replacement. By ensuring regular deliveries, businesses can reduce the chances of customers purchasing from local stores or alternative suppliers by guaranteeing that they come back.

Replenishment subscription model pros

Customer retention: Convenience reduces the likelihood that customers will shop around, thus helping to maintain your customer base.

Consistent demand and revenue: Regular deliveries mean steady income and more predictable stock management. 

Streamlined shopping experience: Automating the reordering process for essentials spares customers the effort and time associated with repeat purchases.

Replenishment subscription model cons 

Subscription cancellations: Customers might cancel subscriptions if they feel overstocked or if their usage patterns change.

Limited upselling opportunities: With routine orders predominantly focused on necessities, there might be fewer opportunities to introduce new or premium products.

Customer sensitivity to price changes: Regular subscribers may be more alert to price adjustments, which can affect retention if not managed carefully.

What type of business is it good for? 

Replenishment models are perfect for businesses that sell consumable goods that require regular replacement or restocking. It suits customers who value convenience and want to minimise the time spent shopping for everyday items.

3. Access Subscription Model 

Access subscription models provide ongoing access to products or services, creating a continuous customer engagement loop. Famous examples include Netflix and Spotify, which allow unlimited streaming of entertainment, whilst services like Adobe Creative Cloud offer professional software tools on a subscription basis. 

The access model is not just for big companies like Netflix and Spotify. It can also benefit any business that offers a service or tool that customers need constant access to. A model for accessing software, learning platforms, or entertainment can keep users interested and bring in a consistent income.

This model allows users to access the content they need without having to purchase it outright. By providing access to content through a subscription or membership, users are more likely to continue using the platform. This can lead to a consistent flow of income for the provider.

One of the access model’s main appeals is that it can accommodate different user needs through tiered pricing plans. Businesses provide various options to meet different needs and budgets.

Some plans are affordable and come with basic features. Other plans are more expensive but offer full access to all features. This pricing strategy attracts more customers and improves satisfaction by matching service levels with user needs.

Access subscription model pros

Flexibility: Customers can access services or content whenever needed, which boosts user convenience and satisfaction.

Scalable revenue options: Tiered pricing structures allow businesses to cater to different levels of need and budget. 

Continuous engagement: Regular updates and new content help keep the service fresh and engaging, encouraging ongoing subscriptions.

Access subscription model cons 

High dependency on content renewal: Continuous investment in new content or features is necessary to retain subscribers, which can be resource-intensive.

Risk of high churn rate: Subscribers might cancel if they feel they aren’t getting enough value from their subscription level.

What type of business is it good for? 

Access models are suitable for businesses that offer services or digital content that can be accessed over the Internet, particularly when new content or features can be regularly introduced to maintain high customer engagement and value. 

What Are The Benefits of Subscription-Based Business Models? 

Subscription business models offer several advantages that can significantly boost company growth and customer retention. Let’s take a look at the top five benefits of implementing a subscription model: 

1. Predictable Revenue Streams

Subscription models provide a consistent revenue stream. Knowing your revenue in advance can enable more precise budgeting for marketing, product development and other operational expenses.

2. Improved Customer Loyalty

By engaging customers regularly, subscriptions help develop deeper relationships. Regular communication can help build customer loyalty. Customers appreciate convenience and personalisation. This makes them more likely to stay with your service instead of switching to competitors. 

Loyal customers can also become brand advocates, further boosting your business through word-of-mouth marketing.

3. Improved Inventory Management

Businesses can better manage their inventory by understanding the number of subscribers they have. This knowledge can prevent them from overstocking or understocking.

Overstocking can lead to wasted resources and increased storage costs. Understocking can result in lost sales and dissatisfied customers. This can help cut costs, especially for products with limited shelf lives or those requiring specific storage conditions.

4. Data-Driven Insights

Subscription businesses accumulate a wealth of data on customer preferences and behaviours. This information is crucial for customising products, targeting marketing campaigns and developing successful new offerings. Leveraging analytics can transform customer insights into actionable business strategies.

