Convenience is the name of the game for online subscriptions. People like to know that their mega pack of toilet paper shows up on their doorstep every month. They want access to an infinite supply of streaming channels instead of having to purchase a movie every night. Many online consumers even seek out dozens of subscription offerings to streamline everything in their lives, from cooking to cleaning, and razors to gift giving.
Subscriptions play an essential role in simplifying lives, but they also make for a wonderful business model. Just take a look at how many companies have shifted to a subscription model: Adobe, Microsoft, Disney, Equinox–they all discovered the benefits of subscriptions, and have therefore switched to subscriptions (at least for parts of their businesses). In this article, we'll explain why it's so beneficial to sell using a subscription model. After that, we'll teach you how to sell subscriptions on Shopify, providing you the easiest method to achieve a subscription business model.
Why is the Subscription Business Model So Appealing?
Adobe is a wonderful example of this. The popular photo/video/website editing software company has a long history of selling expensive industry software. However, a photographer who wanted to use Photoshop would shell out anywhere from $500 to $1,000 for the privilege. Yet, that large purchase meant our professional photographer owned the Photoshop software for the next 10 or 20 years, or really, however long that person was willing to use an out-dated software. Like most older Photoshop users know, that software could definitely last a lifetime. The version from 10 years ago was still incredibly powerful, and many of the newer version features weren't enough to make you spend another $1,000.
Yet, Adobe got smart, or they at least followed the trends of other companies peddling subscriptions instead of onetime purchases.
They discovered the incredible benefits of selling Photoshop (and all of their other software) as a monthly/yearly subscription instead of a onetime payment product. And those benefits ring true for just about every subscription business:
Subscriptions attract more customers. It's a much easier pill to swallow when a customer only has to pay $10 or $20 each month for a product instead of a lump sum of anything higher, whether that's $100, $500, or $1,000. Yet, the business selling the product still makes the same amount of money as long as it keeps its subscribers happy.
A subscription business model provides predictable revenue streams. You're not left making wild sales projections for every quarter. Yes, subscription businesses inevitably lose subscribers, but it's much easier to predict unsubscribe rates every month and look at your guaranteed continued subscriber-base to instantly know how much money your company will make in the future.
Subscriptions increase the return on customer acquisition costs. This is true because subscribers are often more likely to stick around, forget about cancelling, or at least spend time figuring out if they want to continue using the subscription.
You build extreme brand loyalty. It's far more expensive to find new customers than it is to keep old ones, so the subscription model allows you to focus on keeping current customers happy. And when that happens, you build a strong amount of love for your brand, and you increase customer lifetime value.
Subscription models boost opportunities for up-selling and cross-selling. Instead of spending time and money finding new customers, a subscription company can continue selling related products to users who they already have contact with. And those people have already shown an interest in your company!
With that said, it's no wonder so many companies have shifted to the subscription business model. If you're on board, continue reading to learn all about how to build your own business and sell subscriptions on Shopify.
1. Choose a Model to Sell Subscriptions on Shopify
The first step to sell subscriptions on Shopify involves choosing which products to sell, but more importantly, choosing the subscription model. After all, the subscription model often dictates what you sell on the site, or it at least goes hand-in-hand with the products. For instance, it makes the most sense to use a commodity refill subscription model when selling men's shaving accessories or to opt for a product curation subscription model for monthly activity boxes.
If you're wondering what those models entail, we'll outline them all below. After you establish a subscription model, you can combine that with your choice of product line for a more successful online business!
Product curation is popular because of companies like Stitch Fix, CrateJoy, and Breobox, where a brand compiles a collection of items that gets sent out to customers at regular intervals. These are usually sent out in boxes, and sometimes the customer has options to specify which types of products they want to receive. For instance, Book of the Month curates hot books for subscribers to read every month, yet the customers can actually choose from five books instead of making it a complete surprise where someone who doesn't read romance gets a romance book.
Other curation boxes complete most of the work for the customer. The Nomadik subscription box lets you choose your box size, but after that, the company pieces together multiple outdoor, camping, and exploration items like hammocks, compasses, and trail food.
