Recurring Revenue Is the Secret to Ecommerce Income

Recurring Revenue Is the Secret to Ecommerce Income

August 8th, 2023

Discover the gold mine hidden in recurring revenue. Learn how this secret strategy can skyrocket your online store's success in our latest deep-dive blog post.

Sunrise Integration
  by Sunrise Integration

You're So Predictable


Let's explore the world of ecommerce subscription services. If you're a merchant, subscriptions can convert your store into a recurring source of revenue. Establishing a recurring revenue model is like discovering a goldmine that keeps producing treasures (as our partner Recharge can attest to). It's a financial model that brings stability and predictability to your business. The steady nature provides a sense of security and frees you up to focus on other aspects to improve your business. This should be a part of your site's customer growth & retention plan.


So, what exactly are subscription services? To put it in simple terms, a subscription service involves offering customers a regular delivery of goods or services for a recurring fee. These deliveries can occur weekly or more typically, monthly. For example, it could be a monthly shipment of gourmet coffee or a weekly box of fresh vegetables. The subscription model should aim to deliver an ongoing relationship between the merchant and the customer.


How can your online store owner tap into this potential? Let's walk through the basics of how to launch a subscription service for your store and let's start calculating your new income stream.


Calculate your recurring revenue


Starting a Subscription Service


In a recurring subscription model, customers pay to enjoy specific goods or services, delivered on a fixed timetable. The frequency of payments is often customizable based on the user's preferences. It could be on a weekly, monthly, or yearly basis. The customer gets great value and the merchant builds an on-going relationship. To get started with a subscription service, you must first understand what works and doesn't work in this model.


Understanding the nuances of subscription service and understanding your customer is vital. First, you must have a product or service that warrants a recurring need. Then, you have to consider your customer and what they value. You should embark on this thought exercise to determine if your subscription idea can provide added convenience and customer delight. Don't be afraid to conduct market research or even survey your existing customers. You want to ensure your service aligns with customer desires.


What to Sell?

One of the key challenges is determining what product or service to offer. It's not enough to just have a product, you need to confirm if customers need or want it on a recurring basis. Identifying such a product (or service) that also aligns with your brand can be a tricky task. Your product needs to keep existing customers happy while continuously attracting new subscribers. This requires delivering a quality product while also providing customer service. It's not just about shipping a box, you have to consider inventory management, packaging, shipping rates and returns. All of these aspects should be considered when determining if you have the right product or service offering that works in a recurring model.


The recurring subscription model works beautifully with certain types of products, while others can be a poor fit. Products that do not encourage repeat use or have long lifespans are a poor fit for a subscription model. For example, durable goods such as furniture or electronics, which customers buy infrequently, may not be suitable. One of the main appeals of subscription services is the convenience factor. If your product doesn't save the customer a trip to the store or offer something unique, they may see little value in subscribing. Your subscription should thrive on newness and discovery. If a product line lacks variety, customers may quickly grow bored with the same offerings, leading to higher cancellation rates.



Pricing is the next thing to consider. You have to determine if your customer perceives value in your service. You want to find a fair price while also covering your costs and ensuring profitability. Since subscription services involve regular, recurring payments, customers may be hesitant to commit to a subscription for high-cost items. It's worth spending time studying a pricing strategy and understanding what your customers are willing to pay. The perception of value will either entice or drive away customers, so choose wisely.


The recurring nature of subscription services means that your customers will continually assess whether they're getting their money's worth. Consider that a subscription is not just about selling products, but also selling an experience. You want your customers to feel that the experience is worth the recurring payments. The subscription model thrives on the value of personalization and the joy of receiving new products. The benefits of the subscription service should clearly outweigh the costs. For example, a subscription to a grocery delivery service could offer the convenience of doorstep delivery, saving the customer both time and effort, which in turn validates the cost. You want to deliver clear and tangible value that justifies the recurring financial commitment.


Lots of bags means lots of orders


Challenges of Subscription Services


Subscriptions can be tricky, so your business must properly understand the challenges of supporting a subscription-based service. Retailers who lack the resources to deliver consistently, or can't meet customer expectations will quickly face cancellations. You need to continuously innovate, update selections and provide exceptional customer service to ensure subscribers see ongoing value in their memberships. Some of the biggest challenges include customer churn, logistics and support.



For any subscription service, churn is the number one fear. Stores need to make sure that their service is adding value to the customer. One of the biggest reasons customers cancel is dissatisfaction with the products. Surprising and delighting your customers are an excellent way to keep the subscription valuable. Make the customer feel valued and you'll reduce dissatisfaction.



Managing the logistics of a subscription model is complex. Maintaining inventory, ensuring regular and timely delivery and dealing with returns require sophisticated logistical and customer service systems. Merchants need to accurately account for the inventory required for the number of active subscriptions while keeping in mind any potential fluctuations due to new subscriptions or cancellations. You also have to support non-subscription sales of the same product. This is particularly challenging when dealing with perishable goods or items with long lead times. Misjudging demand can lead to inventory or stock shortages, both of which are costly and create a crisis in customer confidence.


Subscriptions promise a regular delivery of goods. This requires a well-oiled supply chain that handles the packing, shipping and delivery on a precise schedule. Any mishap, like a delayed or missed delivery, can lead to customer dissatisfaction and an increased churn rate. When you add returns to the mix, you'll have products coming in and out that must be accounted for in your logistics. Maintaining clear and straightforward return policies, coupled with a dedicated and empathetic customer support team, will help resolve issues quickly.


Overcoming these challenges requires careful planning, continual improvement and a customer-centric mindset. With these in place, the rewards of a successful subscription model can outweigh the difficulties.


Ready to Get That Recurring Revenue?


Embarking on the journey of implementing a recurring subscription service for your ecommerce store might feel like you're playing Jenga, one wrong move and everything will tumble. The adventure however comes with the treasure of predictable revenue, stronger customer relationships and enhanced brand loyalty. That's a game you want to play.


Setting up a subscription model delivers on the wave of modern consumer demands. Give your customers a box of delight every month and they'll await each delivery with anticipation. With that expectation in place, you can successfully build a thriving, sustainable subscription service that adds value to your customers' lives while enhancing your business's stability. Remember to keep your customers at the heart of all your efforts.


Tags:   ecommerce   subscriptions