e mainly associate subscription sales with digital services, such as streaming platforms or subscriptions. Meanwhile, this model is becoming increasingly popular in the physical goods market, for example as a regular delivery of groceries or cosmetics. Is subscription shopping the future of the e-commerce market?
Development of subscription sales
The forerunners of large-scale subscription models, such as Netflix, Amazon, and Spotify, are well-known players in international markets that have established a pattern of subscription sales. Although the companies most associated with subscription sales mainly offer digital services, subscriptions to physical products are also growing in popularity. Subscriptions can include recurring deliveries of groceries, medicines, books, cosmetics, office equipment rental subscribe to regular packages of products such as coffee, alcohol, food, medicines, or books, for example.
Repeatedly meeting consumers' needs regularly through a subscription model has grown in popularity, especially during the pandemic. Research in the US market found that during the COVID-19 austerity, 78% of consumers changed their shopping habits in terms of brands, shops and the way they shopped and 80% of those who subscribed during the pandemic intend to keep their subscriptions (McKinsey, 2021).
Characteristics of subscription sales
As defined, subscription sales are based on a contract with a supplier that offers the use of a service or product or access to additional services for a fixed, regular fee. Subscription sales can apply to consumer products, such as coffee, pet food, or cosmetics, durable products in the form of car or equipment rental, and digital products, for example, access to platforms like Netflix or Spotify. Subscription sales are also dedicated to basic services, such as digital services (Netflix) or physical services (e.g. a gym pass), or additional services, i.e. lower prices, additional discounts, or free delivery. There's no doubt, that subscription sales is one of the biggest trends in e-commerce in 2023.
Subscription sales in Poland
The pandemic has also permanently changed the shopping habits of Poles, bringing a large proportion of them into the e-commerce environment. Compared to Europe, we are around the middle in subscriber sales, and the Polish market is not yet saturated. For companies, this is an opportunity to build a new business model and monetise subscriber loyalty. Interestingly, 30% of Poles are often unaware that they use subscription services. Statements such as 'regular payments' or 'fixed fee' in the consciousness of Poles have not formed an association with a subscription service, which they are by definition (Deloitte, 2021).
The subscription model also increases consumer loyalty. As Deloitte points out in its 2022 study, up to 41% of Poles have reduced the time they use other similar services after purchasing a subscription.
Subscriptions on marketplace platforms, and digital and telecoms subscriptions are the most common. Polish consumers are also open to subscription models for chemicals and cosmetics. They are least receptive to services related to luxury goods, car rental, travel, and, surprisingly, online games, towards which they prefer a one-off payment (Deloitte, 2022). In Google, the most common search terms are phrases related to telecoms and TV subscriptions. Apart from these, the most popular search terms are 'cookidoo subscription' (approx. 4.4tys) - a subscription offered to Thermomix owners providing access to more than 80,000 recipes, and 'legimi subscription' (3.6tys) with access to 180,000 e-books and audiobooks (Senuto).
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Why do customers choose subscriptions?
The strongest magnet for attracting new subscribers (62% of survey respondents) is the optimal combination of offer and price (McKinsey, 2021). A favourable offer does not just mean a lower price in this case. It is also worth considering other factors that, from the customer's perspective, make the offer more useful. Services such as access to limited editions of products exclusive to subscribers, earlier access to novelties, and improved warranty service may increase the attractiveness of subscriptions. 47% of Polish customers choose to subscribe due to financial benefits in the form of attractive product prices and order conditions, e.g. free delivery on purchase or product return. Another argument is convenience (35%) and access to premium offers (27%) (Deloitte, 2022).
Other important advantages of subscriptions are that there is no need to remember to pay and, in the case of durable products, no need to cover repair costs, support in case of product damage, and the possibility to change frequently to better models. The decision to subscribe is also influenced by recommendations from loved ones (traditional services 14%, digital 16%, and e-commerce 25%), as well as positive customer reviews, which are as high as 37% for e-commerce, 26% for products and 14% for digital services. This means that investing in supporting customer feedback communication through reviews and ratings is particularly valuable for subscription sales companies (Deloitte, 2022).
Examples of companies offering a subscription model
Allegro Smart
The leader of the marketplace on the Polish market - has introduced a package of beneficial services such as free deliveries and returns, shopping on 0% instalments, and pre-sale of tickets for events in the eBilet application. The number of Allegro Smart subscribers surpassed 5 million after 3.5 years of the service's launch. The service reacted vigilantly to the competing Amazon Prime offering launching in 2021 by temporarily lowering the price.
Your Kaya
A company selling intimate hygiene products in a subscription model. Your Kaya generates millions of dollars in revenue per month and is in the process of expanding into western markets. According to Forbes a, more than 70,000 customers use Your Kaya's offerings, and more than 50% of all orders are subscriptions.
Sundose
A start-up offering personalised dietary supplements tailored based on a questionnaire about lifestyle and eating habits. Since its inception in 2017, it has gained multi-million dollar growth capital (PARP, VC and angel funding, and most recently US$6 million). Sundose is expanding in countries such as the UK, Germany and Italy, among others. It serves more than 10,000 clients per month.
