How Payments Have Ignited Subscription eCommerce

Subscription commerce has come a long way since book-of-the-month clubs and those record and cassette retailers that tempted teenagers with seeming impossible introductory deals. Yet subscription eCommerce is still a youthful industry, one that, in the words of Emma Clark, chief of staff at Recurly, “is maturing,” with the lessons learned along the way set to influence the next generation of those increasingly popular retail offerings.

PYMNTS recently caught up with Clark to discuss in-depth the current state of subscription eCommerce and the findings of the new PYMNTS Subscription Commerce Conversion Index.

She talked about the vital role that payments — specifically, digital payment options — plays in subscription retail, how the industry will achieve future growth and why a certain level of friction is not necessarily a bad thing for operators of such businesses. The findings of the PYMNTS research provided a foundation for the discussion.

Subscription Growth

The first thing to know about subscription eCommerce is that, despite some recent high-profile stumbles with the retail method — meal kit delivery service Blue Apron has provided reliable drama over the past year or so — and the significant challenge of churn, the model “is not going away,” she said.

In fact, “new verticals” are adopting or considering the subscription model to squeeze more value from their businesses and build brand awareness, Clark said. And everything from personal grooming items to luxury car services (as the report notes, BMW has a $2,000-per-month plan that includes roadside assistance and insurance) are now offered via digital subscription.

And as subscription commerce grows and spreads, payments will have a major role in those developments.

The PYMNTS report found that the average number of accepted payment options on a subscription platform stands at 5.3. Part of the story behind that figure, of course, reflects the trend in the wider world of commerce to offer as many (operationally pragmatic) payment methods as possible. That same ideal holds true in subscriptions — you tend to attract more customers if you don’t limit the way in which they give you their money.

But there’s also a different dynamic in play, Clark said.

“You want to make it really easy to update and change payment methods if customers want to,” she said. And if one payment method fails – hey, it can happen to all of us, and for various reasons — it helps to have a way for subscribers to easily switch to another method so there is no break in the revenue coming from them.

Checkout Experiences

The Subscription Commerce Conversion Index also dives into the differences in checkout speeds for subscription eCommerce sites. Those subscription operators deemed Bottom Performers, interestingly enough, offered faster checkout times than Top Performers, clocking in at 115 seconds compared to 120.2 seconds. According to the report, this might be because Bottom Performers simply did not offer as many features. That said, Top Performers had the largest increase in subscription checkout times (20.5 seconds), compared to 8.8 seconds and 6.9 seconds for Middle and Bottom Performers, respectively.

Clark offered another view about those checkout times, one that doesn’t necessarily contradict the report’s findings but adds a layer of understanding about the subscription eCommerce model and what it takes to succeed with it.

“Quick checkout itself doesn’t necessarily equate to seamless checkouts,” she said. That’s in part because “subscriptions in general involve building relationships” with customers, and that could mean those customers, attracted to a specialized product or offering, might not mind moving more slowly than would normally be the case with other online retail sites.

“Speed can be one aspect,” she said, “but if a product is a bit more complex, customers spending more time on a page isn’t necessarily a bad thing.” Of course, that’s not meant to be an excuse for a clumsy, malfunctioning site or checkout experience — even the most patient of consumers will tire of that.

B2C vs. B2B

In the subscription eCommerce word, B2B tends to outperform B2C, according to the Index, though it also said that both segments dropped in overall scores, with checkout times increasing. “B2B merchants gained an edge with higher implementation rates for product trials, free shipping, plan options, plan changes and feedback options,” the report also found.

On the B2C side, Clark said during the PYMNTS discussion, one of the trends in subscription eCommerce is offering subscriptions for music or other media when consumers are browsing and shopping at Google Play and similar digital destinations.

Meanwhile, in the “physical goods space,” she said, brands are using their store of consumer data to offer specific products to specific customers in hopes of landing subscriptions, and often sweetening the proposition by offering discounts. “In the B2C space, it’s about being smart with your data,” Clark said.

Negative Views

She acknowledged that for some consumers, subscription eCommerce can still carry negative connotations. Some shoppers are old enough to remember those record clubs, for instance –and, even more, consumers often tend to figure that once they sign up for subscriptions, they will have a hard time breaking free if the products or services no longer speak to them. Such a view, Clark said, is typically reinforced by the difficulties of getting out of gym memberships.

It seems obvious but it bears saying — it’s in the best interests of a business to not make cancellations too challenging, which only serves to spark negative PR and word of mouth. Indeed, most subscription eCommerce operators, in Clark’s experience, “are providing options to cancel. It doesn’t necessarily have to be a giant button, but they have to make it easier or else it comes back around to the brand.”

Subscription eCommerce, as Clark discussed with PYMNTS, still has much development to undergo, and those experiments and offerings will make for exciting news over time. That said, there is enough data to paint a detailed picture of the industry, as the Index does, and enough experience with subscription eCommerce to gain a firm grasp of what’s working and what’s not.