Drawing on a long-established business model pioneered by newspapers, a growing number of e-retailers in Europe and the United States are trying out subscription-based e-retailing, Yinka Abdu, founder and CEO of subscription e-retailer Suede Lane, told attendees at a global e-commerce summit earlier this month in Barcelona.
“Subscription e-commerce is essentially the same as the traditional model, used by newspapers since the 18th century,” she said. “By far the most common type is the recurring revenue type based on ongoing orders, where users pay a flat fee for membership.”
Suedelane.com sells the work of emerging artists and designers directly via an online boutique as well as through a subscription service.
After receiving an invitation, clients can buy from the online shop, Abdu said. If they choose the subscription service, they pay a quarterly or annual fee of $120 to $480, depending on the package they subscribe to. With this option, the client fills out a profile describing her tastes and then receives a package every month containing fine art, fashion or interior design items. Consumers can choose to subscribe for one quarter or one year and can end their subscriptions at any time. “The subscription offers a revolving selection of items which differ from those in the online shop,” Abdu said.
The English-language site ships worldwide and accepts multiple currencies. The retailer plans to launch sites in other languages soon. Suede Lane plans to expand from its current offices in Canada and Chile to Europe and West Africa. It recently participated in Startup Chile, a startup accelerator program.
“Subscription e-commerce serves a diverse range of needs, from pet food to shoes, and its success is based on that convenience—people will always have to buy underwear and baby items, but not necessarily want to go the store,” she said.
Niche markets work well for subscriptions too, according to Abdu, because they cater to the needs of a very specific user. Addressing a relatively small population enables the company to offer personalized service, which in turn yields high customer loyalty. This also yields higher margins because people will pay premiums for products customized to their needs, especially with non-commodity items, Abdu said.
“Consumers like the fact that there are no additional fees,” Abdu said of her company’s subscription model. “It’s just a matter of paying ‘x’ amount of money with no hidden costs. People respond very well to that. Some of our customers find conventional design retailers such as art galleries intimidating and expensive, yet don’t have the time or the knowledge required to find unique products.”
She added that her customers appreciate having products chosen for them with their pre-recorded preferences in mind, and also enjoy the surprise aspect of not knowing exactly what they'll receive. “You may know that this quarter's parcel will be a fine art print, but won't know what it looks like until it arrives.”
For retailers, she said subscription e-commerce provides predictable cash flow from recurring revenue, as well as more customer loyalty and engagement with a brand as consumers interact with it on an ongoing basis. “It provides an additional revenue channel” Abdu said. “And there is more potential for upselling and cross-selling.”