The global subscription-based eCommerce market is rapidly growing. As per a report published on Research and Market, the market is expected to reach an astonishing $2419.69 billion by 2028, up from $96.61 billion in 2022.
In fact, you won’t believe, for the period of 2013-2018, it grew at an unbelievable rate of 100%. (Source: McKinsey & Co.) How tempting is that!?
This is because of the immense number of benefits it brings to both the customer and the business. On the one hand, customers get a personalised experience, convenience, cost-saving, improved routine, better service, and much more.
On the other hand, subscription-based model benefit the organisation in the form of high predictability, positive cash flow, increased customer lifetime value, more expansion opportunities, etc.
No wonder that more than half of online shoppers, i.e., 54%, have subscribed to at least one or more eCommerce services, with 15% of them having subscribed in the past year only. Source: Invesp
And around 3 out of 4, i.e., 75% of D2C organisations, will offer subscription services by 2023. (Source: Cision)
So, if you are also one of the ambitious decision-makers who love to seize opportunities as they come, this discussion is where you should start. We are offering a complete end-to-end guide to starting a successful subscription based eCommerce business with market-leading forms and features. We wish you all the luck in the world!
Table of Contents
What is Subscription based eCommerce Business Model?
Subscription-based eCommerce is a fairly modern business model where customers subscribe to your products and services. This means they pay a recurring fee to you in order to get your products and services on a scheduled basis.
Thus, it turns one time shoppers into repeat customers for a long-term or even lifelong relationship. In fact, as we also mentioned above, it has multiple benefits for your business.
6 Phenomenal Benefits of Subscription-based eCommerce Business Models in 2024
Predictable Revenue Streams: Subscription models provide consistent and predictable income, allowing for planning and decision-making, while bringing stability.
Enhanced Customer Lifetime Value: Subscriptions make it easier to foster long-term relationships with your customers, as they have already shown allegiance to your brand by subscribing to it. Hence, there are higher chances that they will stay committed as long as you keep serving the right way.
Improved Customer Retention: Subscription keeps customers connected to your brand, reducing churn rates.
Better Inventory Management: Since you stay aware of the number of customers you need to serve, it becomes easier to manage inventory levels, minimising overstock or shortages.
Data-Driven Insights: Subscriptions also help you by providing valuable data on customer behaviour, preferences, and buying patterns. This leads to data-driven decision-making and well-targeted marketing strategies that exactly serve your purpose.
Opportunity for Upselling/Cross-selling: As a subscription-based business, you also get the opportunity to upsell or cross-sell additional products. As customers trust your brand, they will not hesitate to try out new products from you, giving you a platform to build upon.
3 Types of Subscription Based eCommerce Business Models in 2024
There are three main types of ecommerce subscription models.
- Replenishment
- Curation
- Access
You need to choose the one that suits your offering and business objectives. Let’s see how.
Replenishment Model – To Serve Essential Need of Your Customer
This model allows you to provide products on a recurring basis. Customers specify the product they want and the frequency of product delivery, allowing you to deliver your products accordingly. More-often-than-not, consumers are provided with discounts and offers to attract and retain them due to the high competition in the space.
The model is best suited for essentials that are consumed frequently and need periodic replenishment. Thus, it include most of the FMCG products, such as breakfast cereals, milk, break, soaps, etc.
You can take the example of MilkBasket. It’s subscription programme allows consumers to schedule delivery of their grocery essentials and set the frequency at which they are delivered. For example, if you need bread on every alternate day of the week, you can select the day in the MilkBasket calendar using the app.
This model offers higher conversion and retention rates as most of these products fall under the “essentials” category and consumers shop them regularly. However, since you need to offer lucrative discounts and deals, you will need to operate at scale to gain a sustainable profile.
Also Read: Discover seamless FMCG B2B eCommerce platforms: Where Businesses Thrive!
Curation Model – For Quality Loving Customers
Under this model, you need to deploy smart algorithms that understand each user’s taste and preference. Based on this, you need to provide a collection of assorted products and deliver them to customers at predetermined intervals.
Thus, as you can see, this model packs an element of “surprise” for your customer, which makes it highly suitable for apparel and beauty categories. However, that doesn’t mean it is not for other categories. Curation models is also commonly used for “non-essential” products such as beverages, books, toys, condiments, etc.
For example, a brand using this model can offer hand-picked curated boxes of gourmet food and snacks every month.
Consumers will receive a monthly package of handpicked samples to match their tastes in different categories.
