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Ecommerce glossary > Subscription commerce

Subscription commerce

What is subscription commerce?

Subscription commerce is a business model where businesses offer products and services on a recurring basis. Subscription services and businesses can include SaaS companies, subscription box companies like meal kits and pet food companies, streaming services, recurring memberships, and more. Subscription commerce revenue is frequently calculated in terms of monthly recurring revenue (MRR) and/or annual recurring revenue (ARR).

Why do consumers love subscriptions? 

Subscriptions offer a multitude of benefits for both consumers and businesses. From a user experience perspective, customers benefit from its convenience, as they only have to input their payment information upon signup to receive recurring deliveries of their desired products or access to certain services. Often, subscription products and services also offer subscribers a discount for their repeat purchases (“subscribe-and-save”), as well. 

How do businesses benefit from the subscription business model?

For brands, subscriptions create a dependable source of revenue that recurs on a set cadence. This not only makes forecasting revenue easier, but also streamlines ecommerce processes like inventory management. Additionally, subscriptions have the potential to increase average order value and customer lifetime value across verticals and categories, as we found in our latest State of Subscription Commerce report. Particularly when coupled with customizable product offerings like cross-sells and upsells, as well as flexible checkout and delivery options like skipping an order or swapping products, subscription model businesses can improve customer loyalty and retention, reduce churn rate, and optimize the overall customer experience.