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Subscription Business Model as it relates to ECommerce

post #1 of 5
Thread Starter 
Have been seeing a lot of new start ups and online companies choose to use a subscription model rather than traditional product purchase ecommerce model.

Some examples are: Dollar Shave Club or Craft Coffee just to name a couple.

Do you see this as a growing trend? possible strategic advantages/disadvantages?
post #2 of 5
I was never quite a fan of the model. If I were to create an online e-commerce business, I would focus on making a product of such high-quality that my potential consumers would come back on their own to fulfill it. Having the option to subscribe than depending entirely on a subscription model is different, and I much prefer the former- both as a consumer and a producer. The advantages are clear: consistent revenue from a dependable number of customers, positive brand word-of-mouth, and more predictable inventory fulfillment. The big disadvantage- which is the reason that I don't like it- is that the model may potentially alienate customers who don't want a subscription.

I think this is a short-term trend which comes up cyclically. There hasn't been a big company on this model that seeks to succeed independently over plans of getting acquired. Unless anyone can come up with an example.

On another note, I think companies that offer a 'surprise gift every month' can gain a large following, especially if the company already established a reputation in a niche industry (such as a well-known design blog).

IMHO, there are more disruptive forms of e-commerce like everlane and warbyparkers... these companies are disrupting the supply chain, focusing on vertical integration, and producing quality products at extremely low prices by taking advantage of the benefits of the internet. They are much more agile than their competitors.
post #3 of 5
Subscription business model gives you insight into revenue from future quarters. Moreover, it makes revenue "stickier" due to switching costs (people are too lazy to switch, among other reasons).
post #4 of 5

I think it makes sense as a business model when it benefits the consumer. For example, I remember 7-8 years ago I used to have to spend over $5 to rent one movie from my local video store. Now at Blockbuster, I pay $15 per month and have unlimited access to their store. Business model innovations like this disrupt industries.

 

On the flip side, I know there are some startups where you pay $X per month and you receive a monthly product. It's proven to work with women's purses and clothing so far, but I know there are some companies who are trying to do this with men's health care products and sex toys for couples and to me these might not be as beneficial for the consumer as a monthly service.
 

post #5 of 5

I hope it will bring some positive  output for economy.

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