Ever wondered what to consider when building subscriptions into your ecommerce store?

Core concepts

What to consider when building subscriptions into your ecommerce experience.

January 25, 2023 Seth Bindernagel

Taco Bell now offers a taco subscription called the Taco Lover’s Pass. Now you can “Live mas” (the company’s slogan in case you aren't familiar) by paying $10 and getting one taco per day every month from the TexMex Giant. Maybe that’s crazy, but the Chief Digital Officer says that it shows Taco Bell’s "commitment to digital innovation and value." The early results are noteworthy: “20% of pass purchasers were new to the Taco Bell Rewards Program; meanwhile, an additional 20% renewed it for a second time.”

Subscriptions are on a mega-rise, with some industry analysts predicting that the digital subscription economy will surpass $1.5T by 2025. What do you need to know about building subscriptions into your ecommerce experience? And what can Commerce Layer do to support your product subscription business? We’ve put a primer together for you as you consider building out this aspect of your business.

Why are subscriptions important and increasingly visible in today's ecommerce world?

For one, subscriptions increase customer retention. Taco Bell’s big bet on building a taco loyalty program is one tasty example. Subscriptions increase loyalty, subsequently more customers buy from companies they are loyal to. Rewards and loyalty programs also make customers feel special with premier access to something others can’t get, like 30 tacos a month for $10.

But that’s not the whole enchilada. Subscription programs help businesses forecast and predict revenues, manage inventory, and lower overall acquisition costs, particularly when people buy and subscribe. Customers also love the convenience factor. Think of curated selections of physical products, like BirchBox, which delight with new surprises each month.

What are the different types of physical product subscriptions?

Subscriptions can mean a number of different things, depending on what you are trying to build. We've created a list of the most common types of subscriptions you might want to offer. We've also created a simple framework to help explain each use case and compare similarities or differences. While there might be many layers to this burrito, our list of subscription options includes the most commonly used:

  1. Curation // Subscriptions boxes
  2. Buy and subscribe // Replenishment
  3. Open vs. closed subscriptions
  4. Exclusive mailing list
  5. Renting physical goods

Let's dive in and look at what makes each one unique.

1. Curation // Subscriptions boxes

  • Who?
    Customers who want variety delivered to their door.
  • How often?
    Typically, curations deliver weekly or monthly.
  • What’s inside?
    Brands offer selected products, and can even throw in mystery items to surprise customers.
  • What else?
    The curated selection gives brands the chance to offer other promotions within the box.

2. Buy and subscribe // Replenishment

  • Who?
    These are for customers who use the product on a regular basis and need to restock after a period of time (e.g. razor blades)
  • How often?
    Weekly or monthly, depending on the use.
  • What’s inside?
    Typically the disposable product that someone uses daily.
  • What else?
    Brands who use this effectively often offer a subscription moment just after an order has been placed. The obvious example most have seen are razor blades at companies like Harry’s or Dollar Shave Club.

3. Open vs. closed subscriptions

  • Who?
    For those customers who want to consider regular deals and benefits.
  • How often?
    Deals can be delivered weekly, monthly, or even daily depending on the business. Online grocers will often deliver daily deals since grocery shopping takes place daily.
  • What’s inside?
    Exclusive deals like discounts or limited access to items.
  • What else?
    For an open subscription, all customers can receive benefits, whether it’s on a site, in an app, or in the inbox. If it is a closed subscription, members join an exclusive list with offers no one else can get.

4. Exclusive mailing list

  • Who?
    This one is really similar to the above, but worth calling out. It’s for members who sign up to your mailing list.
  • How often?
    Daily, weekly, monthly.
  • What’s inside?
    Exclusive offers passed to members on a dedicated mailing list.
  • What else?
    Pay for access to a newsletter, customers buy from that.

