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State of Subscription Commerce: key insights from the ReCharge report

2020 was a year of change. Customers lost their jobs overnight and had to cut back temporarily, while others explored new ecommerce brands they had not previously considered. As a result, merchants were able to meet their customers where they were, providing them with the options they were looking for. In addition, leading merchants became known for their flexibility in the shopping experience, whether it’s the ability to pause a subscription, swap products, or offer one-time purchases. 

Data in the report illustrates just how far-reaching the impact of factors in 2020 was across all verticals and geographies. Our report examines the data behind these trends to provide insights into how merchants can increase a customer’s lifetime value (LTV) by meeting them where they are. Keep reading for more, or check out the whole report from ReCharge!

The impact of 2020 on Subscription Commerce

Growth by AOV

As a result of consumers’ challenges in 2020, online ordering and subscriptions have grown in popularity. The number of new stores added to ReCharge by vertical increased across the board in 2020, a trend that wasn’t unique to the year but reached new heights. Average Order Value (AOV) trends showed interesting shifts despite more stores in the market, with some growing others declining slightly. To understand the health of a subscription business, AOV is a key metric. Having a high AOV ensures recurring revenue consistency or even growth. Data between 2019 and 2020 revealed some surprising results. 

source: The State of Subscription Commerce 2021 report, ReCharge

Food & Beverage had the highest AOV of all Food & Beverage verticals. However, it was nearly flat year over year, while all other verticals had significant gains and losses. In addition, the Other category saw really negative growth.

A pivot that offered greater flexibility for customers was introducing checkout options such as swapping products, skipping a month, or allowing for one-time purchases. On top of the already high and growing subscription rate, almost 11 million items were purchased for one-time purchases. For some verticals, such as Health & Wellness, adding a one-time purchase option increased the average order value by 71% ($46.21 compared with $33.79). When merchants take advantage of these options, they create stickiness with customers, meeting them where they are at that time.

source: The State of Subscription Commerce 2021 report, ReCharge

Subscriber Growth and LTV

Due to the flexibility merchants provided, churn was reduced and LTV was extended. As a result, not only AOV was on the rise in 2020. Utilizing data from stores activated in 2019 and 2020, there was astronomical growth on average for most verticals.

source: The State of Subscription Commerce 2021 report, ReCharge

The average growth in subscribers across all verticals was 90% and the average increase in lifetime value (LTV) was 11%, illustrating the absolute boom in ecommerce. However, food & Beverage grew by over 100% in subscribers but showed negative growth in LTV, pointing to first-time subscribers not activating long-term subscription plans.

With overall subscribers growing at an extremely high rate and LTV at a slower pace, it’s clear that new shoppers are trying out subscriptions for the first time. So, how can brands create a shopping experience that encourages loyalty and stands out from the crowd in the growing world of subscription commerce? Firstly, merchants should go beyond simply promoting their products to make an impression on new subscribers.

Brick & mortar stores

The growth in online shopping for even everyday essentials broadened the total addressable market for merchants before shoppers flooded into stores for their daily needs. Subscription commerce also expanded the pool of merchants. Even large brands with more traditional distribution channels began offering subscription options to their customers. 

Brick & mortar stores shifted to meet the new demand of their shoppers. Their loyal customers could have easily been swayed by new brands available in a physical subscription setting if they had not used new tactics. Customers expect brands to meet their changing needs at a particular time by providing them with flexibility. Interestingly enough, even large stationary brands found ways to meet their customers where they were by going directly to them.

What does this mean for merchants who don’t already have a large customer base, substantial brand awareness, and ample marketing budgets? Standing out in a saturated market requires differentiation and diversification. A merchant must utilize data, understand customers, and create a plan of action to meet them where they are and anticipate where they are headed.

The Best-In-Class Subscription Brands

Top-tier subscription businesses share three common characteristics. Combining these factors enables best-in-class brands to meet their customers where they are and provide a stellar experience.

source: The State of Subscription Commerce 2021 report, ReCharge

EarthBreeze, Lovevery, and Black Rifle Coffee Company were all tied to a greater mission and provided customers with value beyond product purchases.

A brand like EarthBreeze stands by a clear, concise mission: Clean laundry, zero plastic. As a result of their specific purpose, they saw a surge in subscribers and continued to grow.

The company Lovevery, which specializes in play-kits for children, is dedicated to helping parents feel more confident. Researchers use science-based research to develop toys that support learning as a child, eliminating guesswork for new parents.

Other forms of loyalty involve community engagement and rewards. For example, Black Rifle Coffee Company gives away free “coins” to long-term customers as part of its loyalty program, creating a sense of belonging and even pride.

Leveraging Integrations

Another characteristic that most successful merchants have in common is their ability to leverage integrations within the ecosystem to communicate, plan, analyze, and provide for their subscribers.

source: The State of Subscription Commerce 2021 report, ReCharge

It is possible for merchants to enhance the overall customer experience by developing an appropriate tech stack. Customers want frictionless ways to interact with the brands they love, whether it’s through a newsletter, a communication hub, a customer portal, or a seamless checkout experience. Technology was created to make life easier.

What’s more, in 2020, a lot of people re-evaluated what was important to them and to their wallets. Merchants who gained the most growth and maintained loyal customers understood this and provided options in the buying experience.

source: The State of Subscription Commerce 2021 report, ReCharge

Key takeaways

Over 2020, merchants who experienced more significant increases in AOV were able to provide their customers with the option to swap products as their needs changed and pause subscriptions as their financial circumstances changed. As a result, merchants’ flexibility improved loyalty, reducing churn and extending the lifetime value of their customers.

By analyzing the data, conducting market research and focus groups, and engaging in subscriber community groups, you can understand customers’ journeys and meet them where they are. In addition, by identifying key goals for the customer and the business, merchants can streamline the checkout process while providing customers with flexibility that works for them.

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