5. Increased Customer Value

Subscriptions can increase the lifetime value of customers by providing ongoing revenue from the same customer base. Additionally, the model encourages upselling and cross-selling opportunities within the subscription experience. For example, giving current subscribers deals and add-ons, improving their experience and boosting their spending.

How to Start Your Own Subscription Business

If you're planning to launch a subscription-based business, ShopWired provides all the tools needed to get started. Here’s a step-by-step guide to help you: 

1. Choose Your Subscription Model

Decide on the type of subscription model that best suits your products and target market. Deciding on a curation, replenishment or access model will impact how you organise your products and interact with customers. You may be starting a new subscription business or adding it to your current offerings. 

2. Develop Your Subscription Model

Define what products or services you will offer. This might involve curating items for a niche, like a monthly gourmet snack box, or essential items like toiletries. Alternatively, you might offer a digital service, such as online courses, software tools or exclusive content.

3. Build Your Website

If you're starting your subscription business from scratch, the first step is to build a website. ShopWired provides all the tools you need to create the perfect online store for your subscription business.

With extensive customisation, plenty of responsive themes and a full suite of ecommerce features, ShopWired is the only solution you need to start a subscription-based business. 

With ShopWired, setting up subscription sales is straightforward. Simply download the free Subscriptions app to start selling products and services to your customers on a subscription basis. 

How the ShopWired's subscription system works:

In the admin system you can mark a product as a subscription product and set the price and billing interval (e.g. weekly, monthly):

When the product is viewed, a subscription tick box will now be visible. Products can be set up as subscription only, or as a separate option to subscribe & save rather than paying for a one-time purchase. 

Within the admin system, you can

• View existing subscriptions and amend the address and customer information
• Cancel an existing subscription
• View orders processed through the subscription (in the same way as any other order)
• Set a subscription date on the app installation page (if you want all subscription payments/orders to be processed on the same day of each month) - enter only a number between 1 and 28 here
• Manually create subscriptions by creating an order which contains a subscription product

Within customer accounts, a customer can

• View their active subscriptions
• View individual details about a subscription
• Cancel a subscription

**Important

The subscription system is only compatible with ShopWired Payments or the Stripe payment gateways. If you're not already using one of these gateways, you'll need to add one of these as a payment gateway on your account.

4. Market Your Subscription Business

Once your website is set up, you'll need to craft an effective marketing strategy to attract and retain subscribers. Here’s how you can effectively promote your subscription business:

Identify your target audience: Understand who your potential subscribers are, including their interests, purchasing behaviours and demographics. This will guide your marketing efforts and help you craft messages that resonate.

Leverage digital marketing: Implement SEO techniques to improve your website’s visibility in search engine results. Create engaging content that highlights the benefits of your subscription service. Consider starting a blog for your subscription box, sharing customer testimonials and instructional content.

Utilise social media: Build a presence on platforms where your target audience spends the most time. Use social media for brand storytelling, live interactions and showcasing new offerings. Regular posts about box contents, behind-the-scenes processes and special promotions can engage potential customers and create anticipation.

Email marketing: Develop an email marketing campaign to connect directly with potential and existing customers. Send newsletters that inform subscribers about new features, products and special offers. Segment your email list to provide personalised content that meets the specific needs of different user groups.

Promotions and discounts: Introduce promotional offers such as discounts on first-time subscriptions or referral bonuses. Limited-time offers can create urgency and encourage sign-ups.

Track and adjust your strategy: Monitor the effectiveness of your marketing strategies through analytics. Track metrics like conversion rates, subscriber growth and engagement levels. Use this data to refine your approaches and implement A/B testing to determine what works best for your audience.

5. Customer Service and Support

Effective customer service is crucial if you want to retain subscribers and cultivate a positive brand image. Here's how to ensure excellent support in your subscription business:

Establish clear communication channels: Provide multiple ways for customers to reach you, including email, phone and live chat. Ensure your customer service team is well-trained and knowledgeable about your products and services.

Responsive support system: Implement a ticketing system to manage customer inquiries efficiently. Aim to respond to customer issues within 24 hours. Utilising automated responses for common questions can also enhance efficiency.