The product curation model has benefits, like:
High profit potential.
Exciting and surprising products sent to customers.
Opportunities to upsell or cross-sell if customers enjoy something in their box.
Great options for gifts.
And potential downsides:
High operating costs.
Logistical complexity, since you have to make a custom box for every subscriber each month.
A high churn rate because many people see these as non-essential or novelty products.
Commodity Refill Subscriptions
The commodity subscription model allows customers to replenish their supply of essential consumer goods, such as toilet paper, bathroom products, and pet food. Many ecommerce businesses offer the refill subscription model as an option outside of a regular online store, giving customers a discount if they sign up for recurring orders.
Here are the benefits:
Conversion rates improve because these are products that customers need regularly.
It's easier to keep around subscribers for longer periods of time.
You're able to offer subscription “pausing” as an alternative to canceling.
And the potential downsides:
Margins are thin because many replenishment models rely on steep discounts. These companies also sell products that tend to already have slim profit margins like consumer goods.
There's fierce competition.
It's difficult to reinvent common household items, so brands need to think of unique value propositions that haven't been explored before.
Try Before You Buy Subscriptions
The “try before you buy” subscription has elements of product curation involved, but it also allows customers to test out products or services and decide on whether or not they want to purchase them.
The fashion box businesses like Stitch Fix and Birchbox each offer try before you buy models, where the customer receives a curated collection of clothing every month. They must then pick the ones they like and send back the other ones.
Brand loyalists tend to stick with these types of subscription services for a long time.
You're not wasting inventory that customers don't want.
There's still a subscription fee, even if the customer doesn't want to purchase anything from the box. Therefore, you receive a certain amount of guaranteed income.
It's a logistical feat to operate a company like this, where you're curating every box, while also accepting returns all the time.
Margins usually remain slim, especially since customers are expected to return many of the products.
It opens up potential for abuse, like people wearing/using products, then trying to return them.
A content subscription caters to online creators and agencies. We're talking about magazines, podcasters, bloggers, and video influencers who want to put a paywall in front of their premium content. A subscription unlocks the paywall, and many times we see additional benefits included with subscriptions like access to a private forum, free swag, or a private training call with your favorite influencer.
You gain a consistent stream of income for your content.
It's more reliable than ads or affiliate marketing if you have a following.
Content subscriptions help present a sense of authority and exclusivity, since people assume that something very special is behind that paywall.
Loyal subscribers become powerful brand ambassadors.
There's a stigma behind forcing people to pay for online content. That's why it's recommended you at least provide something for free, then sell a more exclusive side subscription.
You absolutely must provide high-quality content, otherwise users won't pay for it.
You could hinder your overall followership growth if it's far too clear that your free content is simply a way to lead them to your paid content.
Many content creators forget about their free content (or it becomes lower quality), which eventually leads to disgruntled followers.
Perhaps one of the oldest subscription models, the support subscription option has seen an evolution into the digital age, especially for software companies. Support subscriptions are also possible for companies that sell physical products or services, like if you wanted to provide consistent maintenance work for HVAC customers or a yearly subscription payment plan for auto mechanic customers (something that loops in everything from oil changes to routine maintenance).
This is also extremely common with digital products, where someone uses a software, app, or online tool and has the option to pay a monthly or yearly fee for email support and yearly updates to the program.
You're able to offer products and services at a lower price (sometimes free in the tech world) if you know that you only have to spend time and money on support when someone actually wants and pays for it.
It provides an additional revenue stream for customer support that's only needed in some situations.
You can make multiple support packages so that all customers have access to your resources.
Some people may see this as an unnecessary, forced expense just to get customers into a subscription.
Many software companies find it common for users to simply purchase the original product and opt out of future updates and support, meaning the recurring payments aren't as guaranteed.
2. Launch an Online Store on Shopify
Once you have a subscription business plan, products to sell, and some motivation to launch your business, it's time to create an online store.
The easiest way to go about that is to sell subscriptions on Shopify, one of the most popular ecommerce platforms.
