The business of subscription e-commerce has grown more than 100 percent each of the past five years, expanding rapidly across a wide range of niches.
According to a survey by McKinsey & Company, the largest subscription retailers have seen sales increase from $57 million in 2011 to $2.6 billion in 2016. Even major manufacturers and retailers such as Sephora and Walmart have entered into the realm of subscription e-commerce.
There have also been very notable mergers and acquisitions as a result of subscription e-commerce success. Unilever acquired Dollar Shave Club for $1 billion in 2016, which stands as one of the largest e-commerce acquisitions ever.
Who is fueling the subscription movement?
The rise in popularity for subscription e-commerce has a direct correlation to streaming media services such as Netflix and Hulu, which have been popular for some time. McKinsey & Company’s survey revealed 46 percent of consumers subscribe to at least one streaming media service. The survey also shows 15 percent of online shoppers have subscribed to an e-commerce service within the past year. Only 4 percent of those shoppers are subscribed to a box service alone, suggesting the target audience is first committing to subscription services via streaming media.
Online shoppers that commit to subscriptions tend to do so with a strong commitment to the model. Active e-commerce subscribers, who are most commonly between 25 and 44 years old, have an average of two subscriptions and almost 35 percent have three or more.
The convenience of limiting trips to the store in favor of the typically more personalize and selective e-commerce subscription option is strongest with male subscribers, 42 percent of whom have three or more subscriptions. Gender is also relevant in determining which subscription sites are most successful with males and females gravitating towards different sellers. Among the top 10 overall most popular e-commerce subscriptions, only half are in the top 10 for both males and females.
Consumers who enjoy e-commerce subscriptions do so largely on the basis they have a superior experience over the alternatives. Subscriptions don’t mean much without the promise of incentives such as lower cost, increased personalization, a high level of convenience, or the feeling of being a valued customer.
Enough positive experiences can go a long way as the consumer becomes the greatest asset to growing the base. As is the case with e-commerce stores in general, subscription-based sites can thrive on customer reviews. That is especially true with consumers that prefer curation and access subscriptions, according to the McKinsey & Company survey.
Positive customer feedback can also help subscription sites avoid the dreaded issues with churn rate. Nearly 40 percent of e-commerce subscribers ultimately cancel. Nearly a third do so in less than three months and a half within six months. Obviously, such a churn rate can be problematic with subscription e-commerce sites reliant on predictable revenue growth and customer behavior.
The propensity for a high churn rate is why it’s incredibly important to remember subscription consumers value a great experience above all else. If that’s provided, the positive feedback will follow and you’ll have a recipe for avoiding a high churn rate.
How Engine is improving the e-commerce subscription experience
At Engine, we’ve created a subscription model that is extremely flexible and customizable for any e-commerce business. Essentially, we’ve taken the popular approach of making checkout simple and applied it to subscription as well.
Engine is one of the few, if not the only, e-commerce platforms with native subscription ability. This means your customers will not be redirected through a third-party checkout. It all happens through the site. In contrast, platforms such as Shopify go through third-party apps. This forces businesses to also pay those apps in order to use subscription abilities.
Here are some of the highlights of what Engine is doing with subscription:
- Any products can easily be made subscribable or vice versa.
- Any product can have subscribable variants. For example, if you have a product that comes in three different sizes but only want the largest product to be subscribable, that works great on the Engine platform.
- The periods at which a subscription can be renewed are customizable. If a product needs to be renewed weekly, monthly, or quarterly, that can be done easily with Engine.
- Subscribing is a two-click process. You simply decide you want to subscribe and how frequently. From there, it’s a smooth checkout and shoppers can expect products to show up at their door as planned.
Engine also has a plan to reduce the unwanted churn rates that can come with subscription models. If customers realize an every-month subscription is too much, Engine allows for easy adjustment to an every-other-month subscription. As a result, customers can easily opt to adjust and remain subscribers rather than canceling altogether.