5 reasons why retail box subscriptions are not just another type of sale
Subscriptions are contracts with recurring deliveries, not orders. They renew periodically, which is why they contribute more to the value of your retail business than one-off sales. Renewal strategies and operational processes are critical to capture. In the subscription scenario, stellar customer experience is even more crucial in keeping your customers onboard. One way of ensuring this is to connect your eCommerce site with a contract management back end that drives the automation of your subscription lifecycle with confidence.
Subscription control is all about timing your business processes. There are 4 layers of times:
- The renewal timeline (yearly or monthly),
- The billing timeline (weekly or monthly),
- The revenue recognition timeline (per financial period) and finally,
- The customer delivery timeline (every x days).
These timelines need to be organised in concert to ensure high quality process execution.
Your business applications in Finance, Supply Chain, Warehouse Management and in Accounts Receivable or Payment Management must be aligned with the above timeline-driven events. Failure to do so could result in disaster.
As a retailer, your subscription focus should mostly be on which products can be sold in a recurring manner. But the financial process requires due attention as well. Recurring box subscription revenue must be compliant with IFRS 15 or ASC 606. This means that you need to link each subscription to a plan which recognises your revenue; every month for a yearly invoice, for example. You must also automate this process in order to reduce administrative burden on your finance team.
When you focus on your sales performance, your data analytics and KPI’s will reflect that. But in the box subscription model, new KPI’s come to the surface. In fact, annualised recognised revenue (ARR) and annualised contract value (ACV) become critical to monitor, which would require new reporting models.
A critical process is picking, packing and shipping in the outbound logistics value stream. In box subscription models the same business process is required, however there is one fundamental difference. The orders are generated from the box subscription contract.
In the contract, the customer typically states when deliveries are expected. For example, if you sell wine in a box subscription model, a customer could order a box every month for one year. This means that in the contract, 12 delivery orders should be created automatically and shipped to the the customer’s delivery address. The source of these orders should be based on the delivery schedule that is linked to the box subscription contract. Once an order is created at the right time, it feeds into the pick, pack and ship process. No invoicing of these orders would be required, as the invoice and payment is related to the box subscription contract.
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