Subscription Business Model: How It Works And Helps You Thrive
Are you an ecommerce entrepreneur interested in increasing the revenues of your online store? Don’t you know how to make your business bring you additional profit on a long-term basis? If so, it’s high time to learn more about the subscription business model!
Nowadays the ecommerce sector is growing rapidly. That’s why it provides you with lots of options to expand your business.
Certainly, if you are running a dropshipping store, it’s a feather in your cap. You have all chances to build your own financial empire, especially in case of following the recommendations we are happy to give you.
However, if you’re looking for additional ways to increase your profits and focus on long-term benefits, we would like to recommend that you consider setting up a subscription business model!
How does the subscription business model work?
Well, are you interested in increasing the income from your online store, but it’s the first time you’ve heard about the subscription business model? If so, that’s all right. In this article, we are going to tell you in detail what it is and how it works.
The subscription business model is a scheme in which a consumer pays a recurring price for using the product or service each week, month, year, etc.
How does it work in practice? In fact, there is nothing challenging about it.
Let’s try to describe the subscription business model in the service sector. For example, you’re running a TV channel that provides its viewers with early access to new movies.
Actually, it’s a little bit annoying to search for and buy a new movie since it takes you time and effort. So you offer your clients the access to new movies and series in exchange for a subscription fee. And everybody’s happy!
Certainly, this scheme can vary and it depends upon the niche you deal with. However, its basis is all the same for both Internet service providers and car manufacturers.
And now you may ask a reasonable question: why is this model so profitable for you as a business owner? And why will a consumer overpay for this?
Here comes one of the main advantages of the subscription business model: both business owners and consumers can significantly benefit from it!
Subscription business model for a dropshipping store
At first sight, it’s hard to imagine how you can apply the subscription business model to your dropshipping store. However, experience has shown that it not only works, but it can also bring you a lot.
For instance, you’re running a jewelry dropshipping store. If so, it’s definitely the one for the subscription business model!
You can easily offer your customers the following service: a subscription to jewelry from your stylist!
How is this subscription service going to work?
So you launch an ad campaign that is to tell your potential customers that each month your highly-qualified stylist is going to choose a set of cool jewelry. And those who subscribe to this service will receive such new sets on a monthly basis. Great, isn’t it?
For a customer, it means convenience and effortless reception of hype and trendy products on a regular basis, and for you it means a stable and predictable source of extra income.
Subscription business model: what are the benefits?
Now you know well how the subscription business model works with dropshipping. However, you may ask if it’s profitable for a business owner? Let’s take a look at the benefits this strategy gives you!
The subscription business model can provide you with an income on a permanent basis.
For example, you are selling a particular product. When an Internet user comes to your website and makes a purchase from you, it’s a one-time benefit for you. You can’t be sure that this very person will come back later and make one purchase in your online store. You should definitely make an effort for this.
The main advantage of the subscription business model is that it takes you an effort to attract a customer only once. Then, this person is supposed to bring you money on a long-term basis. In fact, you can benefit from this over months or years, as long as the product you offer is interesting for your clients.
Here comes one more advantage of this model: it’s well known to people from lots of countries. So you don’t need to explain how it works to your customers.
Actually, this business model is widespread all over the world. And nowadays it’s used for business expansion not only by smartphone app developers, but even airlines!
For you as a business owner, it’s essential because your potential clients know all the advantages of subscription products and services. So you’re highly likely to convert as many website visitors as possible without extra effort!
Chance to keep working with a client
What’s more, please pay attention to the fact that this model lets you keep working with a client. It means you can try to interest them in other products or services and increase your income!
So we have highlighted the main advantages of the subscription business model. However, in practice, there are a lot more of them!
Well, should you leave all the rest and set up this model in your dropshipping store? Actually, that’s not a good idea to solely rely on the subscription business model when running your dropshipping store. We recommend that you treat it more as a source of additional income, and consider some important aspects of this strategy.
What to pay special attention to when setting up the subscription business model?
To make the most out of this strategy, take into account the following:
Your business niche
The most important thing for you as a business owner is to understand that the subscription business model can’t suit all the niches. The following niches suit this model perfectly: makeup, shaving stuff, perfumery, stationery, accessories, etc.
Right, your customers will bring you profit on a long-term basis, but you need to attract them, at first.
How to do this? Since the subscription business model is widespread all over the world, you should understand there is a high competitiveness. However, if you ensure an interesting product at a reasonable price (meanwhile, profitable for you), you are highly likely to succeed!
Rate of return
Now let’s talk about expenses and income. How much should your subscription cost to remain lucrative for you?
Obviously, this subscription should pay off as soon as possible. But please pay attention to the fact that it should be not only profitable for you, but also appealing for your potential clients.
So we believe that the cost to engage customers and buy the very product should be paid off in no more than 3 month. Otherwise, you risk a lot.
If you wonder why it’s going to be unprofitable for you, don’t remember that you also need to keep your clients.
As we have already mentioned, you need to keep your clients subscribed to your service at least for several months in order to pay off your expenses.
That’s why you should pay special attention to the selection of products for your service: offer something new, improve the quality, etc.
You need to find one or several products you’re going to provide your clients with. So why does shipping matter a lot?
In fact, small stuff costs a penny. So they are extremely lucrative in terms of the subscription business model. However, their shipping costs often exceed their initial price.
And if you are going to offer your clients one product, it’s not so important. But if we speak about a set of products, it would be a great idea to find a supplier that has a wide range of products. In that case, you can try to cut down shipping costs.
Subscription business model: final thoughts
So let’s sum up why this model can be lucrative for you.
- Whom does the subscription business model suit more?
It is supposed to suit those entrepreneurs who look for ways to get additional sources of income and want to make the most of their businesses. However, if you want to build your dropshipping business solely on the subscription model, please note that it’s not a good idea.
- How profitable can the subscription business model be for a business owner?
It can serve you as a stable source of income on a long-term basis. All you need to do is to offer an interesting product at a relatively low price.
- Which niches suit the subscription business model more?
If we speak about the subscription business model, not all the niches can suit it perfectly. You can easily rely on it if you deal with the products your customers have to permanently resupply: makeup, jewelry, shaving stuff, etc.
- How fast should the subscription pay off?
In fact, the sooner the better. But please note that if it takes you more than 3 month, you risk a lot.
So if you’re an experienced dropshipper and you’re eager to make the most of your business, the subscription business model can be an interesting solution to diversify your offering. Just pay special attention to the aspects we highlighted, and you’re good to go!
And if you still miss a chance to become a 100% owner of a lucrative business, it’s high time for you to start your dropshipping journey!