Looking beyond transactions with Recharge

From June 2021 to June 2022, the Consumer Price Index for All Urban Consumers saw its largest increase in over 40 years.¹ Prices rose to new heights across the board, requiring merchants to adapt to consumers’ changing budgets and needs.

Despite the challenging economic circumstances, subscription growth continued. While some customers decreased their discretionary spending, a substantial percentage invested in maintaining their relationships specifically with subscription merchants.

But why? We know that subscriptions provide stability for both those who sell them and those who purchase them.² But stability can’t maintain itself—it must be carefully cultivated by thinking beyond the present and anticipating future desires and challenges.

In this report, we dig into the what, why, and how behind 2022’s subscription growth. Over a twelve-month period, we analyzed over 15,000 merchantsLooking for more detailed information on how we made this report? Read our methodology. and their customers to uncover how businesses performed over the course of the year, and how customers were interacting with their subscriptions in new ways.

Through these trends, discover how merchants of all sizes and verticals performed in 2022, as well as the tactics they used to create deeper, more valuable customer relationships.

Verticals

Seven categories based on product type

Beauty & Personal Care

Fashion & Apparel

Food & Beverage

Health & Wellness

Home Goods

Pets & Animals

OtherOther includes merchants with offerings like curated boxes of hobby items, lawn care products, items for outdoor activities, and more.

Subscriber count

Four groups based on
active subscriber numbers

0–999 subscribers

1,000–9,999 subscribers

10,000–49,999 subscribers

50,000+ subscribers

Key performance indicators

In 2022, we observed year-over-year improvements in five KPIs for subscription merchants: AOV, LTV, MRR, customer churn, and customer retention. Use these metricsIn order to simplify data visualizations, data calculations have been rounded to the nearest whole number or decimal. to benchmark your business by both vertical and subscriber count.

Average order value

Average order valueIn this report, we calculate AOV by dividing gross merchandise value by total orders. has climbed steadily since July 2021, and in 2022, the pattern continued. This follows a similar growth trajectory to the U.S. Consumer Price index for all goods and services,³ suggesting that inflation is a key factor in 2022’s AOV growth.

Food & Beverage maintained its lead

All merchants $47

Food & Beverage merchants $59

Food & Beverage merchants maintained their lead from 2021 in overall AOV. Their AOV was $12 greater than the average across all subscription merchants.

Food & Beverage merchants continued to top the charts for overall AOV, while Beauty & Personal Care brands saw the highest year-over-year growth percentage.

While customers made 33% more orders in the Home Goods vertical, purchase amounts appeared to be smaller, as year-over-year AOV declined slightly.

The impact of subscriber counts on AOV varied from group to group. Seeing the highest increases were those with 50,000 or more subscribers, a category comprised largely of merchants selling lower-priced replenishment products.

Proven tactic

Cultivate healthy growth without letting AOV steer the ship

To encourage customers to stick with your business in times of high inflation, consider launching smaller, lower-priced options in every category. Meanwhile, maintain your efforts to boost AOV with strategies like instating order minimums for free shipping, bundling products in creative ways, and offering loyalty programs.

If the value of each transaction dips slightly in the short-term despite these efforts, don’t panic. In a time of high customer acquisition costs, retaining your customers is one of the most important ways to cultivate steady growth in the long run.

“In the economic times we’re facing, it’s important to offer multiple price points in all categories.”
_{Cindy Nichols, Founder & CCO, The Wordy Traveler}

Lifetime value

Lifetime valueIn this report, ARPU (average revenue per user) is used to estimate LTV (customer lifetime value) using the following formula: total revenue in a given period / number of customers in the same period. largely grew year-over-year in 2022, highlighting the increasing momentum of repeat purchases.

LTV continued to climb

Graph showing that subscription merchants saw an average of 12% LTV growth

Graph showing that subscription merchants saw an average of 11% AOV growth

Subscription merchants saw an average of 12% LTV growth, compared to 11% AOV growth.

The majority of verticals saw even greater growth in LTV than AOV, again suggesting that inflation played a role in driving growth in 2022.

Although their overall LTV was lower, merchants with 10,000 or more subscribers experienced higher levels of LTV growth than those with fewer than 10,000 subscribers.

Again, the popularity of lower-priced, replenishable subscription products among these larger merchants suggests that businesses and consumers alike see these offerings as a worthwhile investment.

