How to build a successful eCommerce subscription business
The online subscription service market is booming for eCommerce businesses of all sizes. In fact, analysts expect it to skyrocket to $2.64 trillion by 2028.
If you’re an eCommerce business, this is a ripe opportunity to expand your customer base and grow your profits. For starters, eCommerce subscriptions make customers’ lives easier and bring in steady revenue.
But to create a subscription service, you must understand how one works, your business’ options and the tools you need to bring it to life.
In this guide, we’ll walk you through how to set up eCommerce subscriptions, and help you start planning. Your business will be selling subscriptions before you know it.
[Related: 4 Habits of highly successful eCommerce businesses]
Why choose an eCommerce subscription model?
The most obvious reason to adopt an eCommerce subscription model is that it brings your business recurring revenue.
We’ll define different eCommerce subscription model options below. For now, let’s look at the benefits your business can see when you use the subscription model in eCommerce.
Top tip: Plug Airwallex into your eCommerce site and start accepting subscription payments from your global customers in 170+ currencies via 10+ payment methods. Our software handles the complex subscription logic, customer details and payment information. So you can sit back and put your recurring billing on autopilot.
[Related: How to shift your products online in 8 easy steps]
When customers make a one-time purchase, your business earns revenue. But when a customer buys and subscribes, you’ve got a locked retention period for that customer. And when customers are satisfied with the products and/or services you provide and the money they save, they’re likely to renew their subscription.
It’s a quality inherent in eCommerce subscriptions. However, to keep retaining customers, make sure they have flexibility in their membership. They should be able to change their schedule, opt out, change a date or shift plans easily.
That flexibility is a massive part of the subscription model’s appeal. When customers are happy, they’ll come back.
Gain recurring revenue
This is the clearest benefit for your business. You secure payments for set periods, and customers’ subscriptions bring them convenience and quality products/services.
To make sure your business incrementally increases repeat revenue through eCommerce subscriptions, scrutinise your key performance indicators (KPIs) regularly. That way, you know you’re bringing in profit, gaining customers and making your subscription service worthwhile.
Boost customer lifetime value
Better customer lifetime value (CLV) is another quality that accompanies an eCommerce subscription model. Customers know what they’ll receive and when, and they’ll likely remain subscribers when your products/services make the grade. And when you know a customer’s purchase timing, you can calculate CLV with much greater accuracy.
Plus, with highly satisfactory eCommerce subscriptions, your SMB has less risk of customers making one-time purchases. After customers agree to a set payment and delivery service, your CLV benefits in the short and long terms.
And to make matters better, increased CLV leads to decreased customer acquisition costs (CAC).
Let’s say you know what customers want and when. With a few KPI calculations, you can fine-tune exactly how much raw material and labour you’ll need in the next measurement period.
The ability to control how much inventory you have on hand is invaluable. For instance, if you deal in perishable goods, having a backlog can lead to waste and longer acquisition times. If you sell products very specific to a customer bracket, you can determine how many items to keep in storage on average (e.g. 10% high-end, 50% midline and 40% budget items).
For instance, with eCommerce subscriptions, you know for certain that X number of customers want X items in X weeks. The ability to assess and control inventory saves time and money as well as avoids overstocking and understocking.
[Related: Top stock control methods to master inventory management]
Attracting investors is a top priority for any SMB. Fortunately, using the subscription model in eCommerce can draw them to your business — if you can show solid numbers and innovation.
Investors look for strong customer relationships and predictable revenue, and eCommerce subscriptions tend to produce both. As a result, your SMB looks far more enticing to investors when it has financial stability and growth potential. But back to those numbers.
You should be able to show increased customer subscriptions (even if the trend is gradual), low churn and glowing reviews. Because customers trust reviews more than they trust ads, sound reviews mean you’re fulfilling your promise and building customer loyalty. That cycle leads to investors’ attention.
[Related: Net revenue retention and 3 things every venture capitalist looks for]
Create a fantastic customer experience
It’s one of your greatest (if not the greatest) goals — give customers a spectacular shopping experience. An eCommerce subscription model provides you with special opportunities to make customers happy while meeting previously unaddressed needs.
Although convenience, savings and flexibility are key to a great customer experience, meeting an unexpected need is a smart tactic. Perhaps you introduce customers to products they didn’t know existed or give them the chance to try something new. In the end, customers should be satisfied with what they bought and how they’ll save with eCommerce subscriptions.
