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Getting Started with Continuity Ecommerce, Part 1: Approaches, Expectations

Summary

Continuity ecommerce combines recurring earnings, connected devices, and auto-ship functionality. It has subscriptions on steroids, and it is becoming big business. In this guide, I will explore how merchants can execute continuity applications — both direct and through marketplaces. Profitability […]

Continuity ecommerce combines recurring earnings, connected devices, and auto-ship functionality. It has subscriptions on steroids, and it is becoming big business. In this guide, I will explore how merchants can execute continuity applications — both direct and through marketplaces.

Profitability in ecommerce is driven by numerous factors, but repeat clients are more rewarding than first-time buyers. The math is simple: When the customer purchases only once, the cost of getting that client typically wipes out any gain on the sale. If you are able to amortize the acquisition costs over multiple revenue, the client is profitable. Moreover, repeat customers are inclined to spend more on each trip, making the connection doubly attractive.

Clients on continuity programs typically purchase three to six times per year compared to just once or twice for ordinary customers.

But there is another important dimension to continuity applications: order profitability. Optimized continuity programs enable merchants to improve inventory turns of highly profitable products and, because of this, get volume discounts on the stock side.

Subscription retail isn’t new. In recent decades, however, basic retail subscription applications are replaced by far more sophisticated continuity applications that leverage profound analytics and learning to drive dictate profitability though stock efficiencies and long-term client relationships. These programs have exploded online with many new direct-to-consumer brands. Dollar Shave Club, by way of instance, reinvented men’s shaving by selling razors on continuity. Stitch Repair showed that curated style can work well from the continuity model. And Birchbox did the exact same for makeup and beauty. These companies have been widely emulated.

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According to a McKinsey study in late 2017, continuity trade retailers grew sales from $57 million in 2011 to $2.6 billion in 2016. Recurring revenue models are highly valued by investors, driving higher valuation multiples. Big companies have snapped up start-ups within this space for serious cash: Unilever purchased Dollar Shave Club for $1 billion, and Albertsons acquired Plated, a meal delivery service, for $200 million.

The McKinsey study also revealed that 15 percent of online shoppers have signed up for one or more continuity programs, often through monthly boxes. These customers are often younger, wealthy urbanites who appreciate service.

But the notion of continuity commerce is widely applicable for ecommerce retailers and brands, not only specialized businesses.

3 Approaches

  • Consumable replenishment. If you’re selling a fast-moving consumer merchandise, continuity commerce can be appealing to clients. It’s especially related to products which are near or touch the body, where consumers are brand loyal. Examples are makeup, deodorant, toothpaste, sanitary goods, shampoo, body wash, laundry, over-the-counter medications, and dietary supplements. Additionally, it includes pet products. The nearer a product is a daily essential — and inconvenient to purchase locally — the more likely an internet continuity model will triumph.
  • Category possession. If a client is interested in, say, hydrating body scrub, she’s probably interested in similar products, such as moisturizer, makeup remover, etc. Similarly, a customer purchasing organic pet food for the pet is most likely wanting dog chews, pet vitamins, and various over-the-counter pet medications. To put it differently, as soon as you secure a client on a continuity program, additional category items can easily be introduced. “Surprise and pleasure” marketing methods, like including a sample present in recurring dispatch, can be effective. And when timed properly, these shocks decrease churn by reinvigorating the connection.
  • Connected products. Connected devices often require consumables, like capsules for coffee and tea machines, filters for refrigerators, or toner and paper for printers. Consumables are generally high-profit items. Most connected devices do not make it effortless to get these consumables, though it’s a golden opportunity to build direct relationships with consumers, irrespective of where the item was sold.
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Client Expectations

  • Value. Consumers expect greater value when purchasing on an auto-ship, continuity program, particularly where they’re purchasing a bundle of goods or committing to a minimum number of purchases. Normally, merchants should avoid free trial offers and large upfront discounts. Both will recruit high-churn clients. To lower costs, send replenishment items in cheap”green” packaging, passing the savings onto customers while leveraging environmental issues.
  • Convenience. The ease of never running from a staple item shouldn’t be underestimated, particularly if the item has limited supply, is bulky, or inconvenient to buy locally. Making the process simple and frictionless appeals to a lot of consumers.
  • Transparency. Consumers expect transparency since continuity programs require their own trust. This means simple termination, terrific service, and no nasty surprises in their credit card bill. All can help build a relationship that lasts decades. Only a hint it will be tricky to cancel is sufficient for many consumers to not sign up.
  • Flexibility. The top reason customers cancel continuity programs is lack of flexibility. A good example is a client going on a holiday and having to pause or defer delivery. Or maybe a customer would like to alter the program since his needs have changed. These alterations should be as easy as pressing a button, sending a text message, or making a fast call. When they are not, it can quickly lead to cancellations.

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