— January 24, 2019
A growing number of e-commerce businesses and payment solutions have also opened opportunities for innovations that make online consumers life easier. Not to mention business advantages for online stores and a new way to monetize their services.
Subscriptions got very popular in the past few years, which shouldn’t be surprising, as it’s driven by convenience. People can simply order items from the comfort of their own homes and receive things they need or want regularly. Convenience, in question, is the value proposition of subscriptions which, naturally, leads to higher customer retention rates.
One of the Accenture reports predicts that millennials will spend $ 1.4 trillion annually by 2020 making 30% of total retail sales. Moreover, according to the Subscription Economy Index® study, subscription-based businesses grew revenue 5 times faster than companies of the S&P 500 from January 1, 2012 to June 30, 2018.
Recurring card payments give businesses regular sales opportunity and predictable cash flow, as merchants know the number of orders in advance. With that being said, it’s much easier to estimate income and plan ahead.
Moreover, subscription-based businesses might notice a better customer retention rate. In the subscription-based model, you have an established relationship with customers, so it’s more likely they will stick to your company for a longer time.
What’s great about subscriptions is that they are available across a variety of product types and services. This is especially worth implementing for businesses with products or services that people tend to buy regularly. It’s not only about groceries, beauty, or a gym subscription, there are still many niches to fulfill.
It’s also a great solution for customers, as for many of them, the subscription model is a perfect way to keep financial health — they have control over their monthly expenses for certain items received regularly. Payments are charged automatically, customers receive their orders without any extra effort, it’s a real win-win.
Turn your business into a well-oiled machine
Not all business models are created equally and a lot depends on the quality of services offered, as well as product types. So, when a merchant runs a regular e-commerce store, there’s no need to turn it into a subscription-based business model completely. They can still offer one-time purchases and start with a few subscription plans to see whether it will work for them. Retailers can also consider running a business that is a hybrid of one-time purchases and a subscription model.
E-commerce retailers can start, for instance, with their actual customers to get valuable feedback on their new business model and assess whether it’s viable for them or not.
Moreover, it’s natural that the payment market has also adapted to a subscription-based business’ needs, as payment providers have noticed a growing interest in this kind of business model.
A reliable payment platform can work wonders for business, so, from a technological perspective, retailers should focus more on payment provider’s APIs that will give them full control over customer’s behavior, let them manage transactions, create charges or assign customers to certain subscriptions.
“The secret key is to find a payment solution that will unlock the potential of subscriptions. The most important things for merchants should be the lack of interruptions and redirections, a frictionless payment process and top-level security,” says Lucas Jankowiak, SecurionPay CEO.
It’s also good to note that subscriptions give opportunities to make cross-sales offers, as happy, long-term customers are more likely to explore new products or services.
“We support merchants that are getting creative with their subscription business models by giving them the tool to set up an unlimited number of plans and create any payment scenario they need. For instance, they can automatically bill customers at regular intervals and boost revenue with cross-sales at the same time,” says Jankowiak.
The main drawbacks of accepting recurring payments that can lead to revenue loss are card’s expiration, declined authorization or spending limits. But still, merchants can count on reliable payment providers that offer solutions, such as account updater and the possibility to set up logic in order to minimize declines.
The subscription model is high on the agenda across the e-commerce industry for some time, so companies that implement this model to their strategy can see positive results in terms of convenience, cost-savings, and income predictability.
E-commerce retailers can turn the hype surrounding subscription business model into a very lucrative business, but only if they provide an exceptional end-to-end experience.