If you’re looking to ramp up your recurring revenue and take your ecommerce business to the next level, read this guide from the Shopify subscription experts at Velstar.
Why start a subscription business on Shopify?
An ecommerce subscription model offers customers a cost effective way of buying the products they want on a recurring basis. This can be the replenishment of the same items, such as razors, or the curation of new and surprise items.
So, how does a subscription business model benefit your Shopify store?
1. Increases customer lifetime value (CLV)
Due to the recurring nature of subscriptions, they help to create a loyal fanbase of repeat customers easily. But keep in mind, with loyalty and retention, it all depends on customer experience and satisfaction. If a customer has a bad experience with your business, chances are they won’t be subscribing for long.
2. Predictive revenue
Subscriptions on Shopify make it easier to predict future revenue and forecast cash flow for other business expenses. This peace of mind is particularly handy if you’re a new startup with ambitions to grow quickly.
3. Streamlines shipping
The regularity of shipments streamlines your Shopify business’s fulfilment process and keeps costs consistent.
4. Lowers customer acquisition costs (CAC)
On a pay-per-product pricing model, you have to invest a lot of time and money into marketing and sales in order to attract new customers. However, with subscriptions, customers make payments on a recurring basis so you don’t have to invest as much in acquiring new customers to keep your business going.
5. Up-selling and cross-selling are so much easier
When you choose a subscription-based business model, you’re better positioned to make more revenue from existing customers than those that aren’t. This is because you have continuous contact with your customers, building trust and loyalty, making it easier to market additional products to them.
As you can see, launching a subscription business has many advantages. The next step is choosing the right subscription model for your Shopify store.
Most common types of subscription models
The three most common types of subscriptions are curation, replenishment and access. Each subscription model comes with its own distinct set of benefits and drawbacks, so choosing which is the best fit for your business will come down to the type of products you’re selling and your business goals and objectives.
1. Curation business model (subscription boxes)
This is one of the most popular subscription business models, implemented by brands like Birchbox. This subscription model seeks to surprise customers with new, highly personalised items.
More often than not, businesses that adopt the curation model tend to sell fashion apparel, beauty or food, but it can work well across other verticals too.
2. Replenishment business model
This model is all about convenience. Replenishment subscriptions allow customers to automate the purchasing process of essential products, such as diapers, vitamins and pet food. If your product doesn’t need to be replenished regularly, chances are the replenishment model isn’t right for your business.
3. Access business model
The access business model is all about exclusivity. Access subscribers pay a monthly fee to get member-only perks, such as lower-priced products.
Bonus: Add-on subscription business model
Technically, this isn’t a business model, however, it’s an approach some merchants take to add subscription services to their existing business. It’s a flexible way of adopting subscriptions without committing to one revenue model or changing your business entirely. So if you’re unsure about subscriptions, adopt the add-on business model and explore the subscription ecosystem further.
How to set up subscriptions on Shopify
Establish which subscription model is right for you and consider the following:
Product contents: will you be replenishing the same product, new products, or giving customers the freedom to select a mix of products?
Frequency: how often will you be delivering your products on a weekly, bi-weekly, monthly, bi-monthly basis, or will you let customers set their own custom frequency?
Subscription payment: will you be charging customers upfront or will you use recurring billing? Also, will you be giving customers a free trial period before committing? And what is the minimum commitment period?
Whether you’re adding recurring payments to your existing business or creating a subscription-based business from scratch, launching subscriptions is simple on Shopify.
Generally, there are two approaches to selling subscriptions: integrate a Shopify app or build your own custom solution.
1. Integrate a Shopify subscription app
Shopify’s app store offers lots of different subscription apps to choose from. To save you time, we’ve rounded up a couple, starting with our go-to, ReCharge subscriptions.
ReCharge: out-of-the-box, you can manage your bespoke subscription business easily within ReCharge’s powerful merchant portal, whilst enabling your customers to manage their subscriptions directly from your store. On top of that, ReCharge provides you with data-driven customer insights, so you can continually optimise your subscription strategy. Price plans vary from $0 to $300 per month, depending on the number of transactions, level of customisation, and level of analytics required.
Bold: built with enterprise businesses in mind, Bold lets you manage and scale your subscription business. Prices start at $49.99 per month and increase depending on the number of advanced features required, including pre-built modules, prioritised support and user permissions.
PayWhirl: making it easy to create, manage, and sell subscriptions through Shopify’s native checkout, PayWhirl is reviewed highly on Shopify’s app store. Payment plans vary from $0 to $249 per month on the ‘Ultimate’ package, and transaction fees decrease the higher the plan you’re on.
Ordergroove: built only for ecommerce businesses selling on Shopify Plus, Ordergroove helps facilitate recurring relationships with customers. Free to install, pricing varies from business to business.
- Native Subscriptions: a relatively new subscription app, Native is well-reviewed on the Shopify app store. Native offers 0% transaction fees, a 60-day free trial and payment plans start from $9 to $49 per month.
