Why you should add a Subscription Sales Channel to Your Online Retail Business

Why you should add a Subscription Sales Channel to Your Online Retail Business

Introduction

If you run an online retail business, I'm sure you know that the biggest cost for most online retail businesses is the cost of marketing, whether you sell on your own website on Amazon or eBay or through any of the other two dozen marketplaces in Europe it's likely that marketing costs you between 10% and 25% of your revenue.

Almost every online retail business I know of is looking for ways to reduce their marketing costs as a proportion of total revenue so that they can increase their profitability.

Probably the best way to achieve this is to focus on turning one off buyers into repeat customers, one very effective way to do that is to use low cost marketing tools like e-mail newsletters to mine your existing customer base for new orders, another and perhaps better way is to use the same tools to help turn you're one off buyers into subscription customers.

The subscription revenue model is hardly new. It first emerged in the 17th century, but in the past few years, subscription businesses have seen a big resurgence and today subscription-based businesses are on the rise especially online.

The subscription model benefits both customers and companies and, with tools like eTail Support to help them it’s easy for online retailers with the right product and a strong customer base to add this high margin sales channel to their channel mix.

Customers enjoy the convenience of auto-renewals and having access to a high-value offer for a low regular payment. Meanwhile, companies offering subscriptions can scale with confidence, with predictable revenue and deeper relationships with their customer base.

With a recurring billing model, your business could see substantial and sustained growth as well as higher revenues and greatly increased customer lifetime value (CLVs). This helps you to scale your business easier and faster, what’s more a subscription customer typically spends up to 10 x more than a one off transactional customer, making them much more economical to acquire.

eTail support offers a software system that provides all the tools necessary for a traditional online retailer to add a subscription sales channel to their business. Our system includes a mobile first, self-service customer portal, web based customer management system and order management system alongside our robust ERP system designed and built for e-commerce businesses. By using eTail support you can add a subscription sales channel to your business in less than a month at a cost of just £250 per month. (yes, we like the subscription model too!)

Customers become more valuable the longer they use your product or service. Companies that focus on keeping their customers will save on acquisition costs, since retention is cheaper than acquisition.

The Case for Subscriptions in Online Retail:

If you have an online retail store that sells products to consumers on a transactional basis – then you have a lot to gain from adding a subscription sales channel to your business model. Your existing historic customer base will be a fantastic tool for you to use in building your subscription customer base, all you need to add is the software provided by eTail support and an appropriate marketing campaign to convert your historic customers into high margin subscribers.

Subscription sales can give you more predictable revenue and an enhanced customer lifetime value through a stronger customer relationship, a product set that is more closely aligned with changing consumer preferences and the ability to scale your business and expand into new markets all while you differentiate yourself from the competition and improve your sustainability by reducing waste.

Understanding Subscription Economics:

Subscription sales have a very different economic profile to traditional transactional online retail. This has advantages both to the seller and the customer, for the seller there is regular revenue and a customer base which does not need to be replenished on a daily basis  through expensive advertising. For the consumer there is convenience and often lower prices which are the other side of the coin to the lower advertising cost enjoyed by the seller.

The Compounding Effect of Recurring Revenue:

At the heart of subscription economics lies the power of recurring revenue. Unlike one-off sales, subscriptions generate a steady income stream that compounds over time. This recurring revenue ensures a more stable and predictable cash flow, essential for long-term planning and investment. It also reduces the reliance on constantly attracting new customers through advertising, as the focus shifts to maintaining existing subscriber bases.

Customer Acquisition vs. Retention Costs:

The subscription model typically involves a higher emphasis on customer retention over acquisition. While acquiring new customers is vital, the real value in subscription economics is realized through retaining and nurturing existing customer relationships. The cost of retaining a customer is often significantly lower than acquiring a new one, making customer satisfaction and loyalty paramount. eTail Support assists in this area by providing tools for customer engagement and feedback, helping retailers understand and meet their subscribers' needs continually.