Read our complete guide to launch a Shopify store, create your products, and start marketing your store from the Shopify Admin portal. Overall, Shopify serves as your hub for every part of your business. You pay a small Shopify subscription to host a website, build the site with pre-made themes and a drag-and-drop designer, and process payments (through the Shopify Payments payment gateway) when users purchase items from the store. It's an all-in-one package for launching an online store.
3. Select a Shopify Subscription App That Suits Your Needs
Shopify sets the foundation for presenting products and giving customers a Shopify checkout module to make those purchases. However, you still have to implement some sort of subscription tool so that your website stores customer subscription preferences, captures payments every cycle, and allows users to use a customer portal to edit their preferences.
Quite a few Shopify subscription apps are available on the Shopify App Store to make this happen. It all depends on your subscription model, but these are our favorites:
PayWhirl: An excellent solution to sell subscriptions, activate automatic billing, and list those subscription options on your current product pages.
Bold Subscriptions: Ideal if you want a ready-to-go subscription system for your product pages. It includes delivery frequencies, hybrid options with onetime payments, and a full dashboard for customers to manage the subscriptions.
Native Subscriptions: Launch subscriptions with shipping profiles, email notifications, dunning management, and more.
Seal Subscriptions: This app lets you auto-charge customers and send out recurring billing invoices. It provides features for product swapping, editing subscriptions, delivery profiles, and payment calendars.
Appstle Subscriptions: We like this subscription app if you're looking for inventory forecasting. It's also ideal to offer customer segment-based plans, advanced subscription management, and dunning management.
Recharge Subscriptions: Helps you turn transactions into relationships with order management tools, subscription billing, merchant tools, and credit card payment management.
Best Practices to Sell Subscriptions on Shopify
Like all online stores, there are some best practices to consider when running a subscription business. After setting up your store, use this list as a consistent reference to avoid any problems in the future:
Spend plenty of time monitoring and analyzing churn. When a customer cancels a subscription, it gives you a chance to see what went wrong. Use surveys and forms on the cancellation page to understand how to improve your services and keep people from cancelling in the future.
Diversify marketing and sales channels. Customers discover subscriptions from many corners of the internet, so it's essential to get your subscription listed where they spend time on the internet. Many people find subscription boxes on CrateJoy, while it's also common for brands to partner with influencers to push the subscriptions. Other popular methods include affiliate marketing, email marketing, and social advertising.
Put plenty of resources into customer retention. Your current subscribers are the most important customers. Don't neglect them just in exchange for finding new ones. Spend time and money personalizing the overall customer experience. Take suggestions from customers, and use data to figure out how to help subscribers and solve pain points.
Avoid aggressive pricing strategies at the beginning. Steep discounts and free trials sound like wonderful ways to bring in waves of new customers, but that's often a recipe for high churn rates, especially for people who have just discovered your subscription. It's rather common for people to sign up to get something for free with no intention of continuing their subscription. Avoid eating into your early revenue by providing value in other ways. Make your subscription so desirable that people will pay full price.
Set clear business goals and check in on them regularly. Do you want to hit a certain revenue number on a specific date? What about units sold? Or customer acquisition numbers? These help you focus on meeting expectations instead of simply hoping more and more people sign up for the subscriptions.
Spend a significant amount of time testing product viability before launching a complete subscription store. Many product categories have seen extreme saturation in the subscription space, meaning you'll have a tough time convincing consumers to switch to your subscription. Therefore, you must complete rigorous research on all subscription products. Surveys, trial runs, and product testing help you understand if there's really a need for a subscription product. It also allows you to figure out more information about potential competitors.
Are You Ready to Sell Subscriptions on Shopify?
We certainly hope so! We recommend testing out each of the subscription apps listed above and experimenting with your products to see which subscription models work best for you. If you have any questions about how to sell subscriptions on Shopify, let us know in the comments below!
Joe Warnimont is a Chicago-based writer who focuses on eCommerce tools, WordPress, and social media. When not fishing or practicing yoga, he's collecting stamps at national parks (even though that's mainly for children). Check out Joe's portfolio to contact him and view past work.