5. Renting physical goods

  • Who?
    For people who want access to products (typically luxury fashion), but don’t want to purchase the products.
  • How often?
    As needed by the customer.
  • What’s inside?
    Access to products that typically can’t get or afford.
  • What else?
    Mostly popular in fashion, customers rent clothes for a limited amount of time. (e.g. Rent the Runway).

What makes subscriptions hard to handle?

For one, if customer expectations are not met, customers can easily cancel. Brands have to continually communicate the value of a product subscription. Regular delivery continually reminds people they are paying for something. You’ve probably said this to yourself: “I don’t use the product or service enough, why am I paying for this?” In fact, 63% of people give this as a reason to cancel.

You might also (or need to) implement different pricing rules to entice people to subscribe. This can get particularly tricky when managing discounts and promotions cross-market. You’ll need to consider (and communicate about!) benefits you offer in one market like free shipping, lower prices, limited time offerings, and other localized promotions related to local holidays and tradition. In this case, you are going to require a solution that supports your pricing team’s strategy.

Delivery is another big consideration. The success of your physical subscription program often relies on a delivery company. And now you’ve handed a critical part of the experience to a third-party. Quality of deliveries is often cited in customer reviews and satisfaction surveys as a key factor in success. You may also want to create customized delivery time slots or schedules. Furthermore, delivery costs can make physical subscriptions a net-negative on your bottom line due to factors refunds and return delivery costs. A strong connection between your ordering platform, payment platform, and fulfillment platform is necessary to keep both your customers happy, and your company finances up-to-date.

Lastly, regular subscriptions require successful order completions. Each month, you have to take payment via payment gateways. You need to figure out a plan for what happens when billing or payment capture fails.

What complexities exist that developers need to consider?

Just like Taco Bell’s late night menu, developers have a number of considerations when building out a system to manage physical product subscriptions. These include:

  • Checkout optimized for subscriptions
  • Fast site speed
  • Connections to CRM and fulfillment backend systems
  • Payment capture
  • Recurring billing
  • Customer support

Focusing on each of these items needs will create a seamless experience for your customers, reducing churn and leading to healthy, durable cohorts of subscribers.

How can composable commerce help solve issues when building out subscriptions?

Composabe commerce is all about selecting the best services available to build the digital experience, and then connecting those services together via APIs. Given the complexities inherent in building subscriptions into your offering, you'll appreciate the granularity and flexibility that composable commerce provides.

Commerce Layer is a headless, composable commerce API. We focus on the technology that powers the transactions on your site, but also on building in key integrations to help you build your experience. We offer over 400 API endpoints, 100+ webhooks, and powerful tools like micro frontends, open source libraries, and a command line interface.

We can also power subscriptions for your ecommerce experience, helping you to build any of the options listed above while providing stability and speed. Our API resources can help you tackle all of the ideas related to physical product subscriptions mentioned above.

Looking for something more?

In the event that you want to work with a subscription management service provider, you can use this list to start your research. You may want to consider several factors like:

  • Low fees
  • Customer service
  • Customizability
  • Plan options (monthly vs. annual, etc.)
  • Payment gateway options
  • Autopay and re-billing after failed payments
  • Gifting
  • Loyalty programs
  • Notifications
  • Reporting
  • Integration with marketing platforms, fulfillment software, and ERPs

Conclusion

Subscriptions can be a game-changer for your business, but they don’t come as cheap or easy as a drive-thru meal at Taco Bell. You’re going to have to work through all the layers of work to build out an experience that keeps your customers happy and subscribing.

We are a great option for you and are here to answer your questions. Remember that Commerce Layer is always free for developers to get going. Open an account and start building from our awesome documentation. Or get in touch! You can join our Slack channel or request a demo. And stay tuned to this blog for more about subcriptions. We have some powerful product updates coming that you won't want to miss.

Hope you enjoyed this post. If it’s working for Taco Bell, it’s going to work for you too.

Get a free live demo.

Get a personalized demo and learn more about what Commerce Layer can do for your company.