Why So Many Online Retail Businesses are Moving to Subscription

Online retail businesses that sell physical goods are increasingly introducing subscription billing models. Really, it seems like you every time you turn around there’s another announcement. Why do subscriptions make sense?

The answer is pretty straightforward. Much of the cost of this type of business, other than product cost of course, is acquiring new customers. Businesses advertise, do brand awareness, participate in social media, and run campaigns on Google Adwords and all sorts of other paid programs in order to generate traffic to their website. They work on their website optimization; hire designers, web writers, and developers to improve conversion rates.

Why retail is moving to subscriptionsSubscriptions help make each acquired customer more valuable, creating a bigger sale and longer term relationship to increase the lifetime value of the customer. The investment in customer acquisition pays off with repeat business, even if the customer doesn’t return to the site.

A single decision to purchase is transformed to multiple orders, and enters a relationship with the customer that can build over time.

What goes on behind the scenes?

Simplifying the complexities of fulfilling orders and shipping orders, there are three logical steps:

Retail fulfillment process1. The order is placed.
As with the traditional one time order, subscription ordering is often through an online portal, e-commerce site, or from a customer service, phone-based representative.

2. The business is paid. Being paid involves a credit card or perhaps ACH direct debit. B2B businesses much more commonly use invoices and deliver through invoices.

3. The business ships to fulfill the order. Of course, the subscription model is much more circular. After that initial sales process, the business still needs to manage the customer base to renew, cross-sell, upsell different products. Traditional transactional systems don’t support this recurring model.

watchnowThis is an excerpt from 5 Reasons for online retail businesses to automate their billing. You can view the on-demand webcast, presented by Fusebill CEO Steve Adams here.

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