To Subscribe or Not To Subscribe
The global e-commerce subscription market is expected to reach $478.2 billion by 2025, according to UnvisDatos, a market research firm. If your hand-crafted coffee mug business is able to capture a measly 0.001% of that market then you’ll have a $4 million company on your hands (good luck with that).
Acquiring a new customer is hard. You should do whatever you can to keep your existing ones and adding a subscription option to your product is an easy way to do that. A small increase of 5% in customer retention can produce a massive 25% (even up to 95%) increase in profits. The e-commerce landscape is exponentially expanding with platforms like Shopify making it possible and easy for anyone with an idea or a product to setup and online store and sell it to the world. The amount of businesses competing for that sale is only increasing and so is the cost of winning that competition. Research has shown that the easiest (and cheapest) way to win is to compete against yourself: do everything you can to retain the customers you already have. Don’t give them a reason to go elsewhere and utilize every strategy you can to make it easy for them to stay.
Retain, Retain, Retain
You might be wondering if you already have decent customer retention. According to ProfitWell, a company that provides business intelligence solutions for companies and businesses, the average retention rate for the retail sector is 63%. So if you’re not anywhere close to that you should get work:
- Know your metrics - It’s impossible to know your retention rate if you’re not tracking your sales and your customers. Platforms like Shopify and BigCommerce make this type of data tracking easy. If you’re a Shopify user check out the following link for more information on tracking those metrics: https://www.shopify.com/blog/customer-retention-strategies#repeat
- Know your customer - It’s import to know what your current customers expect from your company and what their needs are. If you aren’t meeting their needs, they’ll go elsewhere. Stay engaged with them, be consistent, read the reviews, see what people are saying on social media, send out a survey, send out a personal email. If you treat your customer like a number on a spreadsheet then their loyalty will be just as shallow.
- Employ retention strategies - Subscriptions, loyalty programs, discount codes for newsletter subscribers, random gifts or discounts
To Subscribe or Not To Subscribe
As mentioned above one of the easiest methods to retain your existing customers is to offer a subscription option for your current products. Of course, subscriptions don’t make sense for every type of product (like hand-crafted mugs), but for a majority or retail businesses it does make sense. According to UnvisDatos, the top retail industries for subscription growth are as follows:
- Beauty and personal care
- Food and beverage
- Clothing and fashion
- Health and fitness
Besides increased customer retention there are a handful of reasons having subscription revenue is good for your business. One reason is that it creates predictable revenue. Having a predictable revenue stream can help your business grow faster and increase the value of your business in the eyes of investors. Another advantage is it allows for more predicable inventory requirements which will help to decrease your operating costs.
Do Some Research
You can easily turn your stand-alone products into subscription products with subscription payment providers like ReCharge, Bold, or Paywhirl. After you’ve done that you still need to do some research on the best configuration for your subscription product:
- Should I offer a “subscribe and save” perk?
- How what delivery frequency options should I provide?
- Should I charge shipping for each delivery?
- How soon can the customer cancel their delivery?
- What other perks can I provide to incentivize subscribers?
There’s no one-size-fits-all answer to the above questions. You’ll need to continue to monitor your sales data to see what works best for your customers.