A new B2C e-commerce business model that has been introduced in the last years is the subscription based model. Customers create an account and subscribe for a frequent purchase of a product. Earlier, this model has been mostly used by newspapers and magazines. However, nowadays it is used in many businesses and websites.
“The subscription model owes its success to the optimal balance of value it provides to both the company and the customer. For customers, the value lies in the convenience” (Longanecker, 2015). They do not have to remember to reorder again every month. Moreover, the remained price helps customers to stay in their budget. Last, value for the customer is being creating by the bundling of several products in one price.
“For businesses, the value of a subscription is the ability to predict revenue through recurring sales” (Longanecker, 2015). The customers will order again on a frequently basis. Therefore, the lifetime of the customer enlarges and the customer will remain in the long tail. As a consequence, sales predictions can become more accurate and inventory will be managed more precisely. This will reduce costs on one side and remain sales on the other side, creating both value for the company.
One successful example of a B2C e-commerce business model based upon subscription is Outfittery.com. Outfittery.com is founded by Julia Bösch and Anna Alex in Berlin, in 2012. They have raised a 20 million dollar investment by Northzone, the investor of Spotify. This online company provides a solution for men who don’t like, or do not have time to go shopping.
Users of Outfittery.com subscribe to the model and create an account with a profile picture. Then they have to complete a survey containing questions about their style, sizes and personality. Once submitted, an appointment with a personal style-expert must be made. During this conversation, the expert will try to create an even more complete and personal profile and preferences of the customer.
“The element of surprise is a big part of our concept: tell us your fashion needs and we will send you inspiring outfits straight to your home” (Outfittery.com, 2016)
Now it is the style-expert’ turn. Based on the profile that has been created, he/she will select a complete new outfit for the customer. Clothes, shoes and accessories will be selected and collected in a box. This box will be sent to the customer.
Once the customer receives the box filled with clothes, they select the articles they like and returns the box containing the remaining unsold products for free. The customer will only be charged for the price of the bought products. This procedure will repeat on a frequent time matter. For instance, every end of the month a box of clothes will be delivered to the customer.
As stated before, the subscription based model offers both value for the customer and the company. Where the customer experience convenience, companies can reduce costs by better forecasting and remain the customer in the long tail.
Longanecker, C., 2015. Why You Should Use a Subscription Business Model. Entrepeneur, 15 3.
Outfittery.com, 2016. Outfittery.com. [Online] Available at: Outfittery.com