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Matt Campbell, Lead Designer at Noughts & Ones
Matt CLead Designer

The Benefits of Product Subscriptions for Shopify Stores

  • Insights
  • 19 Apr 23
    Young Woman Packaging Up Flowers in Her Store

    πŸ€” What are Product Subscriptions?

    Product subscriptions on ecommerce stores refers to a payment model that allows customers to sign up for a recurring payment plan to receive products on a regular basis, such as monthly or quarterly. This model provides customers with the convenience of automatic product delivery and gives Shopify store owners a more stable and predictable source of revenue.

    In today's retail landscape, offering monthly product subscriptions is becoming increasingly popular among businesses looking to boost customer loyalty and revenue. By providing a convenient and personalised shopping experience, subscription-based models have been shown to improve customer retention rates and drive recurring revenue for businesses.

    In this article, we'll be taking a look at some of the most popular advantages that online store owners gain by implementing product subscriptions on their Shopify stores, including increased monthly recurring revenue, greater customer flexibility, improved customer retention and much more.

    πŸ’· Increased Monthly Recurring Revenue

    Monthly subscriptions are a great way for Shopify store owners to increase their monthly recurring revenue (MRR). By offering customers a subscription option, store owners can guarantee a steady stream of income each month thanks to an automatically recurring subscription fee.

    For businesses that operate in more seasonal industries such as gardening or fashion, fluctuations in customer purchasing behaviour can vary wildly depending on the time of year. Subscriptions help combat this issue by providing a more stable and reliable source of revenue for store owners in industries such as these, something especially important during slow sales periods.

    Recharge Payments - State of Ecommerce Subscriptions MRR Diagram 2023
    Recharge Payments - State of Ecommerce Subscriptions MMR Diagram 2023

    βš™οΈ Greater Customer Flexibility

    With subscriptions, customers can schedule automatic deliveries to ensure they always have the products they need without having to remember to manually reorder. This convenience can be a powerful motivator for customers to continue shopping with your Shopify store, leading to increased customer retention and ultimately, increased revenue.

    Giving customers the ability to manage their subscriptions on an order-by-order basis also plays a direct role in increasing their average order value (AOV). A 2021 study from Recharge Payments found that offering customers flexible purchase options such as the ability to skip a delivery, swap a product and select an item as a one-time purchase increased their AOV by an average of 6%.

    Recharge Payments - State of Ecommerce Subscriptions AOV Diagram 2023
    Recharge Payments - State of Ecommerce Subscriptions AOV Diagram 2023

    πŸ’š Improved Customer Retention

    A study by Omniconvert found that the chances of an ecommerce customer returning to make another purchase drop to 20% after 200 days. However, for Shopify stores that offer subscriptions as a method of selling products to their customers, 42% of subscribers continue to make repeat purchases for at least a year depending on the vertical, far greater than the average monthly user retention rate of 1% observed within the ecommerce industry as a whole.

    This is particularly true for products that are purchased more frequently such as food and drink, beauty and household items. In these verticals, users are more likely to commit to a specific brand in order to meet an ongoing need in their lifestyle.

    For Noughts & Ones client The Cheeky Panda, who specialise in a range of sustainable bamboo toiletries, implementing subscriptions as part of their core business model saw customer conversion rate increase by 6.57% percent, with an accompanying increase in average order value of up to 24%.

    In terms of specific verticals, home goods demonstrated impressive customer retention in Recharge Payments' 2023 subscriptions report, ranking highest in both overall customer retention and in the highest increase in 12-month customer retention, highlighting the value of maintaining a loyal customer base over an extended period, which can result in long-term benefits for the business.

    Interestingly, it appeared that merchants with a smaller subscriber base actually had an advantage in retaining customers over a 12-month period. This suggests that smaller businesses may be better positioned to develop more personal relationships with their customers, resulting in increased loyalty and retention. In contrast, larger businesses may struggle to maintain the same level of personalisation and customer engagement, which can negatively impact customer retention rates.

    Recharge Payments - State of Ecommerce Subscriptions Customer Retention Diagram 2023
    Recharge Payments - State of Ecommerce Subscriptions Customer Retention Diagram 2023

    🀝 Deeper Customer Relationships

    When it comes to selling products online, customer experience really matters.

    73% of people consider customer experience as a crucial factor in their purchasing decisions, and customers who are completely satisfied with a product or service not only contribute 2.6 times as much revenue that a partially satisfied customer, but also tend to be more loyal and recommend the brand to others.

    Alongside providing an engaging and meaningful customer experience at the point of sale, implementing Shopify product subscriptions can also create a sense of loyalty and trust that can lead to increased sales and repeat business for your store.

    Additionally, offering exclusive benefits to subscribers, such as early access to new products or discounts, can further enhance the value of the subscription and deepen the relationship between the customer and the business.

    πŸ“₯ More Personalised Marketing Campaigns

    Another benefit of integrating subscription platforms on Shopify is the ability to collect valuable customer data which can be used to create personalised marketing campaigns, increasing the likelihood of further repeat purchases and strengthening the relationship between your store and your customers.

    Just looking at email campaigns alone, CRM platform MailChimp found that personalised and segmented campaigns perform far more effectively than generic campaigns sent to all of your customers, each of which will have their own unique wants and needs from your products:

    • Opens: 14.31% higher than non-segmented campaigns
    • Unique Opens: 10.64% higher than non-segmented campaigns
    • Clicks: 100.95% higher than non-segmented campaigns
    • Bounces: 4.65% lower than non-segmented campaigns
    • Abuse Reports: 3.90% lower than non-segmented campaigns
    • Unsubcribes: 9.37% lower than non-segmented campaigns

    This type of segmentation also allows stores to target customers are different stages of the sales cycle, sending unique marketing materials to new subscribers, hesitant shoppers or recent customers to help improve customer retention while simultaneously decreasing churn rate.

    Young Woman Arranging Sunflowers

    πŸ“¦ Simplified Inventory Management

    By allowing customers to subscribe to products, Shopify store owners can better predict demand and plan their inventory accordingly. This can help to avoid overstocking or understocking of products, and businesses can use this subscription data to identify which products are most popular and adjust their inventory levels or plan promotional campaigns accordingly.

    Subscription-based models can also help Shopify store owners streamline their supply chain management. By having a steady and predictable demand for products, store owners can work closely with suppliers to ensure a consistent supply of products, reducing the time and resources required to manage their supply chain and freeing up time to focus on other aspects of their business, such as marketing and customer service.

    Offering product subscriptions can also lead to a more efficient and cost-effective order fulfilment process.

    Subscriptions allow for regular and predictable orders, which can make it easier for store owners to prepare orders and fulfil them in a more timely manner. This can lead to faster and more efficient order processing, which can improve customer satisfaction and reduce the likelihood of order errors.

    Additionally, the regular and predictable nature of subscription orders can help store owners optimise their shipping and delivery processes, reducing shipping costs, improving overall efficiency and helping to minimise the negative effect on the environment.

    πŸ›οΈ Looking to Implement Product Subscriptions on your Shopify Store?

    At Noughts & Ones, we pride ourselves in designing and developing custom Recharge Payment integrations for planet-friendly businesses that take their environmental commitments seriously. We do this by strictly adhering to our own Conscious Developmentℒ️ framework and working with green tools that let us code more efficiently.

    Get in touch with our friendly bunch of website designers, developers and project managers to find out how you can start offering product subscriptions on your Shopify store to your customers today.

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