What Every Merchant Wants

Every merchant wants to:

• Convert first time shoppers into loyal customers
• Increase the lifetime value of their customers (CLTV)
• Reduce customer acquisition costs as a percentage of CLTV

There is no better or easier way to increase customer lifetime value than to have a customer subscribe to recurring monthly or quarterly purchases.

• Would you rather sell a single $31 box of diapers? Or 12 boxes at $28 each?
• Would you rather have a predictable revenue stream, or choppy ups and downs in order volume?

Popularity of Subscriptions is Growing

Retailers and B2B merchants have caught on to subscription magic, and recent growth in subscription and membership commerce has been tremendous:

• Subscribe and Save
  Dozens of retailers offer subscribe and save options for consumer and business staples – e.g. monthly diaper, coffee, or office supplies deliveries. Amazon offers the service in 28 categories, and also enables its FBA merchants to offer Subscribe and Save for their products.

• Monthly Box Clubs
  My Subscription Addiction lists over 2,000 “of the month” clubs. Visits to subscription box websites grew by over 3,000% in a 3 year period, up from 722,000 visits in 2013 to 21.4 million in 2016 – Source: Inc. Magazine

Retailer Benefits from Ecommerce Subscription and Continuity Programs

The benefits are clear, yet it’s worth recounting them.

• Higher Lifetime Customer Value. Consider a coffee services company that sells to businesses.
  • A portion of annual revenue is locked in and stable.
  • Their customers don’t have to think about coffee re-ordering or shipments.
  • Coffee and supplies won’t run out, so their customers won’t need to even think about purchasing from a competitor
  • The merchant has more opportunities to engage with its customers. According to Narvar’s March 2017 post-purchase benchmark, the click-through-rate on marketing assets that appear on a branded order-tracking page is 3x higher than for marketing emails.
• Lower Customer Acquisition Costs
  • The more repeat customers you have, the lower your overall new customer acquisition costs will be as a % of total sales.
  • Loyal customers will refer new customers to your business, further lowering total customer acquisition costs.
• Better Inventory Forecasting and Management
  The portion of inventory dedicated to subscribe and save customers has close to a 100% likelihood of being sold and shipped. Therefore, a known proportion of inventory will have the highest possible inventory turns, reducing overall inventory costs as a percentage of sales, and yielding a higher return on capital.

Ideal Products for Subscriptions and Continuity

Typical subscription products share a handful of characteristics:

• The items “run out” or get “used up” in a predictable time frame.
  Batteries, diapers, socks, water and air filters, office printer ink, coffee, and home cleaning products all get worn out or used up on a fairly predictable basis.
• Running out is an inconvenience.
  You want batteries when the remote control dies. Running out of diapers is… messy.
  • Health, household & baby care: Diapers and detergents
  • Beauty and Personal Care: Razors, hygiene products and soaps
  • Automotive parts: Filters, cleaning cloths
  • Office products: Paper, Dry-erase markers, printer ink and toner
  • Sports & outdoors: Sports tape, sports drinks, vitamins
  • Clothing: Socks, boxers
  • Electronics: Batteries
  • Pet Supplies: Dog treats and puppy pads

Target’s Subscribe and Save Page

How to Manage a Successful Subscribe and Save Program

There are many operational requirements to consider:

• Payment processing on an automated basis
• Order entry, processing and approval on a scheduled basis
• Inventory allocation and forecasting based on subscriptions and non-subscription sales
• Discounts for subscribe and save
• Easy customer self-service options – e.g. subscription cancellation or modification, address change, skipping a delivery, credit card updates, etc.
• Timely customer communications and personalized email updates

Order and Inventory Management Software

Order and Inventory Management Software simplifies this complexity.

If your commerce technology stack already includes an Enterprise Order and Inventory Management system (OMS), such as the one from Pulse Commerce, then you may already have the tools in place to capitalize on subscription opportunities. In-depth subscription management features are not native to all order management systems, so you’ll need to explicitly inquire about the capability.

Whether your online storefront is running on a homegrown ecommerce platform, or on a cloud provider’s, like Shopify Plus, Magento, or BigCommerce Enterprise, a competent order and inventory management system can streamline every step required for a successful subscribe and save program roll out.

