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The Subscription Economy in the E-commerce Industry

Published on 11/01/2018 - Updated on 11/22/2019

Customer experience is everything in today’s e-commerce market. More than ever, the power balance has shifted in favor of consumers, and businesses must adapt to not only sell their products and services but also provide the best experience to their buyers before, during and after a purchase is made. Consumers are interested in more than just a product or service. They want to have access to a convenient solution to a problem that is often a recurring one. And this is what set the basis for and favored the popularization of the subscription economy, also known as recurring billing.


The Subscription Economy

The concept of recurring billing is not new. People are used to recurring payments when it comes to paying rent, school tuition, and even gym memberships. However, the subscription business model has become more popular in recent years, particularly in the digital environment. Netflix, Spotify, and Amazon Prime to name a few, have millions of users worldwide paying a subscription to get access to their services.

Subscription-based businesses generally succeed because a) they offer a good deal (like fast deliveries at lower cost), b) they have unique products (such as craft beer or hot sauces clubs), c) they are convenient (like boxes that present you with samples of different products you can try), and d) they usually cover a real need (such as pet food or food boxes).

In the current subscription economy, where customer experience is everything, merchants must keep their focus on innovation, customer satisfaction and customer retention if they want to have a successful business. A hint of creativity is also essential. There is enough space for traditional industries to turn into the subscription model.

For instance, the newspaper industry is adapting to the digital era by offering monthly subscriptions for their readers who want to have access to the content online. Even beauty and fashion industries can succeed with a recurring billing model. Birchbox is a famous success story in the cosmetics segment and Le Tote has found a way to innovate in the fashion segment. The company allows their customers to rent clothing items and accessories from their inventory, with the option to return the items or purchase the ones they wish to keep.


Things to Consider When Starting a Subscription Business

First of all, if you are either starting a new business or if you want to transition to a recurring billing model, ask yourself if your product or service can work with a subscription model. While the subscription economy is quite flexible and can fit with a wide variety of businesses, it is not something universal that can be applied to every type of business out there. Therefore, you need to make sure you have a product or service that warrants recurring billing. To do so, start by running a pilot test. See how consumers react to what you are offering and be sure to know what the market looks like in your segment.

Additionally, make sure to choose a platform adequate to manage your subscriptions, as well as the recurring payments. Having the right tools to automatize and correctly implement processes like counter checking cards, sending email reminders, anticipating card expiration dates, retrying declined cards, suspending accounts, communicating with suspended accounts, and discontinuing product delivery for non-paying accounts, among many others, is key for the success of your business.

Finally, you must understand that the customer journey in a subscription model is very different from a one-off purchase. The journey does not end with the delivery of the product or service. It is an infinite loop and you need to make sure you are providing a great customer experience to not only grow your customer base but also have loyal and happy clients who continue to pay to get access to what you are offering.

If you want to enable recurring payments in your shop selling to Brazil, contact us and our team will be happy to go through the particularities of the Brazilian market with you and introduce our solution for recurring payments.

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