EU Customers Warming to Convenience of Retail Subscriptions

Competition in the eCommerce space is increasing as customer acquisition costs continue to rise.

Thomas Marks, head of growth at sticky.io, attributes the growing competition to new eCommerce businesses bursting onto the scene while existing eCommerce brands enter the subscription commerce space.

Consumer expectations around subscription services are also evolving, Marks told PYMNTS in an interview, making it further challenging for brands to keep consumers engaged.

How, then, can eCommerce firms continue to attract new subscribers? Per Marks, it begins with developing content and building a loyal customer base using a word-of-mouth marketing strategy.

“If you’ve got a loyal customer base that’s engaged with your brand and they’re telling their friends and family about the enjoyment that they get from that interaction, and how much they appreciate your products, that’s a gold mine.”

Offering special discounts and promotions to entice new customers can also make a difference, whether it’s a free trial or a subscribe-and-save discount, Marks noted.

Then there’s looking beyond traditional standard digital advertising on social media to explore affiliate marketing campaigns by leveraging existing data gathered from interactions with prospective customers, he explained.

“Most eCommerce brands have built a database of prospective customers through interactions that didn’t necessarily result in a purchase so [they can engage] those customers through email marketing and promotional campaigns.”

Beyond the quest for new subscribers, retaining existing customers is critical to having a healthy business in the subscription commerce space, Marks said, pointing to the monitoring of key subscription metrics such as the ratio between customer acquisition cost (CAC) and customer lifetime value (LTV), also known as LTV/CAC ratio, as one way brands can improve retention.

As he explained, “If you’re losing only high paying customers, that may make your retention rate look favorable, but if you have a lot of low-value customers that you’re retaining, that’s not a healthy business.”

Lastly, he said artificial intelligence (AI) and machine learning will be key in helping subscription-based merchants better understand their customers, personalize their offerings and optimize their operations.

This is where he said sticky.io comes to play, offering merchants custom, data-backed rebill strategies using an AI-based Smart Dunning service that enables them “to predict when a customer might churn or the best time to retry a transaction based on the card issuing bank or the country of purchase,” Marks added.

The US/EU Approach to Subscriptions

Beyond Amazon’s Subscribe and Save program and digital subscriptions, Marks said European merchants and consumers were slower than their U.S. counterparts to adopt subscriptions as a merchandising model.

Another major difference between the two subscription markets is that the U.S. is largely focused on convenience and value, with replenishment subscriptions being the dominant form of subscription services, while Europe tends to focus more on luxury goods, with brands resorting to subscription boxes to introduce consumers to luxury items.

He pinned this difference in mindset on lifestyle habits — most passenger journeys in Europe are made on foot or by public transport, which makes it easier to access goods and services, whereas American consumers are mostly commuting to work by car “and do not want to get off the freeway to grab dinner or buy something on a whim.”

However, Marks said the pandemic, which led to a rapid increase in subscription commerce volumes across Europe, particularly in Germany and the U.K., has caused a shift in mindsets, driving home the idea of convenience and value for European consumers.

“[European consumers] are starting to value the convenience of subscriptions and having things just show up at your door that you can replenish on a weekly or monthly period,” he added.

Moving Beyond Subscription Commerce

While having predictable recurring revenue is important, Marks argued that direct-to-consumer (D2C) merchants can expand beyond subscription commerce and sell using other methods — a strategy that not only diversifies their revenue streams but allows them to reach new customers who might just want to try out their products without subscribing.

He pointed to U.S. shaving equipment manufacturer Harry’s as an example of a firm that has successfully expanded beyond a basic subscription to include a full line of facial care or skincare products.

“Harry’s has created an online consumer experience where you can subscribe to as much or as little as you want beyond your original razors and shaving cream subscription,” Marks pointed out, adding the firm has “diversified to become a powerhouse as far as giving consumers choice and flexibility.”

The right mix of flexibility and personalization can also be a game changer for consumers who want control over their subscription offering, whether it’s the flexibility to pause, skip, or upgrade a subscription, depending on their unique needs.

He also said that Harry’s serves as a good example, particularly how the company notifies customers weeks before subscriptions are rebuilt to allow them to make any additions or subtractions to their next delivery.

That demand for flexibility further transcends beyond products and services to payments, he added, with customers expecting that brands will offer major payment methods like Apple Pay, Google Pay and Amazon Pay while reducing friction at the point of checkout by allowing one-click purchase for example.

As Marks said: “The easiest way to reliably meet all of your subscribers’ needs is to have them tell you what they want.”