Subscription management tools: Allow subscribers easy access to manage their subscriptions through their user accounts. Features such as pausing, cancelling or changing subscription details should be straightforward.

Regular feedback loop: Encourage feedback through surveys and regular communication. Use this feedback to improve your products and customer service practices.

Educational content: Provide detailed FAQs, instructional videos and product guides. This reduces the number of common questions and makes customers happier by helping them find answers on their own. Pro Tip: Easily create educational content using an AI video generator, use AI voice for narration, and add text to video to reinforce key points.

Prioritising customer service and support can increase subscriber renewals and loyalty.

Refining Your Subscription Service for Ongoing Success

To maintain a competitive edge and keep subscribers engaged, it's important to regularly refine and improve your subscription service. Continual assessment of how your service is performing and making data-driven adjustments is key for sustained success.

Set KPIs like subscriber growth, churn rate, revenue per user, and customer lifetime value. These metrics are key for understanding your service's strengths and areas for improvement.

Leverage analytics to track customer behaviours and preferences. This data can help you make informed adjustments to your marketing, product development and customer service strategies. If you see a trend of subscribers dropping off, especially after the trial period, investigate ways to retain them.

Experimentation is also key. Test various aspects of your subscription service to determine what aligns best with customer needs and preferences.

Lastly, actively seek and respond to customer feedback. This feedback can provide direct insights into subscriber satisfaction and expectations. Implement changes based on this feedback. This allows you to enhance the service and also show subscribers you value their input.

The above tips will help fine-tune your subscription service to better meet subscriber needs and adapt to evolving market conditions, ensuring your business thrives over the long term.

Final Thought: Embrace A Subscription-Based Model for Continuous Revenue

Subscription business models offer a sustainable pathway to steady revenue and deepened customer relationships. Whether you choose a curation, replenishment or access model, these strategies can dramatically boost revenue your ecommerce business. 

By leveraging a platform like ShopWired, you can effectively manage and grow your subscription service, from initial setup and customer acquisition to ongoing management and optimisation. 

Subscription-Based Business - Frequently Asked Questions

1. How do I choose the right subscription model for my business?

Choose based on your product or service type and customer preferences. Curation is great for personalised goods, replenishment for essential items, and access for continuous services.

2. What are the key benefits of starting a subscription business?

Subscription models provide predictable revenue, enhance customer loyalty, offer opportunities for upscaling, and gather valuable customer data for business improvements.

3. How can I start a subscription business?

It's easy! Simply choose your subscription model, develop your offerings, build your website on ShopWired, market your service, and provide excellent customer support. ShopWired provides all the tools you need to get started.

4. How can I market my subscription business effectively?

Use targeted digital marketing strategies, leverage social media, engage in email marketing, offer promotions, and ensure your website is optimized for SEO.

5. What should I consider when setting prices for my subscription service?

Consider your cost, competitor pricing, perceived customer value, and financial sustainability. Test different pricing tiers to find what works best for your audience.

6. How can I reduce subscriber churn?

Maintain high product quality, offer excellent customer service, engage regularly with customers, and adapt your offerings based on customer feedback and behavior analysis.

7. Can I change my subscription offerings after launching?

Yes, it’s important to stay flexible and responsive to market changes and customer feedback. Regularly reviewing and adjusting your offerings is key to retaining subscribers and staying competitive.

8. What are some strategies for optimising the customer experience in a subscription business?

Enhance the customer experience by regularly updating your product offerings, personalizing communications, and simplifying the subscription management process. Listening to customer feedback and promptly addressing their concerns is crucial.

9. How do I handle logistics and fulfillment for a subscription business?

Partner with reliable fulfillment services that can scale with your growth. Automate as much of the shipping and handling process as possible to ensure consistency and efficiency.

10. What legal considerations should I be aware of when starting a subscription business?

Be mindful of consumer protection laws related to automatic renewals, cancellations, and refunds. Ensure that your terms of service and privacy policies are transparent and compliant with all applicable regulations.

11. How can technology improve my subscription business operations?

Invest in robust subscription management software that integrates seamlessly with your ecommerce platform. Automation tools can help streamline operations, from billing and renewals to customer relationship management.