Coffee Desk
A company offering premium speciality coffees, teas and barista accessories that serves 15,000 customers every month. Coffeedesk's omnichannel approach includes an online shop for retail customers, a sales platform for business customers, a network of coffee shops and regular activities on social media such as Facebook, Twitter and Linked-in. In a subscription model, customers can order a regular delivery of fresh coffee and tea straight to their home!
Health market
A popular online shop offering mainly healthy food, free from GMOs and harmful preservatives. In line with the slow life philosophy, it promotes healthy eating and a lifestyle in which taking care of one's own needs and closeness to nature are paramount. Thanks to a subscription, the shop's customers receive regular parcels of their favourite food products.
The market is moving towards subscription sales
Subscription sales, despite their advantages, also present some barriers for users. Customers are most likely to cancel their subscriptions because they do not see the added value of this solution (42%), the subscription lacks access to new products or services (30%). Many also prefer to shop when they need to (55%) or do not see any value for themselves in this model (48%). One-third of customers do not like commitments and occasionally use the services or products in question (McKinsey, 2021).
It appears that in many cases, although a large group of customers prefer one-off purchases, more and more companies are switching entirely to a subscription model. Companies such as Adobe and Microsoft switched to subscription billing many years ago. Their products like Adobe PhotoShop or Microsoft Office, which could previously be purchased on a one-off basis, are no longer available in this form. Many other service providers have followed suit and today customers can only use software on a subscription basis and in return receive access to automatic updates and occasional promotions and discounts, for example on additional plug-in packages.
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Technological innovations in subscription sales
The recipe for success is an original idea, a high quality service or product and communication that causes engagement. In January 2023, Komputronik announced the introduction of an equipment subscription service, thanks to which customers can use the equipment rented to them by paying a fixed amount in monthly fees. The Komputronik subscription is a long-term equipment rental service on a subscription basis. The customer chooses a smartphone, laptop or smartwatch product from a prepared list and signs a contract for a minimum of 12 months. After one year, he or she can return the equipment to the shop.
In total, an annual subscription costs roughly half of what you would have to pay to buy the equipment outright. This is a particularly attractive solution for fans of technological innovations, who like to use the latest generation of equipment and, in the subscription model, do not have to struggle with selling used equipment. Plenty, which specialises in renting electronic equipment without a contract, for any time, was previously successful in this market.
The key to successful subscription sales in e-commerce
1 Define what potential benefits you can add or eliminate inconveniences within the subscription - it is these values, properly communicated, that are designed to address an unmet need and build customer motivation to subscribe. The basis of the decision should be to accurately identify the path a consumer takes when purchasing a service or product as Java Coffee Roasters has done, for example, by offering a specially selected coffee each month in light and dark roast versions even before it arrives in shop.
2. Work on a competitive advantage for your offer and differentiators that is not available anywhere else - competitive advantages can be different aspects of your offer, such as certified grown ingredients, freshness control, or organic packaging. The key is to understand how the consumer thinks and what will give them satisfaction. Netflix, for example, has ensured that the offer is unique by investing in film productions that are not available on other channels.
3. Constantly engage in understanding your customers' needs to best respond to their preferences. If you don't do it - your competitors will - it is important to analyse, among other things, transactions, and research to understand customer motivations in order to optimise the shopping and user experience at every stage. This is how, for example, advanced algorithms in the form of 20 mathematical models that segment the readers of the Wyborcza portal into roughly 100 different groups work. This makes it possible to profile articles in such a way as to maximise user satisfaction and, at the same time, provide other content so that readers have access to comprehensive information.
4. Expand the system with complementary services so that the customer has less incentive to use a competing offer - the future of subscription models is to develop larger ecosystems to offer a differentiated customer experience and encourage a variety of offers on attractive terms. A good example of this is the Empik Premium subscription service, which offers customers free shipping, discounts, access to audiobooks and music, as well as special offers from external partners, discounts in cafés and cinemas, or pre-sale tickets for cultural events.
Subscription sales or loyalty model?
In the US, subscription sales grew by 300% (Businesswire, 2019). The Polish market has only recently experienced strong growth in subscription offerings and this trend will continue. In a sense, the subscription model competes with traditional loyalty systems, although it may also be their natural evolution, as exemplified by the Empik Premium program or the recent idea of the Amic petrol station chain, which has prepared subscription services of an automatic car wash and a daily hot dog for participants of its loyalty program.
Why introduce a subscription?
Subscription sales, properly implemented, are an opportunity for stable company revenue in uncertain times. It builds customer loyalty, allows customers to be introduced to a wider range of offers through surprise packages, for example, and allows the company to better estimate its monthly revenue. Customers appreciate subscription solutions, provided they deliver a high-quality, valuable experience, an attractive price, and additional benefits. When this is the case, the subscription payment model effectively increases spending on a category of products or services, leading to higher basket value and purchase frequency. The data speaks for itself: 59% of Poles started spending more on a particular service or product after purchasing a subscription (Deloitte, 2022).