Enhancing Customer Lifetime Value (CLV):

A key metric in subscription economics is the Customer Lifetime Value (CLV). CLV tends to be higher in subscription models as customers make repeated purchases over time. eTail Support’s analytics capabilities enable retailers to track and analyse CLV, offering insights into how to maximize it through targeted marketing, personalized services, and loyalty programs.

Pricing Strategies in Subscription Models:

Subscription pricing requires a different approach compared to one-time sales. The challenge is to set a price that is appealing to consumers while also sustainable for the business. This involves considering factors like cost of goods, market positioning, and competitor pricing. eTail Support can aid in this process by providing market analysis tools and facilitating A/B testing for different pricing strategies.

Minimising Churn:

Churn rate, the rate at which customers cancel their subscriptions, is a critical metric in subscription economics. Effectively managing churn involves not only providing excellent value and service but also understanding and addressing the reasons why customers leave. eTail Support's customer feedback and analytics tools can help identify churn trends and develop strategies to mitigate them.

Financial Forecasting and Resource Allocation:

The predictable nature of subscription revenue allows for more accurate financial forecasting and resource allocation. Retailers can better plan inventory, staffing, and marketing expenses. eTail Support’s forecasting tools provide insights into future revenue streams, helping retailers make informed decisions about resource distribution.

Leveraging Economies of Scale:

As subscription businesses scale, they can leverage economies of scale. Costs per subscriber can decrease as the customer base grows, allowing for greater margins or the ability to offer more competitive pricing. eTail Support supports scaling efforts with its scalable platform, ensuring that retailers' subscription services can grow without constraint.

eTail Support: your partner in Subscription Success:

eTail Support offers  a comprehensive and dynamic tool for online retailers looking to harness the power of subscription models. By leveraging eTail Support, retailers can not only add a subscription sales channel to their business quickly and easily with very little cost, but you can also create a more engaging, customer-centric, and profitable subscription experiences.

eTail Support provides a comprehensive software platform that simplifies the management of subscription services. From handling recurring payments to offering insightful analytics and customer engagement tools, eTail Support equips online retailers with everything needed to launch, manage, and scale a subscription services effectively.

Our software includes a customer portal where your customers can manage their own subscriptions, an order processing system with predictive purchasing and a customer management system for your staff to use both to directly manage subscription customers and to build reports to help you understand them better.

Streamlining Subscription Management:

eTail Support subscription management solution is comprehensive. From automated billing and payment processing to our self-service portal for customer subscription management, eTail Support simplifies operations, reducing administrative burdens and enhancing efficiency. This streamlined management is crucial for maintaining a smooth and customer-friendly subscription experience.

Scalability and Flexibility:

As you grow your subscription base, eTail Support's scalable architecture ensures that you can handle increased demand without sacrificing performance. This scalability is vital as you expand your market reach and adapt to evolving market conditions.

Enhanced Customer Support and Service:

eTail Support offers robust customer support features, including integration with systems that provide automated email responses and chat support. This ensures that subscriber queries and issues are addressed promptly and effectively, enhancing the overall customer experience and fostering trust in the brand.

Compliance and Security:

In the digital age, data security and compliance with regulations are paramount. eTail Support adheres to the highest standards of data protection and privacy, ensuring that subscriber information is securely managed and compliant with regulations like GDPR and CCPA. This commitment to security and compliance not only protects the retailer but also builds consumer confidence in the subscription service.

Continuous Innovation and Improvement:

eTail Support is committed to continuous innovation, regularly updating its platform with new features and improvements based on emerging technologies and customer feedback. This approach ensures that retailers using eTail Support stay at the forefront of subscription service trends and best practices.

Help and Support

eTail Support staff are available to help you with the  set up of your subscription sales channel, from system set up to marketing we are here to help you make the most out of the opportunity to grow your business.