2. Build your own custom subscription solution
We can help you build your own custom subscription solution. Shopify recently introduced Subscription APIs and tooling, enabling developers to build public or private bespoke subscription experiences within the Shopify Checkout.
It’s worth noting that the new Shopify Subscription API, allows apps like Recharge and Bold to connect to Shopify to create and process subscriptions directly through the Shopify checkout. So it’s not a matter of choosing between Shopify’s subscription API or a subscription app, you can have both.
Before the announcement, there were two separate checkouts, the subscription app and Shopify. Customers would go through different checkouts depending on the contents of their cart. Now, merchants can use subscription apps like ReCharge and Bold for customer and subscription management, while order processing will take place through Shopify and its native checkout. One unified checkout for subscription and one-time products.
How to grow your ecommerce subscription business
Setting up subscription functionality on Shopify website is only the beginning of your recurring revenue journey.
Once you have the foundations in place, there are several strategies you can employ to spur growth.
1. Improve your email marketing tactics
Email marketing is an incredibly powerful marketing tool. In fact, email marketing has a return of investment (ROI) of $36 for every $1 spent. So, if you’re not including it as part of your growth strategy, start now.
Email marketing is just as important for subscription-based brands as it is for one-off sale brands. This is because emailing your customers keeps them continually engaged and your brand top of mind. However, to be successful and drive significant results, your emails need to be highly personalised and targeted, to avoid spamming your customers.
When it comes to email campaigns for your subscription-based business, address the following:
- Customer acquisition.
- Engaging your existing customers.
- Turning regular customers into subscribers.
- Gather more information about your customers so you can market effectively to them
- Reactivate inactive subscribers.
Any results-driven email campaign will incorporate these five tactics within their email campaign and translate them into engaging messages.
2. Create a loyalty or referral program
Ecommerce owners who embrace subscriptions have better customer retention because of the recurring nature of subscription purchases. But you should go one step further to cultivate a community of loyal fans by implementing a reward or referral programme.
For example, you could give referred customers a juicy discount, and give those customers who are referring, a free month’s subscription or discounted shipping, etc.
You might also want to leverage your loyalty program email campaigns to help build stronger connections with your subscribers. This will help communicate your brand values, up-sell and cross-sell.
Finally, we recommend creating a tiered loyalty program, so your subscribers have a reason to stick around and something to work towards. Benefits might include:
- Gift/discount on special occasions such as birthdays, subscriber anniversaries, etc.
- Exclusive offers and discounts.
- Early access to sales, member-only products, events, etc.
- Experiential rewards.
- Free trial or bonus products.
All these extra perks will help you turn regular customers into loyal subscribers and ensure you retain them for longer.
An example of a subscription brand that implemented a tiered loyalty program and has achieved enormous success is the UK’s largest gin subscription club, Craft Gin Club.
Using Loyalty program provider, LoyaltyLion’s integration with subscriptions app, ReCharge they included a subscriber tier that allowed subscribers to earn 200 points for every box they receive.
On top of that, Craft Gin Club awards their most loyal subscribers with exclusive discounts on their subscription box and vouchers to use on their members-only store. For example, a subscriber who collects 1500 points can either apply for a £5 voucher or have a £15 discount on their ‘Gin of the Month Box’.
Since implementing a loyalty program, Craft Gin Club has increased its repeat purchase rate by 46% and member spend by 51% thanks to redeeming subscribers.
3. Start texting your subscribers
These days, people are constantly on their mobile phones. In fact, it’s estimated that people check their phones on average 150 times a day. That’s a lot, right?
This offers merchants an incredibly lucrative opportunity to communicate with their customers more effectively on the channel that they use the most. And with 90% of SMS messages read within 3 minutes, merchants can be confident that customers are reading the content they’re sending.
So how can you use SMS to grow your subscription business?
Well, you can use SMS to keep your brand top of mind by sending subscribers weekly, monthly, bi-monthly reminders about their subscription. Also, you can keep customers updated on the shipping process to create a sense of anticipation and connection to your brand until their package arrives at their door.
Other ways to use SMS for your subscription business include sending out discount codes, referral links, renewal reminders, subscription order abandonment, upcoming payment reminders, failed payment alerts, etc. The most important thing to remember with SMS is that it works best when the content included is time-sensitive and actionable. Sending text messages that fit these criteria can help you keep more of your subscribers.
If you want to implement SMS into your subscription-based business or simply want to find out more about it, get in touch with our team of SMS experts today!
We work closely with many industry-leading third-party SMS apps that will help you reach your customers wherever and whenever you need to.
4. Leverage user-generated content (UGC)
UGC is a great way to build trust with your customers because it communicates your brand’s authenticity and provides social proof, which customers value.
For this reason, you should build UGC around your subscription business. Not only will it keep your customers coming back for more, but it will also reassure new subscribers that they’re making the right decision.
