Subscription commerce is a recurring delivery service that shoppers prefer for its convenience and personalized experience. It is increasingly used on ecommerce sites and is gaining popularity in many industries, including food and beauty. The benefit of building long-term customer relationships is the opportunity for stable revenue.

This article provides a straightforward explanation of how to get started with subscription commerce, a market that is expected to continue growing. It also includes examples from Japan and overseas.

What’s in this article?

• What is subscription commerce?
  
• Subscription commerce model
  
• Advantages and disadvantages of subscription commerce for businesses
  
• Advantages and disadvantages of subscription commerce for consumers
  
• How to start using subscription commerce
  
• Examples of subscription commerce in Japan
  
• Overseas subscription commerce case studies
  
• Starting a subscription commerce business
  

What is subscription commerce?

Subscription commerce is on ecommerce sites, allowing customers to pay a fixed fee and receive products selected by the business offering the service. The trend began in the US and is now being adopted by many companies in Japan. This business model is widespread, and the market is expected to grow.

Differences from traditional subscription services

This model is similar to subscription services in that it delivers goods to customers regularly. The main difference is that instead of choosing the product themselves, the company selects it and gives it to them. It resembles Japan’s traditional “hanpukai” service, where members receive various food items. But while hanpukai mainly deals with food, subscription commerce handles goods in a variety of categories.

Subscription business market size in Japan

In 2023, Yano Research Institute’s study conducted in seven major sectors (fashion, restaurant service/takeout, lifestyle, leisure/entertainment, information content, education, and medical/health) excluding subscription delivery services. The subscription services market size in Japan in 2022 was ¥896.56 billion on a consumer payment basis and is anticipated to increase 5.2% year on year to approximately ¥943 billion in 2023, and 4.2% year on year to approximately ¥983.1 billion in 2024.

With recent price increases, there have been some changes in the industry, and growth rates are forecast to fluctuate in different sectors. Still, the subscription business is a thriving market and is likely to grow steadily.

Subscription commerce model

Curation

With so many online choices, it can be challenging for customers to find offerings that match their preferences. This has led to the creation of curated services that deliver items carefully handpicked by celebrities and experts based on specific themes. It’s for those interested in quality products but don’t know what to choose. For example, they can receive goods selected by experts in the field, such as sweets carefully prepared by a pastry chef, cosmetics recommended by a beautician, or health foods chosen by a doctor, allowing them to enjoy high-quality items they would have difficulty finding on their own, without the hassle of having to decide for themselves.

Convenience

This service is suitable for relatively low-cost daily necessities. The target audience are those who are not interested or too busy to go shopping and would like someone else to do it for them. Examples include underwear, socks, other clothing that are needed relatively quickly, men’s grooming products, and household goods, all delivered regularly.

Trial

Consumables such as cosmetics and foods are the most appropriate trial products. They are aimed at people who want to try a sample-size item before purchasing the full-size version.

Take cosmetics and bath products, for instance. When subscribers sign up, they can provide information such as skin and hair type, and the company delivers samples according to their requests. This is more likely to result in sales than random sample distribution.

Advantages and disadvantages of subscription commerce for businesses

Advantages - Prospects and stable sales

Subscription commerce has a promising future as a market because it has already become a familiar service in society and is projected to expand.

Since the business model secures clients and delivers goods regularly, relatively stable sales can be expected.

If an ecommerce site has several products to sell and shoppers need help selecting their favorites, they might leave the site (abandon their cart) before making a purchase. However, companies using subscription commerce can capture those interested in items but don’t know which ones to buy.

Over time, companies accumulate customer data that can be analyzed to understand what the market is looking for and inform product development.

Disadvantages - Initial cost and time to monetization

The most important aspect of providing shoppers with a regular product delivery service is offering items that match their preferences. To do this, companies need to gather information about their preferences and interests ahead of time. As with starting any business, there will be initial costs for product and service development, advertising, and system implementation. Because monetization takes time, you need to plan your finances well in advance.

Advantages and disadvantages of subscription commerce for consumers

Benefits - Time and labor savings

In today’s society, we are inundated with information and choices, and there is a lot of misinformation on the internet, making it difficult to choose reliable offerings. With subscription commerce, there is no need to select items or go shopping.

Disadvantages - Higher prices and waste

Regular fees will be incurred during the service period. Depending on the usage rate, users could receive more products than they can use, resulting in waste. Even with a lower introductory price, the standard fee might gradually increase.

