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September 21, 2017

Why Subscription Commerce Has Taken Off in the United States

It’s not just the e-commerce sector online these days, as there are numerous other variants of the industry that serve different purposes. One of the commerce services growing in popularity is subscription commerce. This service primarily targets audiences who seek a regular flow of products on a bi-weekly or monthly basis. For example, those who need e-juices for their e-cigs will shop at Auster.com where they’ll regularly be provided with a box of their favorite e-juice flavors. So, why has subscription commerce taken off so rapidly in the United States from a business viewpoint?

Regular Revenue

The good thing about subscription commerce services is that customers pay for a package every couple of weeks or so. This, in turn, provides the business with a constant flow of revenue. This is primarily the main reason why many business-minded individuals are quickly jumping on the subscription commerce bandwagon. A regular revenue can help businesses grow quickly because they have the opportunity to invest in regular bulk inventory that gives them bigger discounts.

Easier Inventory Management

Another crucial reason why subscription commerce is popular is that it’s very easy for business owners to manage their inventory. Whether you’re looking to sell gym supplements or house cleaning products, it’s much easier to manage inventory if you know you’re selling it regularly to the same customers. This ultimately increases business efficiency, which could help save further costs down the line.

Bigger Profit Margins

Because of the fact it’s very easy for subscription commerce businesses to get a regular revenue and it’s also easy to manage inventory, it means bigger profit margins are available to take advantage of. Bulk inventory discounts, fewer costs on couriers, and fewer employees all help towards increasing profit margins.

Higher Conversions

The subscription commerce industry is still somewhat unique, which means it’s easier to convert products. Of course, this all depends on pricing structures and the niche you’re in, but most businesses thrive thanks to higher conversion rates.

Fewer Expenses

A subscription commerce business is fairly easy to manage and organize, so the need for additional employees or storage space is usually not necessary unless it’s a much larger company. This means that expenses are much lower than other e-commerce businesses which, again, increases profit margins considerably. Even the delivery of products is usually cheaper because you can order couriers in advance and order their services in bulk if need be – primarily because you have subscribed members so you’ll know what you need. It would also be possible to have an in-house delivery crew to cut costs further if expanding was an option in the future.

Of course, subscription commerce isn’t always as easy as the above suggests and it does also have many drawbacks. For example, it’s usually harder to market the business because there are still so many people that are unsure of what it does. However, it’s certainly an industry that’s very much at the top of the list for many entrepreneurs.

The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.

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