The traditional e-commerce model is built on a lot of assumptions, even more guesses and a lot of grinding wheels spinning in an effort to get consumers to buy and win long-term loyalty. The subscription model has become a popular way of achieving recurring purchases. According to a survey deployed by McKinsey & Company, 15% of consumers belong to an e-commerce subscription, 32% of which are focused on replenishment of regularly-purchased items in order to save time and money.
While on the surface subscriptions can be appealing to both consumers and brands, there are many challenges within the subscription model. According to the McKinsey survey, not only are customer acquisition costs high, but 40% of subscribers cancel their subscriptions (often in the first few months), making it difficult for brands to cover the cost of acquisition. While subscriptions offering replenishment are the most successful at driving long-term subscriptions of a year or more, there are still many reasons that consumers pull the plug on their subscription. For example, due the the lack of alignment between calendar-based subscription orders and actual consumer usage, many consumers end up with extensive back-stock of products and cancel their subscription due to an over-abundance of product they don’t need (and are not necessarily loyal to at that stage in their journey).
However, if brands can better deliver on the value and convenience of the subscription model through a superior consumer experience, they can win long-term subscriptions. That’s where the connected e-commerce model comes into play.
The traditional e-commerce model is falling short because it fails to account for the human aspect of product usage: where, when, how and why a consumer uses a product. Today’s subscriptions, while offering value to the consumer through the convenience of auto delivery and better pricing, still fail to deliver products based on the precise needs of the consumer at any given point in time.
What is connected e-commerce?
Connected e-commerce brings content together with commerce in order to provide consumers with a personal, relevant and valuable buying experience throughout the entire buyer journey. Recent advancements such as sensor technology and machine learning can help brands understand true consumer usage, including day, time, geolocation and volumetric data. This not only provides the opportunity for brands to interact with consumers in real-time as they use the product, but to significantly increase the value of the subscription model by timing replenishment based on need, cement buyer loyalty, reduce single-use packaging in support of the company’s sustainability goals and further optimize the supply chain.
Brands that have implemented connected e-commerce are enjoying benefits such as:
- Gaining a more accurate picture of the customer journey
- Removing bias from consumer behavior data, connecting at the point of use <60 seconds in-context responses at point-of-use
- Increasing revenue while eliminating waste with the ability to provide consumers with the exact amount of product that they need, when they need it.
- 33% increase in lifetime value (LTV)
- 15% decrease in inventory care costs
When connected e-commerce is in place, the product literally orders itself while creating a better experience for customers, which creates an immense opportunity for brands. How does your brand plan to address the human element to replenishment subscriptions over the next year? Share your comments below.