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Why is subscription essential for DTC/CPG brands?

Ravi Rathee
December 28, 2022

Conventionally only way to update about new products in your business was to advertise in the newspaper or wait for the customer to revisit your store. The contemporary world is a digital world, where you can keep up with your customer with a click. No, it will not be one of those long form-filling processes. How? Well, a direct-to-consumer subscription cuts shorts to the point with a single click. It is an eCommerce strategy that is becoming hip among CPG startups and brands. Established CPG brands are adapting to the customer-centric solutions in their retail channels.

What are CPG Products? 

When we talk about CPG, aka Consumer Packaged Goods, we refer to the products that customers frequently use, such as beverages, cosmetics, candies, vitamins, video games, apparel, and more. The customer will likely repeat the order for CPG products as they are replenishable and replaceable. Therefore, a functional subscription model will serve as the retention door that allows you to converse with customers from time to time.

Conventionally, people offered subscriptions pop up on the exit page or the cart. Today, you can assort your digital platforms to see where the customers can find you easily. The eCommerce platform you leverage will significantly impact your processes and convince your customer to subscribe. The ultimate goal is to provide a superior customer experience through the subscription.

Why Subscription? Why Now?

Every CPG brand is now hailing the supremacy of a digitally driven direct-to-consumer economy. The CPG players are reconsidering their portfolio priorities, strategies, and “where to play” choices in the digital world. According to a report by the Subscription Trade Association (SUBTA):

By 2023, 75% of organizations selling DTC goods will offer subscription services.

The benefits of a subscription e-commerce strategy for CPG are several:

  1. No intermediaries are required.

You can directly converse with the customer and sell the product straight to them without the intermediaries like wholesalers and retailers. A subscription-based strategy allows your brand to get on a one-on-one level with each customer. The growing exposure through important distribution digital channels (website, blogs, Emails) has made it more manageable and accessible. You can leverage your preferred marketing funnel and enable a subscription model. 

  1. How-to-win model with incremental LTV

Subscription-based brands see their ARR grow 9X Times faster than the average S&P average. According to the UnivDatos Market Insights, the “Subscription E-Commerce Market is expected to grow at a CAGR of 68% from 2019-2025 to reach US$ 478.2 billion by 2025.” Consequently, you get an Increase Customer Lifetime Value (LTV). 

  1. High Market saturation = low consumer switching cost + low churn

Forty-four percent of companies concentrate mainly on customer acquisition, while 18 percent focus on retention. So, logically, if you’re part of the 18 percent, you have a competitive advantage.

Brand loyalties can quickly shift. But with a suitable subscription model, you can maximize your time with your customer. Allowing them for flexible checkout, product replacement, or delivery time can reduce churn and increase customer loyalty. 

  1. Build the next best offer

Retaining an old customer is more manageable than acquiring a new one. You have already built trust through the effortless customer experience and transaction. The customer knows about your values; therefore, the following relative step is to make them come back.  Mckinsey's research shows that 15 percent of online shoppers have signed up for one or more subscriptions to receive products on a recurring basis, frequently through monthly boxes.

  1. Saving a failing DTC Company

Yes, many DTC companies can be saved by using a sustaining subscription model. Thrifty customers love deals, and a subscription model works for them in the long run. If they love your product, they will generate recurring revenue time and time again. A subscription model is an agent that works on your behalf. It smartly engages with your customers, even when you are busy doing other things in your DTC. 

  1. Outdo your competitors on Shopify 

By now; it is clear that a subscription is one the most efficient ways to retain customers. However, Shopify does not automatically save customers’ billing information. With each purchase, the consumer will have to re-enter the information. It can be a hassle for many easy-going customers; thus, a subscription app will solve all these problems.

Types of Subscription models

There are three classic types of subscription models. However, a business can add its unique dynamic to the subscription model. 

  1. Subscribe for Replenishment

It replenishes the same products, such as vitamins and razors. You and your consumer gets to save time and money. It is also known as “subscribe-and-save”. 

  1. Subscribe for curation

It curates an assorted platter depending upon levels of consumer decision-making. The CPG brands in Cosmetics, food & beverages, and apparel use this subscription model. 

  1. Subscribe for Access

It allows customers to get exclusive offers through registered memberships. Top DTC Brands such as Skincare and beauty products. Most customers are up for trying out new products and experiencing a twist. Through subscription, you can sell them hot and popular products. 

How does your consumer shop?

Well, the cat is out of the box. You can make your customer spend money by identifying their behavior and shopping patterns, granular data, from detailed demographics and psychographics to consumers’ clickstreams on the web; businesses are starting to create highly customised offers that steer consumers to the “right” merchandise or services—at the right moment, at the right price, and in the right channel. Today’s customer is distracted and bombarded with plenty of information. 

The Harvard Business Reviews' recent article on Know what your customer wants before they shed light on rethinking marketing strategies through data analytical tools. A suitable subscription model will provide meaningful, comprehensive, and factual insights into how your customer shops. 

How to use the subscription model for your Shopify Store?

If you have come this far, you might have made up your mind to go with a subscription model on your Shopify Store. Subscription management is a hard problem with multiple creative solutions. Here are some ways you can enable that ‘Subscription button’ as a CTA:

  1. ReCharge Subscriptions

It is a popular Shopify subscription solution that reduces churn and increases LTV. The app gives actionable insights that help you meet your customer’s needs in real-time. It has a best-in-class portal theme that creates a seamless customer experience. The app features customer-oriented and merchant-oriented subscription functions. 

  • Keep your customer engaged.
  • Integration with top eCommerce tools.
  • Grow AOV through upsells, like adding one-time products. 
  • Improve payment conversions with automatic retries and dining

  1. Appstle Subscriptions

It is a comprehensive subscription model with the tagline “turn visitors into loyal customers”. The app support all Shopify themes; 1.0 and 2.0. Founded by apple-Siri engineers, the app offers you unique functionalities. 

  • subscription build-a-box, 
  • targeted upselling, 
  • one-time product inclusions, 
  • multiple and tiered customer discounts.

 

  1. Seal Subscriptions

If you prefer the subscription option right next to the cart on the store's product page, Seal Subscription provides the most valuable features for this choice. Moreover, it provides it allows the customer to make convenient recurring payments. Merchants prefer it to enable the user to customise the subscription period. For example, a customer can subscribe to product A for a month and product B for a six-month cycle. 

  • GDPR compliant
  • Easy to use and navigate
  • Self-managed subscription
  • Loyalty discounts & gifts

Pro Tip: There are many other apps, such as Bold, OrderGroove and Paywhirl.The common link between all these is they are Shopify Vendor approved

These are the top three subscription app on Shopify. You can pick a model that suits your business size, budget, and functionality. Study and research your customer closely before deciding upon a subscription model. For example, the consumption rate varies from customer to customer and from one product to another. Consequently, DTC companies cost-effectively build awareness, keeping prices low and convincing customers to subscribe.

A solid subscription model tailored to your DTC company model makes you exceptional and more or less successful in the long run. It is time to be a ‘most-loved’ or ‘go-to’ DTC brand. 

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