How Subscription Commerce is Transforming Retail
In today’s digital economy, innovators are quickly entering and creating new markets. Companies like Birchbox, RocksBox and Dollar Shave Club have changed the way consumers shop by using a subscription-based model. This approach enables brands to gain critical customer data that can be used to retain customers in an evolving and competitive market while boosting revenue streams.
When retailers implement a subscription-based model, they're entering new territory inundated with fierce competitors and disruptors. To ensure success, they need to take critical steps beforehand. For this reason, retailers need to be agile and able to align with industry trends as they occur in order to remain relevant, competitive and even become an industry disruptor.
For example, Dollar Shave Club (DSC) was one of the first subscription-based models in the razor industry. As more competitors entered the space, DSC needed a way to differentiate itself and maintain its position as the first mover in the personal grooming market. With a subscription-based model allowing for additional customer touchpoints and insights, DSC was able to determine that virtually none of its members used skin care products after shaving. Therefore, the company used its industry expertise and brand awareness to launch a skin care line made available exclusively to members, thereby making it simpler for them to purchase the product and integrate it into their daily routine and budgets.
This example shows how in order for this model to be effective, all customer engagement data must be captured and analyzed in real time. Retailers can then use this information to inform incentives, customer loyalty programs, product road maps and more. They can also take advantage of this data to create robust customer profiles and deliver personalized, contextualized experiences to individuals across multiple touchpoints. Over time, brands can use the historic and continually updated data to provide personalized messages based on each customer’s unique preferences and data. Ultimately, this helps to foster a long-term relationship built on trust and loyalty.
Lastly, when using a subscription model, retailers should re-evaluate their partner networks’ value chains to identify businesses willing to share revenue streams and quickly grow their customer base. Partners meeting these criteria should be seen as comrades in the move to digital subscriptions. By bundling their products or services with those of their partners, brands can offer a stronger value proposition to the end customer.
One successful example is Birchbox, a leading disruptor that's strategically partnered with the right brands to create a service that customers want. Birchbox follows a subscription model whereby members receive samples of cosmetics and a range of health and beauty aids each month. By partnering with well-known brands, Birchbox has expanded its customer base to reach additional shoppers interested in its partners’ products. Birchbox partners also benefit by increasing their brand awareness and introducing their products to new customers, which will likely yield additional sales.
While brick-and-mortar stores certainly aren't going anywhere, the retailers that will succeed in the digital economy will be the ones that cater to customers across channels and provide individualized shopping experiences. Although more retailers are embracing this digital model, there's still a large opportunity to capitalize on subscriptions. When a subscription commerce model is implemented successfully, it can boost revenue, enhance customer loyalty, bring in new customers and position the brand as a disruptor in the market. With consumers driving their own shopping experiences, the subscription model gives retailers both the flexibility and data needed to give customers what they really want.
Isabelle Roussin is chief solution expert, SAP Hybris Billing, a solution that enables retailers to monetize subscription and usage-based services in real time.