Encourage your subscribers to share photos and videos of their products on social media using a specific hashtag, as well as leaving a review on your site. And why not go one step further and reward customers with extra loyalty points if they share images of themselves using your products.
For example, beauty brand Birchbox uses a branded hashtag #futureiscasual extensively to encourage users to create & share content around it.
5. Invest in influencer marketing
Influencer marketing is becoming an increasingly popular advertising avenue to boost brand awareness and grow revenue, and subscriptions are no exception.
Reach out to influencers and ask them to promote your subscription offerings and set up long-term partnerships with selected, relevant influencers. This is especially useful given the longevity of subscriptions.
There are lots of subscription brands, including Bitsbox, Wild and our client YourZooki, that have grown their businesses through influencer collaborations and haven’t looked back since.
10 subscription-based brands on Shopify
Naturally, when it comes to setting up a winning subscription offering on your Shopify store, it’s always handy to have some inspiration.
So, below, you’ll find 10 of the best subscription-based brands on Shopify.
Santo Remedio (a Velstar client) combines scientific research with the latest nutritional expertise to provide supplements that help people live healthier lives. On each of the brand’s product pages, they give their customers the option of a one-time purchase or ‘subscribe and save’.
Those who sign up for the subscription service have their products automatically delivered on a schedule of their choosing. Also, customers can change or cancel their subscription at any time based on their health needs.
What’s more, Santo Remedio has gone one step further by integrating the loyalty and rewards solution, LoyaltyLion, to provide subscribers with everything they need to stay satisfied and keep returning.
Oatly is the top-selling oat milk in the world, and has grown significantly in popularity over the years as consumers get more serious about their impact on the planet. Oatly’s dairy-alternative products aren’t just available online either, you’ll find them in large supermarket chains’ brick-and-mortar stores everywhere.
But for those serious about a plant-based diet, the brand’s subscription service is perfect. All customers need to do is set up a subscription service via the website, and include how often they’d like to receive their oat milk.
Huel (human + fuel) is a meal replacement brand that offers its customers nutritionally complete food. Each of its products contains a balance of 26 vitamins, minerals, proteins, essential fats, carbohydrates, fire and phytonutrients.
Customers can purchase products across a range of categories on a one-off basis or on subscription, which can be cancelled with no additional fee incurred. Also, customers can personalise their subscription based on their nutritional needs.
Founded in 2014 with a simple idea: women shouldn’t have to compromise when it comes to feminine care. From 100% cotton pads and tampons to cramp-care and sexual wellness products, LOLA is reinventing how women talk and feel about their reproductive health. LOLA offers its customers the flexibility of a one-time purchase or sign up to a ‘subscribe and save plan’, where customers can save up to 18% off their orders.
Also, LOLA’s subscriptions can be personalised to suit a customer’s menstrual cycle or sent every three or six months.
Founded over 20 years ago, Pixi has grown into a global beauty brand with a loyal following thanks to its natural, skin-loving products.
For its most in-demand products, including toners and oils, it offers ‘auto-replenish’ subscriptions, which not only saves customers money but also ensures they never run out of their most loved products ever again.
Launched in 2015, FFS is a brand only for women that takes the inconvenience out of shaving.
Once a customer signs up for the subscription service, they receive a new razor and replacement blades. From then on, the subscriber receives fresh new blades with every shipment at a date of their choosing.
Wild is on a mission to change the way consumers use and throw away bathroom products.
It enables shoppers to buy deodorant and soap refills, while just using one case, again and again. When a shopper signs up to a subscription plan they can choose the scents they like, how often they want a delivery and save 20% on their first purchase.
The infamous cartoon cat, Pusheen, jumped onto social media in 2010 and has since built a cult following.
For all Pusheen cat lovers, a subscription box was created named ‘The Pusheen Box’ containing officially licenced, first-edition and exclusive merchandise. The subscriptions box has proved hugely popular amongst fans, with 36% of subscribers signing up for the annual subscription plan.
Freshly Picked was founded in 2009 by CEO, Susan Petersen after she discovered there was a lack of cute baby shoes that wouldn’t fall off her little one’s feet.
From creating their first pair of leather moccasins to now selling over a million pairs worldwide, Freshly Picked has become the go-to-brand ‘for mums by mums’.
This brand offers its customer a VIP subscription membership model called The Fringe.
Subscribers have to pay a monthly fee and in return they receive exclusive offers, VIP early access to limited edition products, and monthly store credit. This credit never expires so subscribers can build it up over time, which keeps their brand top of mind for months on end.
Hubble is the first-ever contact lens brand sold directly via an ecommerce subscription model. It offers subscribers FDA-approved daily contact lenses that are directly delivered to a subscriber’s home.
Your Shopify subscription experts
Are you inspired to join the growing number of retailers that are using subscriptions to grow their revenue and profits?
Then Velstar can help. All you need to do is get in contact and we’ll start the ball rolling!