Let’s set the scene.

Historically, the evolution for most businesses has been like this: 

  1. Start a physical store.
  2. Build a website. 
  3. Set up an online shop selling one-time products. 
  4. Run those businesses for a long time. 
  5. Add social media, focus on growth, and get more sophisticated.
  6. Bolt on a subscription service.

More frequently, businesses start at the second or third step, and this is in part thanks to how easy it is to set up a website or an online shop compared to how expensive and limiting it is to start a physical store. In fact, some modern and forward looking companies have started to change this order entirely. 

Take major shoe brand Allbirds for example, who started out as an online shop, opened their first physical store years later in 2017, and have since expanded to 33 locations in 2021 while hinting at “hundreds of potential locations in the future”. And this story is not unique. Brands like Warby Parker, Rent the Runway, Bonobos, and UnTUCKit have done the same. 

So, for transactional retailers, it’s e-commerce first and then everything else. The historical sequence of starting a business is only now being brought into question as the subscription-first model grows in popularity. 

For many businesses, subscription revenue is their most profitable and predictable, plus it increases the value of their business. So why is subscription the last stage in this sequence, and not the leading strategy?

When is the right time to build your subscription strategy? 

For New Businesses

The first answer is: before you start your business. Choosing a subscription model as your starting point makes you a subscription-first entrepreneur. This allows you as an entrepreneur to build recurring revenue into their business from day one, which means your growth will compound — when you get your first customers, they will still be there when you get more customers the next month, and so on. Plus, both your inventory levels and your cash flow will be more predictable. But there’s a deeper reason to start with a subscription model.

A subscription-first business starts with the purpose of servicing customers on an ongoing basis, which aligns the business and customer for the long term instead of speeding through a one-and-done transactional relationship. As long as a subscription business keeps their customers happy (good products, fair prices, great service), they’ll stick around for a long time. Ultimately, subscription-first businesses will spend less time chasing new customers and more time delighting their existing ones. 

However, just because you’ve started with a subscription offering doesn’t mean that you can’t integrate transactional commerce too. Just as Allbirds didn’t limit themselves to being an online shop, subscription companies can also branch out. For example, while Dollar Shave Club famously started with their subscription program, they now also upsell customers with one-time products and stock their products in physical retail stores.

Many entrepreneurs are busy right now building a future in which their online coffee subscription can grow so much that it can scale into a nationwide coffee chain. Another entrepreneur is probably building an online meal prep subscription that will one day turn into its own physical restaurant. Someone else is likely running a pet food ecommerce shop that will eventually be sold in Costco and other large brick and mortar retailers.

Although their product offerings are different, there’s one thing that’s consistent with all of them – they simply start with subscriptions and layer everything else on top.

For Existing Businesses

It’s one thing to implement a subscription model when you’re building from the ground up and it can guide your early growth, but what if you’re an existing business? 

If your business is already up and running, the best time to add a subscription offering is… right now.  

Developing a subscription strategy has obvious benefits like increasing your revenue , growing the value of your business, making your metrics more predictable, and so on. To build a subscription strategy, you should first develop your model around a product (or line of products) that customers actually need and want on an ongoing basis. If your product isn’t naturally well suited for subscription, try searching for complimentary products that customers should always have.

For example, a shoe brand might create a subscription for shoe cleaner, polish, and shoelaces sold with each pair of shoes. A tennis pro shop, on the other hand, might sell a seasonal racket restringing subscription, while a wine shop might offer virtual tasting sessions for recipients of regular monthly shipments.

Selecting a product is the easy part. The real challenge for an existing business is deciding whether you want to simply bolt the subscription onto your existing business OR prioritize subscription and make it the focus of your business model?

Take for example Raw Generation, a juice cleanse brand. They started selling juice cleanses online using a transactional model (one-time purchases), and later added a subscription model. Now, when online shoppers add a cleanse to their shopping cart, the subscription option is preselected on a quarterly cadence (every 3 months). Shoppers who wish to make a one-time purchase have to explicitly change the order before checking out.

It’s clear that by preselecting subscriptions, Raw Generation prioritizes (and values!) their subscription sales more than their transactional sales. Plus, their subscription model is integrated into their business model and user experience. But is Raw Generation subscription-first?

Well, customers have a very easy time deselecting the subscription and don’t receive any real compelling reason to subscribe; the subscription offer is simply preselected. For Raw Generation to become more subscription-first, they should create more explicit marketing for the subscription and design the customer journey around it, and perhaps even remove the option to buy it once – or at least make that option harder to navigate to.

TL;DR 

If you’re getting started as an entrepreneur… Consider putting a subscription strategy at the core of your business from the very beginning, and grow thanks to loyal customers who aren’t afraid to commit long term, then expand from there. 

If you’re already running an existing business… Consider building a subscription strategy yesterday. But be careful to not just bolt it on. It’s important to integrate and make subscription your first priority in order to be successful. If your subscription offering is simply an option, it may never reach its full potential. 

Сontent creator at Subbly