The challenge with this model is the high cost incurred in two aspects. First, to attract new customers, you need to shell out extra money for your marketing, branding and packaging efforts. Second, you need to maintain a vast range of products to meet the varying tastes of different consumers.
Additionally, for your existing customers, you need to offer high-quality products personalised to the maximum possible extent.
On the positive side, however, this also means that, if executed properly, this model offers huge profit potential. Here, opting for health and beauty industry solutions for your eCommerce store will be a great way to get an expert solution for your domain.
Access Model – For Enthusiasts
Under this model, you charge a subscription fee to let your customers access your products and offer them exclusive member-only deals, discounts and offers.
These models are very well suited for hobby-based and leisure products where the consumer wants to access exclusive products and services that are not available to the general public.
Some examples are health and fitness, food, and fashion, wherein customers want to access exclusive products and feel special in the space. For those in the fashion industry, there are fashion industry eCommerce solutions available that cater to specific industry needs.
Now that you know what a subscription based eCommerce business model is and its type, now is the time to plan for your very own eCommerce business. For this, you need a roadmap, and here it is.
Launch Your Subscription based eCommerce Business With This Detailed Roadmap
Launching a subscription-based eCommerce business involves multiple steps. From ideation to execution.
Here’s a comprehensive 4-phased roadmap that you can follow to successfully launch your very own subscription-based eCommerce store.
Phase 1: Finding the Right Idea and Solid Planning
Start with extensive market research and idea validation:
This phase is all about building a strong foundation for your eCommerce business. For this, you need to do the following:
- Identify your niche market.
- Research competitors and understand customer needs.
- Validate your idea through surveys, focus groups, or landing pages.
- Assess your resources.
Your research should be able to answer the following questions:
- Who are my consumers?
- Who are my competitors?
- Is there any gap between what consumers want and what they get?
- How can I differentiate my brand from my competitors in the same space?
Once you have the answer to the above mentioned question, now is the time to make a foolproof plan.
Develop a Research-based Winning Business Plan
Based on the findings of your research, you need to find the right business model that can serve your identified target audience better.
Your research would also help you identify the unique selling propositions (USPs) of your business that outsmart your competitors.
Also, depending on the status of your available resources, create financial projections and a budget.
Thirdly, you need to outline marketing strategies that successfully incorporate your USP and growth plans that take your above-mentioned findings into account.
After you have devised a meticulous plan, its time to fine tune it in Phase 2.
Phase 2: Developing Feature-packed eCommerce Store
After you have charted out the big picture in Phase 1, in the second phase, you need to decide on the granular details.
Here, you need to decide on the subscription tiers, pricing, and billing cycles of your eCommerce business. This will also include planning out the benefits and value proposition for each tier. Here, you need to balance what’s good for your consumers with what’s good for your business.
Pro Tip: Plan by prioritising consumer needs over your business needs.
Find the Right eCommerce Development Partner
In this phase, you will also need to find and partner with the best eCommerce development company in India who can build your platform as per your existing plan. Your eCommerce partner will help you in the following ways:
Recommend the Right Platform for you
Your eCommerce development partner will also help you choose the right platform (like Shopify, Magento, WooCommerce, etc.) for the best subscription management. They will customise the platform to accommodate subscription features such as recurring billing, customer account management, etc.
Like in our case, we help you understand the Magento platform and why it is the leading choice among businesses looking to enter the eCommerce space. Our Magento extension development services help your online store gain features completely unique to your business, helping your brand gain a competitive edge.
Create prototypes and MVPs for proactive troubleshooting
They will develop the prototype to test the shopping experience and the functionalities of your eCommerce store. They will also launch your eCommerce store with a Minimum Viable Product (MVP) to gather feedback from early adopters and improve your eCommerce store as per the response.
Offer Constant Support from Pre-to-Post launch
Even after the launch of your eCommerce business, they will offer steady and perpetual support so that if you face issues like server downtime, security breaches, compatibility errors, data loss, update and patch management, network connectivity problems, and software bugs and glitches, they will not bother you.
In short, this will ensure a fail-safe approach to getting your eCommerce store up and running. As for us, we offer an end-to-end Magento development service package to help you enter the eCommerce market with ease and confidence.
Phase 3: Start Marketing and Prepare to Operate
Once you have partnered with the right eCommerce partner, you do not need to worry about the development parts and can focus on other critical aspects like marketing and operations.
Phase 3 is about building a strong brand and setting up robust operational processes. Remember, marketing attracts the customer; operations retain them. Both of these aspects are important for a successful eCommerce business.
