by Christine Olivo, University of Houston – Downtown

Shopping is a habit that everyone will always enjoy or will always have to do. Nowadays, shopping happens online or offline. Online you have sites like Amazon, Lazada, Zalora, and other marketplaces that allow you to shop without leaving your home or desk.  Offline you get your traditional brick and mortar stores that you must physically visit.

For the past 4 years, however, retail’s growth has been surpassed by a new business model.  In 2016, the Subscription Economy Index (SEI) revealed that subscription businesses grew revenues nine times faster than S&P 500 company revenues and four times faster than U.S retail sales over 15 consecutive quarters (January 1, 2012 to September 30, 2016).

This is not surprising. With customers’ behaviour evolving; with time being more and more limited due to work and other priorities; with more and more places they would like to explore – subscriptions make so much sense.  As a matter of fact, you are probably subscribed to something: whether it be Netflix, Spotify, cable channel, Internet, or phone line.  But what if you can also subscribe to consumer packaged goods (CPG)? In 2014, these subscription boxes started growing by 100% annually, and nothing is stopping it.

Retail vs. Subscriptions

In the traditional retail store, the aim is to sell a product.  This is a short-term business relationship between the business and the customer as each sale equates to one customer purchase.  These stores offer a wide range of products and services but are mainly focused on offering customers single purchase experiences, rather than trying to attract future purchases.  While this has worked effectively in the past in gaining customers, it is a challenge obtaining future business from the same customers – especially in this era of decreasing brand loyalty.

In the subscription business model, the business aims at creating long-lasting relationships with customers.  These longer relationships come in the form of the customer paying for a product prior to receiving it, usually paying and receiving repeatedly for a certain time span.  The product, and usually the time span or subscription length, can be chosen and sometimes customized by the customer. Therefore, the commitment from the customer may be a one time purchase or may be a monthly purchase for one year or more.  This is where great customer experience comes into play: if they are happy with your service or product, there’s no exact reason to cancel.

Why Customers go for Subscriptions

Convenience is one of several reasons why customers are now leaning more towards subscriptions instead of retail.  Having an automatic withdrawal of funds on a specified date and being replenished with necessities or desires makes it easy to not worry about future purchases.  For example, one may subscribe to a box that contains healthy food and drinks every week for one month, like this one from Foodlab.  In your traditional store, this would be a one time purchase and the customer would need to go back to the store or order again online to receive another box.  However, for a subscription, the next payment would be automatically charged and the next box would be delivered the next week. This eliminated the need to go to the store, repurchase online, remember to make payments, or remember to refill an order, thereby creating a unique convenience to the customer. It automates a customer’s purchases with just one click.

Value for money When a customer subscribes to a box, she/he omits the need to be physically present when purchasing that particular item. They get to save on gas, parking, and, more importantly, time. At the same time, subscription boxes, which present an assortment of new products every month, give customers access to brands and labels that are surprisingly pleasing to them. So they get to save more when subscribing than buying these items individually, some of which are difficult to purchase in stores. The customer can usually customize when they want to pay and receive the product, depending on their lifestyle needs, like weekly or monthly and for a duration of 3 or 6 months.   

Personalised experience will provide customers with a chance to get subscription boxes more tailored to their preferences.  Some subscription boxes offer different options on what to add to the box, and others offer quizzes to discover the interests of the customer and customize their box according to their answers.  Also, some people appreciate the element of surprise. Some subscription boxes are able to feed their appetite by providing exciting products or experiences, like this Tralulu Deluxe Mystery Hike on  Curating subscription boxes based on interests and preferences enable the customer to receive personalized experiences from the business.  Lastly, customers can choose the length of their subscription.

Why Businesses Should Consider Subscriptions

Continuous revenue & predictive operations are benefits that vendors receive from subscriptions.  It is much easier to predict revenue when customers are subscribed for a certain amount of time for a specific price.  As a vendor, you know how many orders are due during a certain time frame, so you can more effectively plan out investment to produce these products. This enables you to better predict how much supplies will be needed and when you should start production and fulfilment to ensure timely delivery.

Customer lifetime value (CLV) is much higher with a subscription-based business model.  Customers will be continuously purchasing for the duration of the contract.  This generates better customer satisfaction, when products or services are timely delivered and at good quality.  It also produces longer business with customers building long-term consumer relationships. When there are persistently happy customers, cancellations may be avoided, more purchases will happen, and more customers will be obtained.

Subscription is the Future of Your Business

We have been asked before: “Is subscription for all sorts of businesses?”  The answer is yes. If you are creative enough as a business person, you will find a way to use subscription in augmenting your sales.  Scratching off your retail business model (that is already working now) immediately will not be smart. However, dipping your hands in subscriptions, exploring it, and making it an added revenue stream is the way to go.  As your subscription business grows, you will understand that it is a totally different ball game that actually gives you better leverage and keeps you ahead of the industry pack.

If you are someone who wants to start a new business straight under the subscriptions model, congratulations for foreseeing the future of shopping.

Visit and we will launch your subscription business the simplest way possible.

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