Subscriptions have been around for years - think direct debit at a utility company, phone provider or sports club. Now the concept is also becoming increasingly popular in e-commerce through so-called "subscription commerce."
The subscription market in Europe is about 350 billion euros. About 5% of European households' consumption is spent on subscriptions. That amounts to an average of 130 euros per family! In addition, direct debits are very popular for recurring payments. An average household has six direct debits running. Thanks to the popularity of subscription commerce, that number will increase rapidly. It provides convenience for both consumers and retailers.
The main reason for choosing a subscription formula is the convenience and service of having something delivered to your home. Depending on the nature of the product, one does not have to make an expensive purchase because you pay per month instead of paying a high amount all at once. Which usually includes maintenance as well. Research shows that Dutch people are willing to pay 40 to 70% extra for a subscription formula compared to a one-time purchase of a product.
Subscriptions are focused on a long-term relationship
Subscription forms have had a strong focus on B2C for several years, but B2B organizations have also been interested in this form of business.
In private business (B2C), we note that not only traditional providers but also producers of consumables and consumer products are increasingly embracing subscription forms. Take, for example, the razor blade subscription or a subscription to socks, T-shirts and/or boxer shorts. It is the way to retain customers and establish a long-term relationship. Of course, with the possibility of pausing the subscription at any time. The cost of attracting new customers or persuading an existing customer over and over again increases year on year. In some cases, even doubling can be seen. Establishing a long-term relationship is much more interesting than making a one-time sale. Moreover, every purchase is a moment when a customer has to consciously cross a threshold - considering whether the purchase is still necessary.
Convenience
More and more organizations are turning to formulas in which all types of consumables are linked to a recurring model. Some examples are: the smart refrigerator that makes sure consumables are ordered automatically or HP that makes sure you never run out of ink in your printer. The printer itself "orders" new ink when it reaches a certain level. In short, subscription formulas are becoming increasingly important toward the future. And what works in one country can be copied relatively easily to another country provided you select the right payment methods.
Advantages
A subscription model offers the necessary advantages. The customer lifetime value increases and expensive products become more attractive to a larger audience because of the partial payments. For retailers, a monthly recurring revenue means a lasting customer relationship and allows them to make a better sales forecast.
Integrating subscriptions into your online store
When you want to integrate subscriptions, you need to think about a number of things carefully. What is the benefit you are offering to the customer? Is it a pampering moment for the customer when they receive the product at home monthly? Will the customer have the option to cancel or pause the subscription at any time? Would you like to spar with an expert about this? Then get in touch with us!
