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Subscription commerce businesses are testing new innovations in a bid to understand their customers, deliver better value and keep costs low. While it remains to be seen whether the particular business models are sustainable and profitable in the long run, nothing is stopping entrepreneurs from experimenting. In this article, we examine ways through which different subscription businesses are innovating.
Most of the innovations by subscription commerce companies are an amalgamation of traditional sales with social commerce. Entrepreneurs are quickly realizing that it is no longer sufficient to set up an online site and upload products Amazon style and wait for customers to come. Online consumers have been craving for a more personalized shopping experience and entrepreneurs have been taking notes.
The modern subscription commerce business can be generally categorized into three models: essentials, curation or specialties.
1. Essentials Products Subscription Commerce
Subscription based businesses selling essential products are by far the most common in the subscription economy. The businesses operate on the fairly old ecommerce model where they supply products and bill customers for them on a regular cycle.
However, some businesses in the category are innovative. One of the notable innovations that have been adopted by businesses in the category is social commerce. In 2011, social commerce went mainstream as retailers started integrating Facebook share and like functions into their pages. Majority of online retailers use social commerce to build brand awareness and drive sales.
Products carried by businesses in this category have the following characteristics:
a) Low price. The items are low priced and need to the replenished frequently. Examples include basic goods like pet foods, detergent, flowers, vitamin supplements, etc.
b) Shipping. The items need to be shipped to the consumer in a flexible manner.
c) Expiration. The items have a limited shelf life.
d) Flexible subscription. Customers have the ability to skip subscription for items they may not need in a particular month.
Most subscription commerce businesses in this categories rely on inbound marketing to drive sales. Search engine optimization and social media marketing are crucial to the companies generating new leads and sales. Examples of businesses in this category include Bulu Box, Avalon Floral, HBBloom, Vitamins on Demand, Pet Flow, Flowers of the World and others.
Businesses that sell essential products are trying different ways to understand customer needs in order to present products with better value propositions. Many websites have implemented “wish lists”, where customers can make lists of items they would like at a certain price and when the items are available, the companies inform them.
2. Expert Curation Commerce
Entrepreneurs are using expert curation to drive purchases and present new products that have a clear value proposition to customers. Curation commerce is all about personalization. Amazon and eBay use pure algorithmic recommendation which is usually not effective. Their recommendations are not curated but are made by software and output as recommendations.
One of the features of curation commerce subscription business is that they address a highly targeted audience and have an element of surprise. Examples of industries where the curation business model is being applied include wine taster’s club, beauty, chocolate tasters, unique personal arts and crafts, jewelry, antique collections, collectibles, watches, rings, specialty boxes among others.
Curation subscription businesses are very social and viral in nature. To register at the website, users have to log in with a social network account, usually Facebook, and when they add products to their wish list, the action can be seen on their social networks. As a result, social network connection can know what a user is purchasing and this can lead to a viral effect. Examples of businesses using curation commerce include Birch Box, Flavrbox, Beauty Fix, CurlBox and others.
Expert curation has also been successfully implemented by fashion companies like Mr. Porter.com, a men’s online fashion shop. By understanding the psychology and buying behavior of men, Mr. Porter has been able to recommend valuable products with a direct value proposition to its customers.
Businesses in other industries are also experimenting with curating offers based on their customers’ interests indicated on social networks or past online purchasing decisions. For example, Netflix announced that it had improved its recommendation algorithm in a detailed blog post last month.
The challenge on expert curation subscription commerce involves data. Businesses need to get adequate user data to be able to recommend more personalized products that can increase sales. The more customer behavior data a company has, the higher the chances of recommending useful products. Another challenge is dealing with constantly changing data in the markets that the businesses serve.
3. Specialty Products commerce
Another business model in the subscription commerce space is the specialty products commerce. This model is similar to the essential products model but is mainly involves goods that are difficult to find and are targeted. Websites in this category do not appeal to all customers; they have a niche audience that is passionate about the products offered.
Ecommerce businesses in this niche serve highly targeted audiences that need products that are not easily available. Examples of items that are sold in this subscription commerce model include perfumes, skin care products, medical supplies and others. Some businesses that have adopted this ecommerce model include Perfume Emporium, Bread and Butter, and Liz Earle.
The challenge of operating this business model is reaching a highly targeted customer base and giving them a value proposition that will make them subscribe.
Success of Subscription Commerce Businesses
Regardless of the type of subscription model you want to run, you need to take care of four main things that relate to customers for your business to survive and make a profit. These are:
a) Community: Subscription ecommerce websites need to focus on satisfying the needs of their customers. Finding a niche audience of your products is crucial to being profitable in the long run.
b) Creativity: To improve user experience, ask for feedback from your existing customers. Niche audiences are moving from giants like eBay and Amazon because they cannot find a personal touch there. Consider the experience of customers on your website, the offers you present and other ways to differentiate your company from the big players.
c) Trust: Trust is important regardless of whether you are running a one-man operation or a big subscription commerce business. Have an efficient subscription billing system and put steps to safeguard customers’ data by securing your servers with SSL. You should make customers comfortable with giving transacting at your website.
d) Content: Content is also important not only to customers, but for search engines rankings. Editorial and curated content will help you to better address the needs of your customers than simply uploading images and using manufactures’ descriptions as content for your products.
There are many innovations happening in the subscription economy. Which other innovations have you noticed in the industry?
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