Proven tactic

Establish a recurring relationship from the get-go

Make it easy and enticing for customers to subscribe from the first time they visit your site. For example, AutoBrush offers their toothbrushes at a reduced price for first-time customers if they also sign up for auto-refills of their replenishable brush heads.

These types of subscription-on-first-purchase offers can not only help you acquire new customers, but also retain them longer, leading to more purchases over their relationship with you.

“If any of your products are replenishable, you can create a subscription model.”
_{Ari Ziskin, Director of Ecommerce, AutoBrush}

Monthly recurring revenue

Customers continued to invest in recurring purchases in 2022, with merchants' average monthly recurring revenueIn this report, we calculate monthly recurring revenue by dividing ARR, or the average monthly gross merchandise value from subscriptions generated in the last 12 months, by 12. increasing by 7%.

Home Goods' MRR gained momentum

Graph showing that MRR for merchants in the Home Goods vertical grew by 14%

Graph showing that the average merchant MRR grey by 7%

Home Goods merchants saw an average of 14% MRR growth, compared to 7% for all merchants.

Despite seeing reduced AOV and LTV growth, Home Goods brands’ MRR grew by 14%—well above the merchant average. This suggests that the vertical saw a larger increase of newer customers in 2022.

MRR growth for merchants with 10,000–49,999 subscribers vastly surpassed that of those with both 50,000 or more subscribers and fewer than 10,000 subscribers.

Proven tactic

Cultivate a recurring mindset through customer relationships

To strengthen trust in your brand, find meaningful ways to connect with subscribers. Consider podcasts that educate and entertain, social media sites where you can individually respond to customer content, or a community platform where users can interact with your brand and each other.

By centering your customers in this way, you create deeper meaning and strengthen their relationship with you beyond just transactions.

“Generally you’re not just signing up for a product—you’re also signing up for a relationship with the brand.”
_{Ryan Baylis, Co-Founder & CEO, Drift}

Customer churn

Though merchants saw seasonal spikes in churn following certain promotional periods, such as Valentine’s Day and Cyber Week, overall monthly customer churnThis report uses median (not average) churn rate to remove any outliers. rates decreased throughout 2022.

Despite the cost of goods increasing due to inflation, customers showed a higher propensity to stay loyal to brands and stay subscribed for longer.

Fashion & Apparel churn changed with the seasons

Graph showing that churn for Fashion & Apparel brands varied by 2.3% in 2022

6.5% 9.0%

Churn for Fashion & Apparel brands varied by 2.5% in 2022.

While all verticals followed this pattern of reduced churn, Fashion & Apparel brands saw the highest variability in churn rates. Promotional periods could impact these brands to a greater degree than others, while the seasonality of fashion trends may also come into play.

Merchants with over 50,000 subscribers held the lowest and most predictable churn rates month-over-month. This suggests that the more resources and customer data are available to a merchant, the more effectively they may be able to predict and mitigate churn.

Proven tactic

Make it easy for your customers to stick with you

Focus on your cadence

When it comes to delivery cadence, every customer is different. Research the ideal frequencies for reordering your products to help customers find the right cadence from the start, and offer multiple cadences for your replenishable products, with easy options to adjust.

Identify churn risk milestones

Stop churn before it occurs by identifying risk milestones for your customer base. You can then proactively reach out to subscribers and give them a reason to stay before they churn, or offer them options like swapping a product, skipping an order, or pausing their subscription.

Set up automations to mitigate passive churn

Make sure your dunning automations are primed to mitigate passive churn (for example, sending notifications when a customer’s credit card is declined), and consider integrations that will help you take the guesswork out of winning back lost customers.

“The reason you got to 10,000 subscribers should still be the reason that you can continue to grow beyond 40 or 50,000 subscribers.”
_{Ryan Fair, VP of Marketing & Ecommerce, Clearly Filtered}

Customer retention

According to a report by Omniconvert, the chances of an ecommerce customer returning to make another purchase drop to 20% after 200 days.⁴ Looking at the subscription ecommerce merchants we studied, we found that in 2022, subscribers stuck around longer and in bigger droves, with an average of 45% retention after 6 months.

Home Goods' retention surged ahead

All merchants 33%

Home Goods merchants 51%

12 month customer retention for Home Goods merchants reached 51%, compared to the 33% average across all subscription merchants.

