Subscription Commerce’s Recurring Value Challenge

Subscription commerce is all the rage and shows every sign that it will keep growing in the 2020s. It can be tempting to assume that what is happening now will keep happening in the future — a common fallacy. But that would be a mistake. After all, ongoing success usually comes to the people and companies that don’t take the present for granted.

How not to take all that for granted — how to do better subscription commerce — was one of the main themes of a recent PYMNTS discussion with recurring payments provider Recurly’s Emma Clark. The interview took place amid concerns — always there, but perhaps growing in recent months — about the churn suffered by subscription commerce providers. As PYMNTS research has demonstrated, 20.1 percent of consumer retail product subscribers plan to terminate their services in the next 12 months — a data point that should be on the mind of all merchants taking part in subscriptions.

How Might Subscription Commerce Look In 2029? Recurly’s CEO, Dan Burkhart weighs in on the future of Subscription Commerce with @pymnts‘s Karen Webster https://t.co/y4jkHq1WzQ https://t.co/xnDQr7TOGW #subscriptions #payments pic.twitter.com/tJ8UKn8JH8

— Recurly (@recurly) October 23, 2019

Churn Factors

Churn can often be blamed on two significant factors, as PYMNTS research has shown. First, some 13 percent of consumers prefer to buy products at once, not necessarily on a regular basis. And research finds that 12 percent of subscription consumers can no longer afford to keep buying products via that retail method. After all, so much of the fun of subscription commerce — its sizzle and appeal — comes from what she called the process of discovery, the joy of which can lead consumers to sign up for subscriptions. But that joy often fades soon enough, leading consumers to cancel their subscriptions and recurring payments.

But there are solutions to that problem. “One way to fix that is to focus on value and price,” Clark told PYMNTS. “Make subscribers feel like the experience they are getting from that box sparks enough joy” to keep those payments coming, she said. “It’s about making it more than the box you receive in the mail every month. It’s about providing overall value to your subscribers, so they feel the cost is worth the experience.”

That’s a message that should resonate widely, as, according to PYMNTS research, some 41.2 million American adults subscribe to some type of subscription retail product offering. The subscription box market is filled with familiar brand names like Blue Apron, Dollar Shave Club, Loot Crate and Stitch Fix, but one name holds a commanding share in consumer retail products: Amazon. New PYMNTS survey data found that nearly half of respondents — not including those with Prime accounts — receive some retail product through an Amazon-backed subscription.

Moments Of Delight

Indeed, Amazon’s domination in subscriptions means merchants have little room for error as they seek to onboard and retain customers. But that doesn’t mean the task is impossible, as Clark explained during the PYMNTS interview. Subscription commerce operators — whether retailers or even direct-to-consumer brands — can find ways to put more sizzle into their programs via such methods as, say, expertly- and data-backed product recommendations that can serve as subscription add-ons every month, or tying other services or offerings to those subscription boxes — for instance, links to fitness sites and classes for consumers buying fitness-related products.

“I am buying into that moment of delight,” Clark said, describing an ideal subscription commerce experience.

Granted, some subscription experiences are more open to moments of delight than are others. For example, there’s not much excitement when needed, but mundane monthly, replenishment supplies of toilet paper arrive at the door. Even so, there is also a chance to do better and find innovations and convenience, even if relatively minor.

To illustrate that point, Clark told a story about her husband and his subscription to a company that sends razors to him each month. Some men might not wear out their razors every month, and if those products pile up, the temptation to cancel the subscription likely will increase. Why not offer more chances to, say, a pause those subscriptions, Clark suggested, instead of potentially losing that customer?

That’s not all subscription merchants can do to improve retention. According to PYMNTS research, they could be successful by offering bundled services and enabling subscribers to purchase items beyond those included in the subscription box. This is true whether subscribers are enrolled in box-of-the-month services or want to replenish things like toothbrushes, diapers, shaving products and other items. In fact, among those subscribed to services with bundling package availability, 85.5 percent reported being satisfied with their services.

“It’s all about building the recurring value for consumers,” Clark said. And you can bet that subscription commerce operators who survive long into the next decade will apply that lesson in multiple ways.