Conclusion

In conclusion, product subscriptions and continuity orders offer significant upside as long as you have the necessary technology and automation in place. Read 11thStreetCoffee’s case study to learn how a mid-market merchant successfully implemented a Subscribe and Save program. And to learn more about other ways to increase loyalty and customer lifetime value, you might enjoy our webinar, Building an Effective Digital Loyalty Program in the Amazon Age.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

How Innovative Ecommerce Technology Helped a Local Staple Become a National Brand

Kansas City, MO – October 3, 2017 – Necco Coffee is celebrating its 50th anniversary as the leading coffee services company in the Kansas City metropolitan area.

When Necco Coffee was founded in 1967, it was impossible to envision the future that awaited 50 years later.

Anthony Simone, Senior set out to source a better cup of java for his hometown of Kansas City, Missouri. A coffee connoisseur, he knew what a good cup of joe tasted like, and he knew plenty of people who wanted something better than the grocery store brands in their downtown offices. He grew Necco to become Kansas City’s leader in office coffee and vending services.

At the time, there was no Internet. And there were no K-cups either. Anthony and his company grew, slowly but surely. His service was reliable, delivering on time, and his company always focused on delighting customers. The enterprise expanded to sell coffee supplies, filters, and more.

Fast forward 50 years to 2017, and 11th Street Coffee, the Internet Division of Necco Coffee, is growing fast. 25% fast, while coffee service competitors are either not growing at all or shrinking.  Anthony Junior, the founder’s son, is leading that online retail growth with products and sales channels that didn’t exist when he was born. 11th Street Coffee is one of the select few retailers certified to sell Keurig products online. In the span of the last 10 years, they’ve more than doubled their family business by embracing ecommerce, the K-Cup trend, and technology innovation. It has been quite a transformation.

Ecommerce

Ecommerce started off small, piggybacking off the telephone order business. A modest number of orders would come in and go into the queue with the telephone orders scheduled for mail delivery.

And then, the business grew. And grew. Which made it harder and harder to get shipments out the door fast enough. There was just too much paper shuffling. So 11th Street embraced new technology; software that would take their online orders and accurately print out shipping labels and packing slips.

K-Cups

As K-cups gained popularity, the online business flourished even more. Necco and 11th Street Coffee sought a fairly exclusive arrangement to sell Keurig’s K-Cups online.  The business really started to take off now, but their technology wasn’t keeping up.

Speed Bumps Ahead

Soon they hit more speed bumps. Customers wanted to sign up online for ongoing subscription deliveries like they could on Amazon.com. 11th Street Coffee wanted to offer online promotions through social media.  Customer service personnel needed easy access to modify online orders up until the UPS guy showed up at the warehouse. More customers were buying on mobile devices. With increased online volume, powerful reporting and business intelligence was needed to make better inventory planning decisions. The current platform couldn’t handle any of it.

Technology Innovation and Partnership

The company set out to better manage their online and offline orders, customer service, procurement, inventory, warehouse and fulfillment. They wanted to keep growing without adding more corporate staff – only more people to fulfill more orders.

They evaluated dozens of software platforms, and finally found a partner who could deliver everything they needed and then some. Pulse Commerce helped 11th Street Coffee transition to their next phase of growth, replatforming their ecommerce and back-office technology in 2013 to enable all the new capabilities they needed. Not a single order was missed or delayed in the transition. And, as soon as their new foundation was in place, their growth skyrocketed, and has been running at double digits since.

Sustainable High Growth

Today, their customers ‘subscribe and save’, ordering coffee subscriptions online. 11th Street Coffee sets up new promotions and coupons, and distributes them on social media instantly. 11th Street Coffee creates insightful reports with detailed breakdowns. They easily benchmark their operations and continuously improve using the platform’s built-in tools.

Throughout the past 50 years, Necco and 11th Street Coffee have always focused on the customer — whether delivering around the corner or across the country. And whether they’re taking orders by telephone or by mobile device, customer focus has remained at the forefront of every decision they’ve made. Which is why more and more customers decide to buy from 11th Street Coffee every day.