Starting a Subscription-Based Ecommerce Store? What You Need to Know
What did we do before Amazon Prime?
For online shoppers, the feeling of being an “insider” and the perks that come with it (discounted products, fast shipping, easy returns, etc.) are hard to beat. This model has paved the way for other big brands to start subscription-based ecommerce programs of their own.
Many business owners believe that a subscription-based ecommerce model is only appropriate for consumable products that lend themselves to subscription — food, supplements, makeup, skincare, pet supplies, etc. But that’s not the case!
Now that consumers are conditioned to understand and appreciate the perks of a paid membership, a variety of businesses can launch a subscription-based ecommerce program — even if their products don’t fit the traditional model. Depending on your product offering, this could create a major opportunity for your business.
In this post, we’ll discuss the benefits of subscription-based ecommerce, what member perks could look like, and what types of brands this works best for.
Benefits of Membership Programs for Subscription-Based Ecommerce
Membership programs benefit both the brand and the customer.
On the business owner’s side, membership programs encourage monthly recurring revenue, a golden metric every subscription-based ecommerce brand should strive for. They also increase each customer’s loyalty and lifetime value by increasing repeat purchases and average order value.
All these metrics are crucial for building a long-lasting, stable, and healthy subscription-based ecommerce business.
The benefits members receive are up to you on the customer side, but they must have tremendous perceived value. We’ll explore what this could look like next.
Common Perks Associated With Subscription-Based Ecommerce Membership Programs
Here are some of the most common perks subscription-based ecommerce programs offer their members:
Special shipping rates
This could be free shipping or discounted express shipping. Typically, a customer’s order needs to pass a certain price threshold to qualify for the free shipping option.
Free returns
Returns are inconvenient for both the business and the consumer, but they’re an inevitable part of the ecommerce experience. To stay competitive, rather than offering free returns to everyone, what if you made returns a members-only perk? This way, membership fees can help offset the costs of processing returns.
Early access perks
Subscription-based ecommerce membership programs can offer members early access to new products or exclusive access to valuable content.
This VIP treatment adds to that “insider” feel, generates excitement, and is perceived as valuable by customers who love your brand.
VIP discounts
If you have adequate product margins for this, you could also offer special discounts for your subscription-based ecommerce customers. This could be secret member-only sales or a steeper discount than for regular customers.
What Types of Businesses or Products Are Good for Subscription-Based Ecommerce Membership Programs?
When assessing whether a subscription-based ecommerce program is right for your business, consider your product line and your customers’ purchase behavior.
You don’t need a membership program if you sell a single product or products that don’t require repeat purchases. But if this is the case, we strongly recommend investing in research and development for your product line. Offering new products and acquiring repeat customers can help you move from the survival stage of business to the health stage.
If your product line allows subscription-based ecommerce customers to buy regularly, offering a membership program could be great, even if you’re not a traditional subscription-based brand!
Here are a few types of products that subscription-based ecommerce membership programs do well for:
- Consumable products such as food or supplements
- Replaceable products such as skincare and makeup
- Apparel and accessories
- Magazines, books, or digital content
- Products that have a software element or that benefit from regularly released content
4 Key Decisions to Make When Launching Your Subscription-Based Ecommerce Membership Program
So, you’ve decided to start a membership program for your subscription-based ecommerce store — but don’t go flying off the handle just yet! Answer these four questions to ensure a successful launch:
1. What’s your program’s value?
Whether you provide members with free shipping, special discounts, or exclusive access and/or support, create a high-value program that’s easy to deliver.
2. What will membership cost?
The membership fee depends on your product’s price, the value customers receive by being members, and the revenue the membership generates for your subscription-based ecommerce business.
If you want to launch an Amazon Prime-style membership, charge a small fee and rely on the increased customer lifetime value to achieve financial success. If you look only at program fees vs. the cost of delivering the perks, you may find yourself at breakeven (or possibly a loss). But if the program increases repeat purchases and customer lifetime value, that’s not necessarily bad.
For your reference, here are a few costs associated with popular subscription-based ecommerce membership programs from various businesses. The benefits of each of these brands’ programs vary, but most fall into the four categories mentioned: shipping, discounts, exclusive access, and support.
- Costco and Sam’s Club both charge anywhere from $60 to $120 per year.
- Amazon Prime is $139 per year.
- Walmart Plus is $98 per year.
- REI is $30 for life.
- Beautycounter is $50 per year.
- Bed Bath & Beyond is $29 per year.
3. How will you implement the program?
Next, determine how you’ll set up the program logistically. Consider the following components:
- Technology: You’ll need a platform such as Recharge or Bold Subscriptions to help on the functional side.
- Email automations: Make sure customers who sign up for the membership are tagged accordingly. Then, set up the necessary automated email flows for them. These include welcoming the customer to the program, outlining their perks, and reminding them when their membership renews.
- Regular email communication: When developing email content, speak to your members like VIPs. If early access to sales or new product launches are part of your program, create separate emails for your members to promote these events.
- Customer support: If elevated customer assistance is part of your program (it should be), make sure your customer service and fulfillment teams are equipped to help.
4. How will you pitch and launch the program?
Lastly, you’ll need an action plan for launching your program and pitching it to your subscription-based ecommerce customers.
Beta test any new program with a small group. Identify your top customers, reach out to that segment, and offer the membership at a discounted rate for a limited time.
Starting with this smaller group will allow you to test the program’s logistics before rolling it out on a larger scale. It’ll also be a great opportunity to collect feedback.
If the beta test goes smoothly and customers are happy, begin marketing the membership program on your website for all customers. Send emails outlining the program’s value to your post-purchase sequence for first-time subscription-based ecommerce customers.
You can also market the membership’s perks on the product or checkout page.
How to Measure the Results of Your Subscription-Based Ecommerce Store’s Membership Program
So, how will you know if your subscription-based ecommerce membership program is successful?
The goal is to attract customer investment, which leads to repeat purchases. To assess how well you’re achieving that goal, consider a few metrics:
- Repeat purchase rate and customer lifetime value. Both these metrics should increase if your subscription-based ecommerce membership program is successful.
- Business efficiency. Consider the return rate for members and non-members and the shipping cost for each. Most importantly, look at the profitability of your subscription-based ecommerce business with and without the membership program.
Ultimately, net revenue must be better with the program in place than without. If the economics don’t work, you’ll go out of business.
Is a Subscription-Based Ecommerce Membership Program Worthwhile?
A subscription-based ecommerce membership program allows you to deliver massive value and a better brand experience for your customers in exchange for a small investment on their part. It also creates brand loyalty, which gives you a leg up on your competition and can increase monthly recurring revenue.
If your product line makes sense for this and your business model allows you to do it profitably, you and your customer can win.
