The Rise of the Retail Subscription
Retail has been transformed by the subscription model. It offers multiple benefits including stable revenue streams and a better Customer Lifetime Value. This article takes a look at retail subscription brands like WineCollective, Stitch Fix, and BarkBox to show how it has elevated retailers to a new level of success. There’s been a massive shift in retail in the last few years thanks to the subscription model.
They’re now everywhere in retail. And it’s no surprise – when done right they bring a lot of benefits, with very little drawback. Subscriptions have unlocked new ways for sustainable growth and revenue streams.
They can be a great addition to a retail business. In this article, we’ll explore how subscriptions have impacted the industry, the benefits they bring to a business, some success stories, and some tips for bringing in subscriptions to your retail business.
How Subscriptions Have Changed Retail
Generally speaking, retail has been a transactional industry. One-off purchases have defined the business/customer relationship.
But once things went online, customers’ expectations began to change a lot and often. It was all about convenience, flexibility, lower cost, and personalised experiences. Once retailers cottoned on to the potential of subscriptions to meet these expectations, they started reaping rewards they wouldn’t have gotten otherwise.
Because subscription models can charge customers on a recurring basis, they have transformed the way retailers think about revenue too.
If we look at the benefits of subscriptions, it’s easier to see why they’ve become so popular in retail.
The Benefits of Subscription Models
Whether you want to add a subscription model to your retail business, or you’re tempted to start a solely-subscription retail business, subscriptions can bring a lot of goodness:
- Predictable Revenue – One-off purchases make it hard for retail businesses to make accurate revenue predictions. But with subscriptions you’ve get a more stable revenue stream. You’ll be able to manage your cash flow better. And it will help you with forecasting, and even inventory and supply chain management.
- Customer Insights – Subscriptions bring you an ongoing relationship with your customers. With the right tools, you can get deep insights into consumer behavior, preferences, and trends. This can help with product development and customising an offering even further, boosting loyalty in the long run.
- Increased Customer Lifetime Value (CLV): It can be difficult and expensive to boost your CLV with one-off purchases. But subscriptions up the CLV because it is a lot easier to sell to existing customers. They tend to buy a lot more if they trust you and see the value. According to BIA Advisory, your current customers spend 67% more than new ones.
- Market Growth & Potential: The subscription market has exploded because customers like subscriptions. When you offer a service that customers like, you open yourself up to organically growing your customer base.
Let’s have a look at the benefits in action with three real-world retail subscription success stories.
Three of Our Favorite Retail Subscription Stories
- WineCollective
WineCollective is a Canadian subscription service for wine enthusiasts who want to try wines from around the world. Their subscribers get a personalised selection, recommendations for food pairing suggestions, and information about the wine and where it comes from.
Because the program focuses on discovery and education, it’s great for anyone from wine newbies to proper oenophiles. It’s actually clever customer base building because as each customer’s wine knowledge grows, so does their satisfaction with the brand.
WineCollective started in 2009, and since have become so popular that they’ve been featured in Huffington Post, Globe and Mail, Maclean’s, Toronto Life, and the Canadian Broadcasting Channel, just to name a few.
- Stitch Fix
Stitch Fix is happy to offer personalized clothing and styling services through its subscription model. After they define their taste, needs, and budget, customers receive curated boxes of apparel and accessories. They keep what they like and return what they don’t.
Founded in 2011, Stitch Fix grew so quickly that it went public within 5 years. Stitch Fix is now worth $1.638 billion. What’s the key to their success? Using a data-driven approach to fashion retail. Combining AI and interactive quizzes and other interfaces, Stitch Fix solves a problem everyone who buys clothes online has – how will I know that this will suit me and if I’ll like it?
- BarkBox
BarkBox is a monthly subscription service providing dog products, services, and experiences to 2 million dogs and their owners. They’re extremely popular, having tapped into the huge pet owner market by offering themed collections of toys and treats.
Founded in 2011, it has shown explosive growth. Revenue growth from 2020 to 2022 was over 41% and annual revenue is now $535 million. And it’s no wonder- BarkBox is known for high-quality products that pets and their owners need (and want!).
Like these companies show, there is a lot of potential. But of course, it has to be done right.
So what can you do to boost your chances?
Implementing a Successful Subscription Model
We’ve worked with a lot of subscription businesses, and here are some of the things we see with the most successful ones.
Know Your Audience – An ongoing relationship with your customers demands that you understand them. That includes who they are, what they want and don’t want, what they value, and what they’ll pay. That way you’ll be able to tailor your offerings to meet their specific needs and preferences. Why would they go anywhere else?
Offer Exceptional Value – Unless you’re very lucky, there’s a lot of competition out there, so you’ll need to stand out. The way to do that is to offer something so compelling that customers feel like it’s a no-brainer. They’ll need to see clear value in the products. Things like exclusivity and personalised pricing are part of it too.
Focus on Customer Experience – Customers have never been so picky. Expectations are high. It’s important to give them a seamless, hassle-free customer experience that extends from the sign-up through customer support, renewals and cancellations, to payments and feedback. It should all be designed with convenience and satisfaction in mind.
Leverage Data for Personalization – Customer data is like gold. And most people don’t make the most of it. But it’s the data collected through your subscription service that allows you to continually make your offerings better. And that brings loyalty.
Innovate and Evolve – Your customers’ needs and wants will change over time, so your subscription offering needs to stay as agile and flexible as possible. Keep an eye on market trends, your competition, and your performance metrics to keep your offering innovative.
Use Automation – Automation makes the entire subscription management process a lot easier, but it also cuts costs, boosts efficiency, makes your customers happy, and scales as fast as you need.
Automation streamlines inventory management, so you don’t get caught out. It creates sales opportunities and keeps track of contracts and terms.
All the data needed is fed in real time to finance for automated (and correct!) billing and payment. It also recognises revenue and reconciles everything back into the books. And monitors your performance and ensures compliance.
And on the marketing and customer service front, personalized automated email campaigns can enhance engagement and retention, while AI-powered chatbots offer instant support, improving the overall customer experience.
Your numbers will be reliable, you’ll have excellent forecasting and reports, and your workers won’t be burdened with manual tasks that are error-prone and rob them of all their time. You’ll all be able to focus on high-value work that drives the business forward. Done right, subscriptions are a great addition to a retail business.
It’s a chance at more sustainable revenue and growth. It builds long-term customer relationships.
Though there are best practices to make subscription models as successful as possible, the potential for rewards is worth investigating.
Curious to learn more? Why not book in an exploratory phone call with us? We’d be happy to show you how you could grow in extraordinary ways.
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