We’re living in a subscription economy. A recent report shows that subscription services have grown 300% in the last seven years with no signs of slowing. This underscores the emphasis on convenience shopping and the overall power of the subscription product business model.
A subscription-based business allows you to sell products on a recurring basis. Orders are automatically placed into your system and customers are billed accordingly. For businesses, this selling model can be a huge time-saver, improve cash flow, and help you plan for the future.
Studies show that more than half of online shoppers subscribe to at least one subscription product business. In the wake of the pandemic, more than 27% of Americans say they plan to increase their reliance on subscriptions.
Shopify makes it easy to start a new subscription product business or complement your existing services with subscriptions. Here’s a closer look at the process and why it’s worth pursuing:
Why a Subscription Product Business?
Subscription product businesses weren’t always the trendy, $10 billion industry it is today. And then Birchbox happened. This low-cost, monthly beauty surprise box is considered the catalyst that started what has now amassed into a highly addictive business model.
Today, people can order anything from razors to makeup to food on a recurring basis, and the options continue to expand. While they’re taking advantage of this growing practice, you could be, too.
Let’s unbox the benefits of the subscription product business model:
The benefits to the customer are multifold. For need-based subscriptions like dog food or pantry items, users can expect to replenish their supply on a predictable, recurring basis. For curated collections and fun pick-me-ups, there’s an element of mystery and intrigue that keep customers coming back for more. There’s also tons of variety, convenience, and rarity built into every box.
Predictable revenue, customer loyalty, and lower customer acquisition costs are among the chief business benefits. In addition, you have a captive audience for cross selling and upselling opportunities.
When done correctly, your subscription product business can be extremely lucrative. Part of ensuring your success is choosing a profitable niche and supporting it with the right tools, technology, and partnerships.
Types of Subscription-Based Businesses
According to McKinsey and Company, subscription businesses typically follow one of three formats:
First, there’s the curation model (55%), which aims to surprise its monthly customers with a collection of goodies each period. This is the foundation for businesses like Stitch Fix, Ipsy, and Therabox.
There’s the replenishment model (32%), which is a recurring subscription for specific necessities. Dollar Shave Club and Grove.co follow this model. The replenishment format tends to have subscribers for longer terms, according to Shopify.
Last but not least, there’s the access model (13%). This is where members pay for a subscription box and get access to members-only pricing and perks. FabFitFun and Causebox are two top contenders.
Choosing your format is a critical step in the process. Once you lay the groundwork, user-friendly platforms like Shopify can help you get your subscription product business up and running.
Setting Up Your Subscription Product Business in Shopify
Shopify builds subscriptions into its platform. Once you set up subscriptions in Shopify, your customers can schedule repeat purchases.
To use Shopify subscriptions, your primary payment gateway must be Shopify Payments. You may also not use accelerated checkouts like Google Pay, Apple Pay, or Amazon Pay for subscription purchases, nor can your delivery options be set to local delivery or in-store pickup.
Check the full (short) list of eligibility requirements here.
One of the advantages of using Shopify is that it offers purpose-built features for your subscription product business.
With Shopify, you can set up products to be sold as subscription-only or as subscriptions or one-time purchases. Shopify also includes an option to offer discount codes on subscriptions. These discounts can apply to subscriptions, one-time purchases, or both.
Shopify offers a suite of integrations to make managing your business easier. For example, Zenventory integrates directly within the platform to automate your picking, packing, and shipping processes.
Managing Your Subscription Product Business
Once you start collecting orders, you can manage them in Shopify at a basic level or import them to a platform designed for higher velocity fulfillment like Zenventory that works directly with Shopify’s integration capabilities.
Streamline Order Fulfillment
You can filter your subscription orders in Shopify by Scheduled, Fulfilled, and Unfulfilled within Shopify. Orders can be sorted and filtered by status as a way to look ahead and stay productive in fulfillment and inventory management.
Scheduled refers to upcoming orders that do not require immediate action. Unfulfilled orders require immediate action, while Fulfilled are completed orders.
If Zenventory is connected to your Shopify store, you’ll have even more statuses to help you keep tabs on the progress of your orders from start to finish: Zenventory removes the guesswork from fulfillment activities by making it easy to see which orders are backorders, which ones are in stock and ready to be picked, and which are boxed up and awaiting shipment. It can even guide the fulfillment team to the ideal locations in the warehouse for picking the items they need to fulfill next as each order moves through the process.
Improve Marketing Effectiveness
Shopify helps you gain deeper insights into what your customers are ordering so you can improve your marketing and outreach.
For example, you can filter your customer list by product or subscription status, then send relevant offers. If a payment failed, you could send them a reminder to update their credit card information. Or if a customer cancels a subscription, you might add them to a reactivation campaign.
Keep Enough Inventory On Hand
Shopify automatically reserves inventory when a subscription reaches its fulfillment date. You can see upcoming orders to anticipate how much inventory to keep in stock. There’s also an option to fulfill orders early to ensure product availability.
Zenventory further safeguards against stock outages in a number of ways. For example, you can view forecasting based on recent sales history. Get automated alerts when stock gets to a critically low point. Detailed supplier catalogs to help you make the best-informed decisions when ordering replenishment stock.
As you sell more products, keeping healthy inventory levels for your customers becomes a bigger focus. The better you can anticipate inventory needs, the more orders you can fulfill (and keep your customers happy!).
Subscription Product Business Tips for Recurring Success
Attracting customers to your subscription product business can be easy if you have good marketing. Keeping them engaged, however, is a different story.
There are never any guarantees in business. But these three best practices can help you maintain your recurring revenue and ongoing success:
Stay Connected with Your Customers
Subscription businesses don’t operate on autopilot. Reach out to your customers with news, tips, offers, and surveys to reduce churn and continue earning their business.
Find New Ways to Add Value
Many subscription product businesses thrive not just because of what’s in the box, but also what’s outside the box. Members-only content, online communities, magazines, and more can help you win and keep loyal fans.
Scale Your Services with the Right Partnerships
Companies like Zenventory handle some of the heavy lifting of running a successful subscription product business. Take advantage of our established systems and tools that integrate with your Shopify platform to simplify the way you work.
Want to see how Zenventory supports your subscription product business on Shopify? Reach out to schedule a demo!