And as any savvy SMB knows, satisfied customers lead to repeat business, which leads to greater revenue. With eCommerce subscriptions, customers can get a “one-and-done” service alongside savings.
Now, let’s look at the three primary eCommerce subscription models. You’ll need to choose the one most appropriate for your eCommerce SMB.
How to set up a subscription service
When you’re ready to sell subscriptions online, you’ll need to examine your eCommerce SMB through micro and macro lenses.
For instance, are your products appropriate for an online subscription service, and will customers want to sign up? How will they benefit from membership?
And you must ask concrete questions about your SMB. Are your KPIs at a place where you can set up an online subscription service? Which eCommerce subscription platform or software will you use, and how will customers pay?
[Related: How to sell online internationally with Shopify]
1. Check how your products or services fit the market.
Because eCommerce subscriptions should grow even more popular in the next decade, your SMB will face lots of competition. Look closely at your SMB’s niche and biggest competitors. Will you be able to stand out and stay viable with eCommerce subscriptions?
If you find you’ll be a small fish in a big pond, explore ways to set yourself apart. Can you offer an angle that few other SMBs do? When you have a definite strategy, you can move forward with greater confidence.
2. Pick the most appropriate eCommerce subscription model.
So, which eCommerce subscription model best fits your products or services? You might discover all three could work, but one should fit closest (your KPIs factor in, too).
For instance, your SMB might sell coffee. The replenishment model would fit, but curation could work if you sell various artisan coffees. Regardless, the replenishment eCommerce subscription model should be best — consumables and replenishment go hand in hand.
Later, you might expand and offer two or more subscription options. It’s wise to watch how successful your first efforts are, then move forward if they work well.
3. Nail down which incentives you’ll offer.
Next, determine how exactly a subscription will benefit customers. Can you afford to offer a discount on all products, or would it work better to offer a specialised box of your most popular products?
For instance, you might offer customers a discount proportional to their plan. If customers subscribe to an annual plan, they receive 15% off all goods. If they subscribe monthly, they receive a 10% discount.
6. Find the best eCommerce subscription software for your SMB.
Now to the tech side — you need to find the right software to handle your subscription service.
Here’s where Airwallex can help. The benefits of using Airwallex subscription management software include:
Sell globally from day one - accept recurring payments in 170+ currencies
Allow customers to pay the way they want, with 10+ global payment methods
Easily adjust your subscription model and pricing strategy with our simple API
Our simple ‘plug and play’ solution requires minimal development work. Simply plug our payment form into your existing checkout and instantly start accepting payments
Our software integrates with leading eCommerce platforms including Shopify, WooCommerce and Magento
Customise the payment form to suit your brand
Avoid unnecessary FX conversions and improve your profit margins
4. Create a marketing plan to attract customers.
Now that you’ve determined your tactics, craft a marketing strategy to make sure customers will know about the subscription option! A clear banner on your website home page could note the new service, and email/SMS marketing comes in handy, too.
The subscription option and its benefits should also appear prominently on the checkout page. Simply presenting the service and its benefits can turn one-time customers into subscribers.
5. Establish a customer retention strategy.
Make sure customers will stay satisfied with their subscription and what they receive from it. Of course, your products should remain high-quality and have timely delivery. But little perks can lead to much better customer retention and word of mouth.
Let’s return to the example of an SMB that sells coffee. Perhaps customers get a ceramic mug with their first shipment, and they receive extras or samples when they refer friends. Remember to leave customers options, like skipping a shipment — that flexibility helps retention.
You’ll see some churn, which is natural. However, when customers stay engaged (and even intrigued), they’re more likely to stay subscribed.
[Related: The best D2C platforms for international eCommerce]
7. Ensure you have the right financial infrastructure in place
This step is particularly important for eCommerce businesses that sell on a global scale.
If your customers are paying in multiple currencies, it’s important to have the right financial infrastructure in place to ensure you’re not caught out by unnecessary FX conversions and fees.
When you sign up to Airwallex, you’ll get a free Global Account which will allow you to collect, hold and spend in multiple currencies with no monthly fees.
If, for example, you have customers in Europe, the UK and America, you can collect subscription payments in EUR, GBP and USD, hold those funds in your account, and use them to pay suppliers, staff and bills, all whilst avoiding FX fees.
If you do want to convert currencies, you’ll benefit from Airwallex’s market-leading FX rates.
