Considering the Subscription Model? Here's What You Need to Know

Do any of these ring a bell?

Netflix, Hulu, Dollar Shave Club, Birchbox, Ipsy, Blue Apron, Lynda, FabFitFun

Subscription services have been around for even longer than these popular companies. Newspapers and magazines started using this model centuries ago, but the technological advances of the past decade have skyrocketed this business model to include almost everything we buy.

subscription box shopify

Photo by Dollar Shave Club

Subscription services have taken off rapidly in recent years, and if you’re wondering if this market has any opportunities left, we’ve got good news:

A 2018 McKinsey study revealed that a whopping 78% of women and 58% of men have at least one active subscription.

Just to give you an idea of how big a market we’re talking here, in 2016, the subscription service business model market was worth $2.6 billion, growing over 45x from just $57 million in 2011.

Which are the most popular subscription types?

For the sake of simplicity, we’ll break down subscription-based business models into two types:

  1. Recurring service (like the shipment of consumables at a certain frequency)
  2. Provides access (to content/service)

A recurring service model revolves around providing the customer with a consistent supply of a product. These days, there’s a box for almost everything! Some are centered on providing a specific, expected product of the customer’s choosing.

Other boxes may be based around a theme the customer chooses. Then the company surprises them with products they select in their boxes. For example, let’s say a customer picks the theme of “weight loss” for their box. You then ship them a box that possibly includes healthy recipes, protein bars, or workout plans.  

Recurring Service Models

Here are some of the most popular and well-known examples of recurring service subscription models:

subscription box program shopify

 Photo by Blue Apron

Meals Subscriptions

Everyone is getting busier than ever and with the struggle to eat healthily, more and more companies are offering individualized meals delivered right to your doorstep. Meals vary from a box of raw ingredients and instructions to ready-to-heat meals.

Blue Apron sends you a box that includes delicious recipes from their chefs along with the fresh, accurately-proportioned ingredients needed to cook your meal.

Home Chef is another meal kit service provider with more variety. Here, you can order recipes with ingredients as well, or you can order oven-ready meals in an oven-safe tray. You can even customize your recipes depending on your nutrition goals.

subscription box set up help shopify Photo by Ipsy

Beauty Box Subscription

The beauty industry is a very lucrative market that is valued at over $445 billion (!). The subscription model is just another way glitz and glam companies are getting their products into consumers’ (well-manicured) hands.

Ipsy is one of the most popular in this market with their “Glam Bag” where they offer customers a selection of new deals that they get to add to their boxes. They also offer “Mystery Glam Bags”, and depending on the price the customer picks, they’re presented with a box of randomly chosen sample-size or full-size products.

 

Coffee Box Subscription

Now that’s a box you can hardly resist. With about 64% of Americans consuming at least one cup of coffee on a daily basis (of which 79% had their coffee at home), you can easily see why this box can be in great demand.

Coffee boxes allow you to experiment with coffee from different countries and roasters, or simply enjoy a rotating selection.

 

Membership Access Model

This subscription model is based on providing customers with access to premium content like e-learning courses, diet plans, entertainment (think Netflix) and many more.

Spotify offers you free access to their digital music streaming service. However, if you want more features and fewer ads, then you’re going to want a Spotify Premium subscription.

Think you’re too old or untalented to learn how to draw? Think again. Stan Prokopenko has a very popular YouTube channel with 1.4 million subscribers where he offers free and detailed drawing videos. His free content is supported primarily by the courses he offers on his website which offers various drawing courses at a premium. 

 

The Most Unusual Subscription Services

Subscription services are literally everywhere nowadays and in spite of the fact that many services are indeed quite valuable and convenient, there are some really unusual subscription services out there. Here’s a couple we stumbled across in our research.

 subscription program implementation shopify

Photo by Box of Goth

Box of Goth

They promise to ship you “monthly gothic goodies” to your doorstep. The boxes are … coffin shaped. So basically, they send you small black coffins filled with goth-inspired goodies. Last August, their theme was Addams Family.

subscription box help shopify

Photo by Imperfect Produce

Imperfect Produce

This one comes with a cause behind it. Imperfect Produce is founded on the principles of eliminating food waste. Just because it doesn’t look good doesn’t mean it doesn’t taste good. Imperfect Produce sends you a box made up of fresh produce that’s not “pretty enough” for big retail stores, at a price that’s less than what you’d typically pay at the grocery store.

Their mission is to reduce hunger, support farmers and producers so they can earn fair value for their produce, and to celebrate imperfections.

Sounds perfect to us!
 

The Witches Moon

Just as the name suggests, The Witches Moon Subscription provides you with a box of magic tools and supplies to perform spellcraft. They offer a wide collection of spell kits, books, magical oils and many more.

 

Considering adopting this model? Here’s how to decide if the product or service you sell would work in a subscription model:

 

You’re probably wondering by now whether or not your product or service would be a good fit for a subscription model. This model has evolved tremendously recent years, so much so that it seems like almost anything can fit into a subscription-based business.

Before you knew a service like Dollar Shave Club existed, who would have thought that a company selling shaving kits would turn this into a service-based business? And yet, they did. After they get to know a bit about your grooming habits, Dollar Shave Club sends you a box of trial size products to try out, then they send you the full-size products’ box 2 weeks later. 

Here are some points to consider when you’re weighing in:

The Value Your Customers Get from Your Product

In order for your customers to subscribe to your service and commit to repeat payments, they must see enough value in your product to make this financial commitment. When you consistently meet and exceed your customers’ expectations while staying flexible with your model based on the feedback you get from them, they will happily keep coming back to you.

 

Check Your Competition

In such a competitive market, you can never ignore what your competitors are offering and how your customers perceive it. Are they happy with your competitors’ offerings? Why? Are they unsatisfied? How to make it better for them? Will the cost of taking market share from the “big guys” in a given space be more than you can afford?

Doing your research can save you a lot of time, effort, and money. It’ll also help you identify the gaps in your niche and where you can provide value that others can’t or won’t.

 

What to Charge for Your Subscription Service

Oftentimes businesses make the mistake of losing profit by undercharging their customers. Depending on your target market, whether it’s a large base or a niche market, and your competition, you may be able to adjust your pricing to be more favorable.

With a large target market, you’ll have more competition but also more potential customers. You’ll need to maintain competitive pricing without going much higher than your competition, and work hard to gain the market share you need to be profitable. On the other hand, in a niche market, you’ll have fewer customers but they’ll come with higher demands. In this case, you’ll need to charge higher to be able to support the higher operational costs and still make a profit.

Offering a subscription service is a great opportunity to build a loyal customer base. Keep your customers happy and satisfied and you’ll have enough recurring business to help your brand prosper and flourish.

Need some help setting up a subscription component to your Shopify store? We've got you!