Despite seeing decreases in AOV and LTV, Home Goods topped the charts for both the highest overall and highest increase in 12 month retentionThis report calculates 12 month retention using the following formula: Percentage of customers who had an active subscription 12 months after their subscription signup / total number of customers who purchased products 12 months ago., showing the long-term value of their customers.

Merchants with fewer subscribers appeared to have an advantage when it came to 12 month customer retention. Those with fewer than 50,000 subscribers saw year-over-year increases, while those with 50,000 or more subscribers saw retention decrease slightly.

Proven tactic

Target your retention strategies with customer data

Send the right offers to the right customers

Segmenting your offers is a powerful way to increase their viability. Divide your efforts between subscribers and non-subscribers, and/or acquisition vs. retention customers, to target the different focuses and preferences of each group.

Find the ideal variety of products

For certain verticals, like Food & Beverage, having enough SKU variety is key for maintaining customer interest. Find the right assortment of products—both in terms of variants and complementary add-ons—for your brand to retain subscribers without overwhelming them.

Make the most of holiday signups

Promotional periods can be key for driving repeat business—in 2022, subscription merchants saw 41% growth in new subscribers across all the days between Black Friday and Cyber Monday. Maximize the value of these customers by making a special effort to retain them with targeted marketing efforts.

“For both acquisition and retention, it’s key to send the right offer to the right segment.”
_{Ari Ziskin, Director of Ecommerce, AutoBrush}

2022 benchmarks at a glance

Using these benchmarksAll figures have been rounded to the nearest whole number or decimal. from merchants studied in this report, contextualize your store’s performance by both product vertical and subscriber count.

Top overall performance Biggest YoY % improvement

AOVIn this report, we calculate AOV by dividing gross merchandise value by total orders.

LTVIn this report, ARPU (average revenue per user) is used to estimate LTV (customer lifetime value) using the following formula: total revenue in a given period / number of customers in the same period.

MRRIn this report, we calculate monthly recurring revenue by dividing ARR, or the average monthly gross merchandise value from subscriptions generated in the last 12 months, by 12.

ChurnThis report uses median (not average) churn rate to remove any outliers.

RetentionThis report calculates 12 month retention using the following formula: Percentage of customers who had an active subscription 12 months after their subscription signup / total number of customers who purchased products 12 months ago.

Beauty & Personal Care

$40Biggest YoY AOV growth among verticals

$130Biggest YoY LTV growth among verticals

$25,510

8.0%Lowest churn among verticals

36%

Fashion & Apparel

$35

$202

$25,613

8.7%

29%

Food & Beverage

$59Top AOV among verticals

$356Top LTV among verticals

$28,676

8.7%

27%

Health & Wellness

$56

$201

$47,777

9.9%

27%

Home Goods

$28

$120

$38,421

8.4%

51%Top retention among verticalsBiggest YoY retention growth among verticals

Pets & Animals

$53

$250

$61,202Top MRR among verticalsBiggest YoY MRR growth among verticals

8.3%Biggest YoY churn decrease among verticals

33%

Other

$53

$221

$20,217

8.7%

34%

0-999 subscribers

$56

$370Top LTV among subscriber count groups

$3,912

8.7%Biggest YoY churn decrease among subscriber count groups

25%Biggest YoY retention growth among subscriber count groups

1,000-9,999 subscribers

$52

$321

$60,953

8.7%

36%

10,000-49,999 subscribers

$60Top AOV among subscriber count groups

$226Biggest YoY LTV growth among subscriber count groups

$463,455Biggest YoY MRR growth among subscriber count groups

8.5%

33%

50,000+ subscribers

$37Biggest YoY AOV growth among subscriber count groups

$139

$2,061,586Top MRR among subscriber count groups

6.4%Lowest churn among subscriber count groups

39%Top retention among subscriber count groups

Subscriber behavior

Given all the unique challenges of 2022, why did subscriptions grow the way that they did? Insights can be found in customers’ behavior—how many subscriptions they held, the product verticals they fell into, and how they interacted with their orders.

67.6%non-subscribers

32.4%subscribers

36.1%of those subscribers held other subscriptions with Recharge merchants

4 total subscriptionsAn individual subscriber was likely to hold over 4 subscriptions in total across 2 different merchants

Merchant 1

Merchant 2

Build a subscription pair

How likely is a Pets & AnimalsBeauty & Personal CareFashion & ApparelFood & BeverageHealth & WellnessHome GoodsPets & Animals subscriber to also be subscribed to a Health & WellnessBeauty & Personal CareFashion & ApparelFood & BeverageHealth & WellnessHome GoodsPets & Animals brand?