8. Keep tabs on your progress.
Like with any other marketing effort, you’ll need to monitor KPIs before, during and after starting eCommerce subscriptions.
However, some KPIs particularly apply to eCommerce subscriptions:
Gross merchandise value (GMV)
Buy-to-subscriber ratio (BSR)
Number of active subscribers (AR)
As you check your metrics, listen to customers and tactfully solicit feedback. Then, you can review your numbers again and adjust your options per both insights.
You can check many other KPIs, especially customer acquisition cost (CAC), monthly recurring revenue (MRR), average revenue per user (ARPU) and churn. But don’t get bogged down.
Carefully weigh your options, and choose the best subscription eCommerce platform and payment gateway for your SMB. When you do, monitoring your metrics is simpler.
[Related: Key performance indicators for emerging eCommerce businesses]
Types of eCommerce subscription models
Before you create a subscription service, you must decide which eCommerce subscription model is most apt for your SMB, products and customers. Let’s look closely at each so you can weigh your options and the model’s benefits.
The word itself may sound high-brow, but it’s actually quite simple. With a replenishment eCommerce subscription model, your SMB replaces consumable items on a regular basis.
This is a particularly popular eCommerce subscription model because customers are going to use products — primarily food/beverage and personal care products. Receiving items they regularly use on set dates simply makes customers’ lives easier.
After all, people are going to run out of standard items (e.g. deodorant, toilet paper, cosmetics). Your SMB can simplify their lives by saving them repeat orders — or helping them remember to order. A replenishment model is especially apt if your SMB offers consumable or one-time use goods.
For instance, if your SMB sells soaps, this is a solid model. If your SMB sells furniture, this model probably isn’t for you.
[Related: What eCommerce businesses need to know about Amazon Pay]
Again, the term might sound fancy, but it’s basic in meaning.
With a curation eCommerce subscription model, you work with customers’ preferences and send packages (often a monthly “box”) tailored to their tastes. You can place a survey or questionnaire on your subscription service website to quiz customers on their likes and dislikes.
This is an excellent model when your eCommerce SMB offers an array of products or services that complement one another. You’ll need to do your research — delve into customers’ demographics and buying behaviours. The packages you send will differ per customer or customer group.
This model may demand additional effort, but it’s worthwhile. Some of the most memorable reviews come from meeting customers’ unique expectations. When you deliver a spot-on box of goods, for instance, customers are likely to spread the word — and free marketing is always great!
In fact, 80% of customers are more likely to buy when you personalise their shopping experience. As a result, your eCommerce SMB’s popularity grows, your revenue increases and investors become more interested.
Access or membership
You can think of the access eCommerce subscription model as a “members-only” club. The key is selling customers quality products at a sizable discount — they’ll want their membership to be worthwhile. As opposed to receiving discounts on specific goods, they receive discounts on all goods under an umbrella fee.
Customers pay a regular amount (usually monthly or annually) and receive perks. These could be sneak peeks at new products, discounts on bulk products, access to luxury goods at lower prices or other exclusive offers. The model’s main benefits for SMBs are locked-in payments and less work from across-the-board discounts.
An access eCommerce subscription model is apt when your SMB has a definite target audience and can offer blanket discounts that make memberships valuable. As with other models, your SMB must deliver on its promise: guaranteeing customers stay pleased and save money.
Successful eCommerce subscription businesses
You’re likely familiar with major businesses that offer subscribe-and-save options (e.g. Amazon, Walmart, Target).
However, some of the most successful eCommerce subscription services are SMBs — or started as SMBs. Again, two categories dominate: food/beverages and personal care/beauty. Other categories, like fashion, collectibles, health care and pet care, are gaining momentum.
You’ll notice explicit traits in successful businesses offering eCommerce subscriptions. They offer specialised products or fulfil an ongoing need. Plus, they skilfully took advantage of an open place in the market.
For instance, customers may not have the time or energy to shop for healthy meals. Or perhaps a customer demographic needs personal care products but doesn’t care to shop around for them. Other SMBs may see a fairly small but loyal niche and cement themselves as a go-to service for items in that category.
In sum, successful businesses offer customers something special with their eCommerce subscriptions. Here’s just a handful of highly successful businesses using an eCommerce subscription model:
Blue Apron. This online subscription service delivers fresh ingredients and meal kits directly to customers. Subscribers have a wide variety of plans to choose from, and they can select plans per dietary needs and preferences.
