Delivery subscriptions are increasingly popular among large and medium-sized businesses – and it’s easy to see why. Consumers benefit from convenience, consistency and reduced delivery costs. By subscribing to a delivery service, consumers know that they can place as many orders of any size as they like in the knowledge that delivery costs are covered. This eliminates the risk of unpleasant surprises at the checkout, and encourages consumers to buy more in order to get their money’s worth.
Of course, businesses benefit from the subscription model, too. As well as potentially improving cash flow and opening up recurring revenue streams, offering a delivery subscription could also be crucial in improving customer loyalty and retention. However, offering this service does come with some logistical, financial and compliance need to knows that business owners should be aware of.
Why offer a delivery subscription service?
Bringing a new delivery subscription subscription service to the market requires a substantial investment of your time, effort and capital. However, there are a number of reasons why medium-to-large businesses should consider it.
The public has clearly developed a taste for delivery subscriptions. An appetite that has only been enhanced by the pandemic when consumers relied on local pick-up and delivery services to get essential (and luxury items) delivered to their doors in lieu of the conventional retail experience.
Because delivery subscriptions offer unlimited delivery for a flat monthly or annual fee, consumers know that they can indulge their appetites for ecommerce without worrying about delivery costs increasing their monthly or annual spend.
Companies that have embraced delivery subscriptions have shown some remarkable returns in recent years. ASOS was also able to grow its revenues by 19% to £3.91bn in 2021, and Amazon made over $30bn from subscriptions and memberships in the same year.
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Improved cash flow
By providing more incentive to buy, shipping subscriptions offer businesses the opportunity to increase order numbers and customer spend. More sales volumes and greater revenues leads to better cash flow and more comfortable margins.
Increase average order value (AOV)
Average order value (AOV) is an essential metric to track. It helps to track consumers’ subscription tiers, one-off purchases and any upgrades they make. The delivery subscription model lends itself well to improving AOV as customers can bundle products together and place larger orders without worrying about increasing their shipping costs. Subscription specialist Recharge Payments logged an average of 11.2% year-on-year growth in AOV across all verticals between 2021 and 2022.
Improve customer lifetime value (LTV)
The shipping subscription model by its very nature extends the customer relationship, increasing the likelihood of frequent orders. Improving lifetime customer value (LTV) results in a longer and more successful customer relationship. Recharge also noted a year-on-year increase of 15% in LTV on average among their subscription merchants.
The expectation of free delivery
Delivery is a crucial sticking point when it comes to shopping cart abandonment. Not only do consumers care about delivery costs, they also expect flexible delivery options to suit them. Research by Modern Retail shows that 68% of consumers will abandon a shopping cart when shipping costs are too high, while 71% of consumers say that flexible delivery is important to them. The improved cash flow and increased AOV from the subscription model makes offering an annual delivery service for a fixed fee much more worthwhile.
What to consider when starting a delivery subscription service
As we can see, there are a number of compelling reasons for your business to offer this. Nevertheless, there are several important factors to bear in mind when creating a subscription service.
Offering delivery subscriptions may mean that you need to rethink your product pricing. The shipping costs that are borne by the company may not be completely covered by the customer’s subscription fee. As such, product pricing may need to be adjusted slightly to ensure healthy margins.
Choosing a fulfilment provider
Delivery as a service (DaaS) has exploded in popularity in recent years with logistics companies offering businesses a bespoke approach to order fulfilment. This can aid your company in offering the flexible and affordable delivery your customers expect. There are numerous fulfilment providers to choose from and businesses are able to find their own ‘sweet spot’ between flexibility and affordability. Many businesses incorporate a multi-carrier strategy to offer the best range of shipping options while also keeping costs manageable.
Consumers value flexibility, not just in terms of delivery options but in terms of payment options. You’ll need a retail POS system that offers customers a range of payment options when they subscribe online. This presents the customer with greater convenience and helps to build good customer relations.
Consumer protection laws
Businesses that want to offer delivery subscriptions also need to be aware of the consumer protection laws that apply to them. Particularly those concerning cancellations and automatic renewals. Customers should be able to cancel at any time quickly and easily, while auto-renewals must be made as clear as possible.
Many companies use a “clickwrap” agreement, where a customer confirms that they have read the terms and conditions of their subscription agreement by ticking a box before the transaction is completed.
Promoting your delivery subscription service
When it comes to promoting your new delivery subscription service, the best place to start is your existing customer base. You may also want to entice new business by offering new customers an additional discount on their first few months’ subscriptions, money off their first order, or even the first month free.
How we can help
Our range of POS and payment systems ensures fast, secure, and frictionless payments when customers subscribe online. With a wealth of integrations, Square can be effortlessly incorporated into your existing eCommerce infrastructure. We can even help you to harness the power of email marketing to promote your new delivery subscription service. We’re here to help your business and your customers get the most from your business.
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