22.8%

65%of subscribers did not make adjustments

35%did make adjustments

39%of those subscribers skipped an order

How many subscriptions did customers have in 2022?

1 in 3

Among merchants who offered subscription purchase options, 32.4% of their customers were subscribers. On average, each of their subscribers held 1.4 subscriptions with them in 2022, holding steady with the previous year.

67.6%non-subscribers

32.4%subscribers

36.1%

Of those subscribers, over 36% held subscriptions with at least one other Recharge merchant in 2022, compared to 31.3% in 2021.

36.1%of those subscribers held other subscriptions with Recharge merchants

4.1

The average subscription customer held over 4 total subscriptions—a 14% increase since 2021—across 2 different merchants.

4 total subscriptionsAn individual subscriber was likely to hold over 4 subscriptions in total across 2 different merchants

Merchant 1

Merchant 2

The takeaway

As familiarity with subscriptions increases, risk aversion decreases

While subscribers maintained the average number of subscriptions they held with a single merchant in 2022, their overall number of subscriptions across multiple merchants increased.

In tougher economic times, consumers may be more hesitant to try purchase options they aren’t familiar with. But as subscription usage increases, recurring options are no longer unfamiliar, and customer behavior is following suit.

Today more than ever, customers appear to be using multiple subscriptions from a variety of providers to meet their needs. Subscriptions are becoming more than a habit—they’re becoming a way of life.

“Today, the market has taken to the word ‘subscription.’ It’s common to sign up for multiple subscriptions, which makes it even more important for brands not to get lost in the mix.”
_{Ryan Fair, VP of Marketing & Ecommerce, Clearly Filtered}

What other products did customers in each vertical subscribe to?

We found that for the vast majority of verticals, subscribers were seeking out other subscriptions in that same vertical. For example, Beauty & Personal Care subscribers were most likely to subscribe to other Beauty & Personal Care brands.

It appears that comfort is a key factor that compels people to commit to a subscription. That doesn’t just mean comfort with the subscription business model—it extends to the very products customers subscribe to.

Build a subscription pair

22.8%

The takeaway

Merchants in your same vertical may be your strongest allies

While other merchants in your product vertical can be seen as competition for consumers’ dollars, they may actually help you achieve new levels of success. After all, when customers subscribe to their products, those same people may be more likely to subscribe to yours.

To leverage this, consider seeking out co-marketing opportunities with other brands in your product vertical. For example, a meal kit company may include free samples of hot sauce from a different brand in their deliveries in exchange for similarly-valued placements.

By supporting your vertical in this way, you not only surprise and delight your customers—you also increase your brand’s visibility into your most viable target markets and acquisition channels. These customers are interested in your vertical for a reason, and your products may build off that interest in complementary ways.

“Every week, someone used to go out to the grocery store and shop for their food. Now, ordering online is becoming a fundamental part of many people’s habits. As that trend continues, the industry will only continue to grow.”
_{Sam McIntire, Chief Revenue Officer & Co-Founder, Mosaic Foods}

What modifications did subscribers make to their orders?

35%

On average, 35% of subscribers adjusted their orders at least once in 2022 through actions like skipping an order, swapping a product, or changing the frequency of their subscriptions.

65%of subscribers did not make adjustments

35%did make adjustments

39%

Of those subscribers, an average of 39% skipped an order over the course of the year compared to 32% in 2021.

The proportion of subscribers who made modifications to their orders held steady between 2021 and 2022. However, the percentage of subscribers who took actions to “trade down” or reduce their overall spending increased year-over-year.

Although the percentage of subscribers who swapped products in their orders remained relatively high at 44%, this represented a fairly significant year-over-year decrease compared to 2021’s 48%.

39%of those subscribers skipped an order

The takeaway

The freedom to spend less can lead to greater spending over time

Flexible subscription management actions, like skips, swaps, and frequency changes, remain key tactics for increasing LTV and retention. But in today’s economic climate, the actions that help customers reduce spending when they need to have become especially critical for weathering the storm.

Customers don't just want the ability to “trade down” their orders—they require it. A study by McKinsey showed that nearly three-fourths of respondents changed their shopping behavior in 2022 to reduce their spending through actions like changing brands, delaying an order, and reducing the quantity of an order.⁵

By providing your subscribers with the options they need to lower their spending from order to order, you give them the tools they need to stick with your brand even in the toughest of times. The trust that creates has staying power, and can mean even greater value for your business in the long-term.