Dollar Shave Club. This service ships customers razors and personal grooming products. It upsells by offering additional personal care products, like facial lotions and creams, alongside its primary product.
Loot Crate. This business saw an excellent opportunity and seized it. Noting buying potential in self-defined “nerds,” it sends curated boxes of gaming and pop culture merchandise to select fandoms.
Peloton. A fitness service, Peloton sells subscriptions that provide thousands of virtual fitness classes. Customers can use these classes with its primary high-priced products (e.g. smart exercise bikes and treadmills). Customers get a few virtual classes with its main products, but a subscription gives them access to practically countless options.
SmartyPits. People purchase deodorant — it’s just a fact. This online subscription service delivers all-natural deodorants to customers who want to avoid aluminium and chemicals (and hassle).
These subscription services clearly offer products that customers either definitely need (e.g. food, personal care) or want (e.g. collectibles, online classes). They also range from basic products to high-tech goods. Some eCommerce subscriptions offer both!
Ultimately, each stays successful by making customers’ lives easier — or simply more fun.
Five steps to make your subscription business a success
Once your SMB’s eCommerce subscriptions are live, you’ll need to take steps to ensure they remain viable. Considering how to attract and retain customers in the short and long terms is crucial.
1. Find your ideal customer base and niche.
Identify your core customer type and broadest audience to tailor eCommerce subscriptions. When you know your audience, you can accurately adjust both large and small aspects — from products offered to timing and pricing.
As we’ve noted, finding a unique angle can boost any SMB’s success. This is doubly true in terms of eCommerce subscriptions!
Let’s say an eCommerce SMB’s customer base consists of millennial women. The SMB sells flower and vegetable seeds. The SMB decides to sell subscriptions online per the curation model, and it delivers monthly boxes specific to that audience’s preferences and the growing season.
Tip: To boost engagement, the SMB could offer access to exclusive forums, send weekly gardening tips and upsell equipment via discounts. By knowing its customers and adding subscription perks, the SMB keeps customers happy with innovative offerings.
2. Make sure you have your costs correct.
To take on eCommerce subscriptions in the first place, you must consider your SMB’s metrics. This includes what you can offer, when to offer it and what discounts are feasible. And that’s not just when determining how to set up a subscription service.
You should monitor those KPIs regularly:
If your numbers aren’t in order, you could lose revenue after your initial investment in eCommerce subscriptions. With the best subscription eCommerce platform for your SMB, you can see how your numbers stack up.
[Related: Choosing your North Star metric]
3. Create memorable packaging while cross-selling when possible.
Customers may find eCommerce subscriptions truly delightful, and how products arrive can be a major factor. When you can cross-sell with or in packaging, you’ve raised your chances of making more sales.
Let’s say the aforementioned gardening SMB sends seeds in a wooden box tied with twine. The box contains not only customer-tailored seeds but also coupon codes for potting soil, trowels and ceramic planters. When the SMB knows it can afford such packaging, it’s made its eCommerce subscriptions memorable and charming.
Plus, it’s likely to gain additional profit from items that may not sell as quickly as its main product.
4. Market your subscription service in plain, straightforward language.
Use clear, concise language when marketing eCommerce subscriptions. No customer likes to wade through heavy, tiresome text. Plus, it may seem as though you’re being dishonest or secretive if you use complex language.
If a customer feels a business is trying to con them, they’re unlikely to become a subscriber. This is particularly true on the checkout page, where customers want to know exactly what they’ll save and what they’re signing up for. After all, pretty much everyone prefers to check the bare facts when it comes to spending money.
5. Use the best eCommerce subscription platform and payment gateway.
We must drive home this point — it’s difficult to succeed when your platform (or software) and payment gateway don’t deliver a seamless experience. This is true for both your SMB and customers.
Customers don’t like getting bounced from one service or platform to the next, which can lead to higher churn. SMBs benefit all around from customer satisfaction and the insights that top-notch eCommerce subscription software can provide.
You may have sound plans and product offerings set up. But if you haven’t built them on a firm foundation, they’re much less likely to garner that repeat revenue from eCommerce subscriptions.
Manage your subscriptions with Airwallex
For a subscription model that grows with your business, try Airwallex.
With an Airwallex Global Account, you can collect subscription payments in multiple currencies, manage money globally without high fees, and improve your profit margins.
Plus, you’ll enjoy simple platform integration, fraud protection and smart payment reminders to reduce customer churn. To get started, sign up free today.
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