Subscription Commerce

Building Innovative Subscription Services With Discovery, Flexibility

Building Subscription Services With Discovery

To provide consumers with the curation of a subscription box or the flexibility of a rental platform, digital innovators are tapping into the subscription business model.

And, while subscriptions can provide consumers with the ability to discover new products or borrow instead of buy, the model also comes with advantages for businesses that use it.

According to the latest PYMNTS Subscription Commerce Tracker, “Businesses value the recurring funds earned from customers’ monthly or yearly payments, and subscriptions often result in higher revenues and profits.” And, the report notes, businesses in different verticals are heavily investing in the infrastructure and technology needed to provide these services.

From Banana Republic to Black Box Record Club, eTailers and brick-and-mortar retailers are offering consumers the opportunity to subscribe to products and/or services.

These are just a few ways that businesses are harnessing subscriptions to serve their customers with a variety of different offerings, from clothing rentals to curated selections of music.

The estimated market size of the sharing economy by 2025 is $335 billion. And even brick-and-mortar retailers are tapping into this market with the help of subscriptions. Banana Republic, in one case, unveiled its online subscription service called Style Passport last year. Style Passport provides a plan of three garments that comes with unlimited exchanges and returns, complimentary priority shipping, and free laundering services. Banana Republic CEO and President Mark Breitbard said in an announcement for the service, “We’re constantly evolving with our customer, meeting her where she is shopping. Style Passport will drive incremental revenue, and help us connect with younger shoppers who appreciate great style and want an affordable, sustainable way to try new fashion.”

The share of surveyed adults who believe that consumers will have more subscriptions and own fewer goods in the future is 74 percent. And sharing economy platforms are tapping into the subscription business model to serve their customers. Get the Gallery, in one case, allows consumers to turn their homes into a revolving art gallery with three different subscription plans ranging from its least expensive, the art enthusiast, to its most expensive, the art collector plan. The company also has a curator who sorts through the submissions it receives to decide what art to have on its platform. It has roughly 25 artists in its gallery. Joe Clark, who founded the service, told PYMNTS in a past interview that the company’s customer is an “individual who tends to place a premium on their home décor.”

The growth in U.S. subscription app revenue in 2019 among that year’s top 100 subscription apps was 21 percent. Apps are also growing their subscriber bases. As Spotify took on Amazon and Apple by launching promotions, the music streaming company registered a higher-than-expected 29 percent jump in premium subscribers in the fourth quarter of last year. The firm’s premium subscribers arrived at 124 million for the quarter, concluding on Dec. 31, while analysts, on average, were projecting 122 million paid subscribers. Spotify, for its part, has had a strong lead against its two nearest competitors. Apple Music had more than 60 million subscribers as of June, while Amazon had over 55 million subscribers. Spotify rolled out multiple marketing campaigns during the quarter. One was a “three months on us” introduction promotion for new subscribers, while another was a win-back offer for returning subscribers.

The approximate growth of the subscription eCommerce market over the past five years was 100 percent. And eTailers are offering curated subscriptions for music, Black Box Record Club, in one case, provides a vinyl subscription service that sends consumers curated records to their doors every month based on their musical tastes. The basic premise of the company is that it sends two records, but it has a focus on personal curation. Members make a taste profile when they join the site, and the company winnows down selections to what its subscribers like and sends them records from their favorite artists. Consumers can connect their Spotify accounts to the firm’s platform, which then gets an updated list of their 50 favorite artists and top genres. The service counts folk, blues, rap, rock, and hip-hop enthusiasts as members.

The estimated market size of agile monetization platforms for recurring revenue subscriptions was $36.7 billion. Sports subscription service RunLocker, in one case, uses Cratejoy for its backend, which Matt Cardosi, who founded the service, said provides “a whole host of analytics” and a good dashboard. RunLocker offers three options for subscription offerings to its members, ranging from a month-to-month plan to a three-month prepay plan and a six-month prepay plan. After customers select a membership level, they choose their T-shirt size and sock size, among other preferences. RunLocker offers a main item in its box — its most valuable product like a baseball cap or a T-shirt — along with a secondary item, which could be a product that is more aligned with rehabilitation, stretching exercises or general fitness.

From RunLocker to the Banana Republic, eTailers and brick-and-mortar retailers are harnessing the power of the subscription business model to bring customers discovery and flexibility. But, while finding and filling a market need are the first steps toward successful business strategies, the long-term nature of subscriptions requires businesses to create plans that both bring new users and strengthen trust with existing ones as they drive innovation with the business model.

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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