“Ecommerce is in its infancy, and there's so much more flexibility coming into the subscription market. Ten years from now, you’ll be able to subscribe to new products in ways we can’t even imagine today.”
_{Sam McIntire, Chief Revenue Officer & Co-Founder, Mosaic Foods}

About this report

Methodology

Over a twelve-month period, we analyzed over 15,000 merchantsThese 15,000+ merchants are a subset of the total count of Recharge merchants. across the subscription commerce industry and their 8.5 million active subscribers—a subset of the over 29 million total customers who used Recharge in 2022. Each of the merchants studied in this report use Recharge to offer subscriptions to their customers.

We compared data from 2021 with data from January 1– December 31, 2022 with a focus on same-store sales (stores that existed both at the end of 2021 and at the end of 2022, removing stores that began their subscription journey in 2022) to give a holistic view of year-over-year growth and trends.

We organized our analysis according to seven product verticals and four subscriber count ranges. Data was pulled with a focus on the change, or delta, in five performance metrics—LTVIn this report, ARPU (average revenue per user) is used to estimate LTV (customer lifetime value) using the following formula: total revenue in a given period / number of customers in the same period., AOVIn this report, we calculate AOV by dividing gross merchandise value by total orders., MRRIn this report, we calculate monthly recurring revenue by dividing ARR, or the average monthly gross merchandise value from subscriptions generated in the last 12 months, by 12. , customer churnThis report uses median (not average) churn rate to remove any outliers., and customer retentionThis report calculates 12 month retention using the following formula: Percentage of customers who had an active subscription 12 months after their subscription signup / total number of customers who purchased products 12 months ago.—to highlight areas of growth. Trends in subscriber actions, including product swaps and order skips, were also studied to gain deeper insights into subscribers’ priorities.

In order to simplify data visualizations, data calculations have been rounded to the nearest whole number or decimal.

Special thanks

Special thanks to the Recharge merchants whose quotes and insights informed this report: Ryan Fair, VP of Marketing and Ecommerce, Clearly Filtered; Ryan Baylis, Co-Founder and CEO, Drift; Sam McIntire, Chief Revenue Officer and Co-Founder, Mosaic Foods; Travis Garcia, Senior Director of Product Management, Pretty Litter; Ari Ziskin, Director of Ecommerce, AutoBrush; Michael Bennett, Subscription and Loyalty Channel Leader, Grunt Style; Cindy Nichols, Founder and Chief Creative Officer, The Wordy Traveler; Erica Berthold, VP of Marketing, PYM; and Katie Spies, Founder and CEO, Maev.

Sources

[1] Consumer prices up 9.1 percent over the year ended June 2022, largest increase in 40 years (U.S. Bureau of Labor Statistics)

[2] The State of Subscription Commerce 2022 (Recharge Payments)

[3] Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (FRED Economic Data)

[4] Real-time Customer Lifetime Value (CLV) Benchmark Report (Omniconvert)

[5] The Great Uncertainty: US consumer confidence and behavior during inflationary times (McKinsey & Company)

Contributors

Leadership: Shan Miller, Callie Hawley, Randi Fuchs, Erica Wylie, Jessica Gonzalez
Copy: Sara Heegaard
Design & Development: Emma Overholt, Kyle McAllister
Branding & Art Direction: Cedric Wilder, Raul Villalobos
Data & Analytics: Brandon Leo, Kate Lafantasie
Strategic Contributors: Luke Retterath, Nalin Chuapetcharasopon, Alyssa Ross

Looking beyond transactions with Recharge

Key performance indicators

Average order value

Proven tactic

Lifetime value

Proven tactic

Monthly recurring revenue

Proven tactic

Customer churn

Proven tactic

Focus on your cadence

Identify churn risk milestones

Set up automations to mitigate passive churn

Customer retention

Proven tactic

Send the right offers to the right customers

Find the ideal variety of products

Make the most of holiday signups

2022 benchmarks at a glance

Subscriber behavior

How many subscriptions did customers have in 2022?

1 in 3

36.1%

4.1

The takeaway

What other products did customers in each vertical subscribe to?

The takeaway

What modifications did subscribers make to their orders?

35%

39%

The takeaway

About this report

Methodology

Special thanks

Sources

Contributors

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