Hit the Right Chord with Marketing and Branding
You need to develop a branding strategy. This includes finalising your logo, website design, and brand messaging. Along with that, you need to plan a pre-launch marketing campaign to generate buzz.
We would suggest contacting a trusted eCommerce website design and development company. They specialise in this area and get you a high performing and feature-packed, fast-loading eComemrce website.
Set Up Robust Operations To Deliver
Now, you need to be ready for action, so in this phase, you need to establish backend operations such as inventory management, order fulfilment, and customer support systems. For businesses managing multi channel sales, it is better to use multichannel inventory management solutions to better manage inventory and avoid confusion.
A step specific to a subscription-based eCommerce business is the testing of the subscription management system. Subscription management is one of the most critical aspects of your business, and you cannot afford to make a mistake when a customer opts for your subscription.
Hence, you need to test your system thoroughly to ensure nothing goes wrong. Here, we would suggest taking the help of an expert. For the Magento eCommerce store, we would suggest contacting the Magento eCommerce store development service provider, as they have an exhaustive list of benchmarks to check your eCommerce store and ensure a perfectly working store.
Phase 4: Launch Your Online Store and Track Performance
Let’s gear up for launch in our final phase. In this phase, all your effort will move towards its conclusion as you officially launch your subscription based eCommerce business.
Market with Your Full Potential
Marketing is key in this phase; you need to utilise various channels (social media, email, influencers) to take your words to your audience and attract as many shoppers and vendors to your eCommerce store as possible.
Know what to track and Monitor Closely
In this phase, you also need to keep a close eye on customer behaviour, market trends and requirements, feedback, and all the essential key performance indicators (KPIs). Here are some crucial KPIs for you to better track your eStore performance:
Annual/Monthly Recurring Revenue (ARR/MRR)
The value of recurring revenue of your subscriptions’ contracts during a month or a year.
Average Revenue Per User (ARPU)
The average amount collected from your subscriber. (Divide total revenue by the number of active subscribers.
Customer Acquisition Cost (CAC)
The amount you spend to acquire a new customer. Get help from a marketing expert to determine this value.
Churn Rate
The rate at which you lose customers each month.
Customer Lifetime Value (CLV)
The total amount a customer spends throughout their membership lifespan.
Based on these, you need to keep evolving your eCommerce store and optimising strategies and customer acquisition techniques.
Time to grow!!
Once you have gained traction, its time to scale your business. Depending on the demand, start scaling operations, increasing product offerings, or expanding into new markets. Magento store owners can choose to move from a single store operation to a fully developed and feature-packed Magento marketplace.
Cost of the development of an eCommerce store on a Subscription Model
The cost of developing a subscription based eCommerce store varies depending on several factors. This includes the complexity of the website, the features required, extension development, the platform used, the eCommerce development partner, and other related expenses.
However, the estimated cost can range from ₹35,000 to ₹20,00,000+, depending on the complexity and features required.
For the Magento platform, an easy way out is to hire dedicated Magento developer to reduce cost and get custom eCommerce store for your business.
An overview of eCommerce website development cost in 2023
Conclusion
Subscription based eCommerce businesses are certainly a great investment avenue and will enter the lucrative eCommerce space. It brings predictability and opportunities, along with convenience and personalization, to the customer. Thus, it helps you serve the customer better and win their loyalty and long-term allegiance.
The four-phased plan. we discussed above clearly lays out a roadmap for you to start your own subscription based eCommerce business. If you still have questions, feel free to reach out to Magento India. It’s time to wrap-up and we wish you all the best.
FAQ’s
1. How does subscription based eCommerce benefit the fashion industry?
Subscription models in fashion offer personalised experiences and recurring deliveries, ensuring customer engagement and convenience.
2. How does Magento aid multichannel inventory management for eCommerce?
Magento’s multichannel inventory management solutions synchronise inventory data across platforms, optimising control and streamlining order fulfilment.
3. Why invest in Magento extension development for a marketplace?
Magento extension development services customise and expand Marketplaces, enhancing functionality and meeting specific business needs.
4. How do dedicated Magento developers benefit the health and beauty industries?
When you hire dedicated Magento developer, they tailors eCommerce solutions for your industries, ensuring user-friendly experiences and backend management.
5. What influences the cost of developing an eCommerce store with Magento?
Factors like design complexity, required features, and extensions influence costs. Consulting experts provides precise estimates.
