So here’s the news: as of this week I am completely changing my ecommerce business model.
I hinted about it a couple of weeks ago while discussing my move to carrying own stock as opposed to drop shipping and the upcoming launch of my new company.
Well, the day has come. This week I officially launched MyMunchiesBox.
But, it’s not the move to carrying own inventory the big change I am talking about. It’s moving to a subscription commerce model. This move means that I will now be catering for a completely different audience and, with quite unique needs and going through a possibly more complex buying cycle.
It’s a move I have been preparing for for the last few months, yet now, after officially launching into it, the whole thing feels more than intimidating. So, for your benefit but also mine, let me recap what I have learnt about the subscription commerce model and tell you what attracted me to it in the first place.
To begin at the beginning, what actually is this whole subscription commerce model?
Often referred to as subcom, it is a business model in which the subscriber pays a flat, monthly fee to receive some type of “box”. Such boxes can be filled in with samples or actual, full sized products. Quite often these are new products or even a random selection, whereby the receiver doesn’t know what they have got until they open the box adding a form of an element of surprise to it.
Subcom companies usually target very narrowly defined customer niche, trying to cater for quite specific needs or solve very particular problem for their customers.
If you’ve heard of online stores as:
then you know some of the top SubCom companies are (although there are naturally many more on the market).
What’s more, there is even a site reviewing various SubCom offerings, you can check it out at: http://www.mysubscriptionaddiction.com
I suppose it’s one of those questions that are really hard to answer straight. On one end, my decision of moving to a subscription based model is based on the niche I have chosen and a need on the market I identified. However, I would be lying in saying that I wasn’t personally attracted to subscription commerce.
What I really like about it is the very personal relationship you develop with your customers. After all, in order to make it, I need to build a relationship that will last beyond just one sale. Moreover, I need to get my subscribers interested in what we do and do so continuously so that they don’t cancel their membership.
I guess overall you sould say that I see the subscription commerce model as a challenge, a something new that I want to explore.
A subcom model allows for a much more in-depth relationship with customers since by buying they are entering a potentially longer lasting relationship with the company. It’s almost like becoming a family.
This is definitely a big thing from the business point of view. By its definition a subcom model offers a continuous and recurring stream of revenue from each subscriber without a need to influence their repeat purchase (as it is the case with more traditional ecommerce model).
Lastly, a subscription commerce model allows for a much more definite business planning. The model allows to plan the customer acquisition costs, determine the lifetime value of a customer and the churn rate (the rate at which users unsubscribe from the service), allowing to improve your planning ahead your business expansion.
A subscription commerce is a hard sell to one time shoppers. Buyers looking to purchase what you are selling only once will be immediately put off by the need to subscribe. Naturally, some people might subscribe for a month to get what they want and unsubscribe after they receive their purchase. However, the whole operation is tedious enough to go through for people who are accustomed to making a quick one-time purchase.
Since sending similar stuff every month is at a core of the subcom model, it can be quite difficult to sustain user interest over time and prevent them from unsubscribing. Yet at the same time, the whole business model greatly limits the area of innovation. Once someone subscribe to receive a particular type of a “box”, it is hard to justify any changes to their subscription, even if from your point of view, they are for the better.
There is also a potential that the subcom business model will be burnt pretty quickly, just like daily deals and flash sales models in the past. In fact, many pioneers of subscription commerce are slowly moving away from the model (or introducing variations to it) which might suggest that the subcom era might be over.
Personally, I think this is far from truth, at least in several industries, however we might see a decline in others.
Lastly, the cost of competition entry on a market is relatively low, making the subscription model quite vulnerable to too much competition. Even if you manage to find a niche with low or no competition, keeping it for yourself only might prove quite difficult.
As of this week I am operating in a subscription commerce model. As mentioned already, it is not only a new way of running an ecommerce store for me but also quite intimidating.
Regardless of it’s pros and cons, I have to say, I am quite happy with making the move. And, you can expect quite a lot of articles about subscription commerce from me here on ecommerceinsiders.
What do you think of a subscription commerce model? Do you buy any subscriptions yourself? And most importantly, would you consider starting a subcom store yourself?