If you’ve opened your eyes in the past year or two, you’ve been bombarded with ads from new subscription businesses. They’ll deliver your contact lenses, dog treats, hair loss prevention or latest fast-fashion to your door each month – automatically. This market is growing faster than you might think! According to research by McKinsey, the largest subscription eCommerce retailers produced more than $2.6 billion in sales in 2016, up from a meager $57 million in 2011.
While it’s easy to conceive of subscription only businesses, selling subscriptions as a type of product offering is an attractive option to consider for many non-subscription businesses. Retailers and even B2B businesses can adapt the subscription model to gain a customer service advantage, build recurring revenue and driven customer retention without really changing their core business.
Before you start exploring options, make sure your eCommerce platform is prepared to handle these new developments.
1. Can your platform currently offer subscriptions without a third-party vendor?
At the basic level, your platform needs to have the right project management features to enable subscription selling. And while many subscription services are treated the same way as regular merchandise in your eCommerce platform, other subscriptions may require different payment, fulfillment, or marketing tools.
For example, if you want to let customers customize subscription orders with other items in your catalog, you’ll need a convenient way for them to find and bundle these products. Along the same lines, you should be able to combine subscription offerings with other incentives, such as discounted pricing on larger orders or benefits based on subscription tiers. If your gold-level subscribers receive 10% off all purchases, you’ll need a way to integrate these discounts in your shopping cart back end while providing descriptions of the benefits through the UI.
2. How does your platform handle payment details for recurring subscriptions?
In other words, can customer payment information be saved and used for recurring subscriptions?
Your primary concern here is PCI security compliance for credit card information. With subscription revenue models, you’re storing customer information long term and billing their card regularly instead of running a one-off transaction. This requires a higher security standard than you might be used to, so make sure your current platform is up to the job. eCommerce retailers are prime targets for hackers and data theft, and threat actors are using more sophisticated tactics than ever before.
One famous example is the 2018 Magento card skimming attack that affected over 1,400 stores in just six months. The costs of these types of breaches are severe, both in financial losses and lost consumer trust. And while bigger companies can more easily absorb these losses, smaller businesses generally cannot afford to. Make data security a priority in your eCommerce solution, if it isn’t already.
3. Are you prepared to handle front-end challenges?
Subscription services are a different beast than one-off purchases. You’ll find that your front end requirements will change as you begin to integrate new subscription models. For example, you’ll need to ensure that your front end store UI and checkout process are integrated to support subscription purchases. It should be simple for customers to browse subscription options, customize their bundles (if available), and follow through with their purchase with full, end-to-end transparency about what they’re paying and what they’re receiving.
Be prepared to build out your front end to accommodate these subscriptions. As noted above, you’ll need to outline the benefits of different subscription packages, the discounts users will receive from higher-level commitments, and any other perks they may qualify for. Many of these functions won’t exist in your current eCommerce infrastructure, so you may need to work with a partner who can explore new options for expanding your eCommerce presence.
At all costs, any retailer or B2B organization is going to want to avoid using a third-party service or microsite to separately sell their subscription products. Using well-developed core functionality should allow you to maintain a single set of customers, offer promotions on subscription and non-subscription products separately and create unique buying experiences for the customer.
4. Are you prepared to build out customer communication?
Customers have different expectations from their subscription service providers. Unlike single transactions, subscriptions involve long-term relationships of multiple transactions and continuous touchpoints between vendor and customer. As such, eCommerce retailers wanting to branch out into subscription revenue models need to upgrade their customer communication in turn.
- How are failed payments handled?
- Do you have established protocols for notifying customers about shipments or delays?
- Can customers view a rundown of their order histories and subscriptions through your website?
Consider how you currently handle customer communication and ask yourself whether your platform offers these more specific features. Options, like delaying shipments, updating customer payment information, and modifying email marketing strategies, should be essential aspects of your eCommerce solution.
5. Do your reporting tools support long-term profitability?
Does your eCommerce platform have the reporting analytics you’ll need to manage the more complicated world of recurring subscription revenue? You’ll find that with subscriptions, you’ll have more elements to juggle—such as balancing shipping schedules against billing schedules, measuring projected revenue based on current subscriptions and creating forecasts for delivery of subscription items. With subscription delivery planning, you need your platform to help you look ahead at upcoming scheduled deliveries—do you have enough product to meet your obligations? If not, can you create and manage vendor orders to get the inventory ready?
While most eCommerce platforms come equipped with basic reporting tools, these subscription focused reporting and analytics aren’t standard. You may need to work with a dedicated eCommerce provider who can help you assess your business’s current needs and suggest specific analytic tools to help you get a handle on your subscriptions. This is the best way to understand your subscription financials today while preparing your company for growth down the line.
Some critical reporting metrics to consider:
- Are you able to measure the value of the average subscription and subscription value of the customer? If you get a new subscription today, what’s the average length of that subscription?
- From the account level, can you follow a user’s subscription path? Have they upgraded or downgraded? Canceled or renewed? This is especially important when you’re on the phone with a customer – how valuable are they to you?
- Do you have subscriptions reporting on a month to month basis? The reporting needs to include churn – how many billing cycles failed? How many cancellations were there?
Are You Prepared to Compete in Subscription Services?
Though merchandise and subscriptions do share some similarities for your eCommerce approach, don’t jump into the niche without doing your due diligence. Although the subscription product market is growing overall, there are plenty of examples of companies who dipped their toe in the waters only to find that their eCommerce framework wasn’t up to the job. Make sure you’re tackling the process with care, and don’t be afraid to reach out for a little outside help as you plan.
The maturation process when embracing digital commerce is different for every B2B company. For those rooted in traditional commerce it takes time to go from offline selling to online to finding not just any customer but the right customer to technology-focused automated selling across multiple channels.
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