How to start using subscription commerce

1. Consider a subscription model

You can start a subscription commerce if you already have a business. First, consider which model is suitable for you.

Suppose you are starting a completely new subscription model. In that case, consider whether you want to go into an ecommerce mall type of business and develop a storefront or whether you want to build your in-house website to get started.

Consider whether you want to introduce a form of subscription commerce in which the company picks the products and services or include the more traditional scheduled delivery offerings the customer can customize.

2. Select a product

Think about what you bring each month in a subscription business. To illustrate, in the case of groceries, select items while considering how you will differentiate yourself from other stores, such as separating your inventory into organic and nonorganic options or providing multiple product sizes.

3. Set the price

Once you have decided on what to offer, set the price.

4. Understanding consumer psychology and monetization

Once you’ve decided on your products and prices, you must consider attracting clients, encouraging continued use, and generating revenue.

For example, you can offer a trial period to encourage new subscribers to sign up or add value, such as a loyalty program, to encourage continued use.

Providing multiple purchase options is also very effective in motivating shoppers to buy. To give an example, if a ¥3,000 item is sold for ¥2,280 and a ¥5,000 item is sold for ¥2,980, many people will choose the one with the higher discount rate (in this case, a ¥5,000 item for ¥2,980).

When setting prices, it is important to calculate profit margins from purchase prices and costs to determine pricing, but it is also key to understanding consumer psychology.

5. Create an ecommerce site

If you don’t already have an ecommerce site, create one once you’ve decided on the products and prices you’ll sell in subscription commerce. In this case, ensure your platform supports the model before implementing it.

6. Introducing other systems

Implement a reliable payment service to process recurring payments.

Stripe Billing, for instance, provides out-of-the-box support for many features needed to run a subscription-based business model. Stripe Billing gives subscription businesses all-in-one functionality, including recurring billing, customer management, and reporting.

In addition, integration with tools such as subscription management software, shipping and inventory management, CRM, marketing communications, analytics, and customer support can help improve operational efficiency.

7. Advertise products and services

When launching a new ecommerce site, you must first consider how to promote your business. You can use social networking sites, paid advertising, or partnering with an affiliate service provider (ASP).

Examples of subscription commerce in Japan

Kids Laboratory

This educational toy subscription is tailored to children’s developmental needs and interests. Toys are available for children up to eight years old, and upon enrollment, children receive age-appropriate toys on a monthly rental basis.

Yoshikei

This dinner ingredient delivery service, used by approximately 500,000 households in Japan, brings recipe items to customers’ doorsteps on the same day. The menu is varied and meets the needs of those who want to simplify their daily cooking and enjoy various meals while maintaining a good nutritional balance.

Laxus

This business provides unlimited use of brand-name bags for a fixed monthly fee. Branded bags can be rented for special occasions.

subsc

Once a month, subscribers receive an array of carefully selected products from well-known stores nationwide for a fixed price. Based on category and price, they choose the right subscription for them.

snaq.me stand

This curated snack subscription service delivers eight portion-sized (approximately 20 to 30 grams each) treats from a selection of more than 100 items that change monthly.

Overseas subscription commerce case studies

Skin Authority

When customers enroll in the company’s Facial Club, designed to help individuals achieve healthier, more beautiful skin, they receive personalized consultations with skincare experts and daily skin essentials sent to them three times a year. Other benefits include expert dermal treatments and discounts on different products sold by the company.

ButcherBox

A subscription business that delivers high-quality meat and seafood to customers. They can choose either a custom plan, which allows them to select the products they want, or a tailored plan, which leaves it up to the experts.

Toy Box Monthly

Toy Box Monthly is a subscription toy retailer for children ages four to eight. It provides plans to fit a variety of budgets and interests.

Japan Crate

This curated business delivers Japanese sweets to people living abroad. Subscribers choose their preferred delivery frequency, and the price per order varies accordingly.

Birchbox

Birchbox offers subscription boxes with a choice of product sizes, including trial and full sizes. A specialist selects and delivers the most appropriate items based on the client’s skin, hair, and makeup style.

Starting a subscription commerce business

Subscription commerce gives customers convenience, exposure to new products, and a discount, while providing a continuous and stable revenue stream for the business. The market is expected to continue growing and is becoming increasingly popular in various industries in Japan.

If you are considering building an ecommerce site that incorporates subscription services, this article presents examples and case studies on how to start this business model.