Generally speaking, subscription business models have been around for quite some time. In the modern era, most subscription services function by way of offering access to services or a type of product to an audience (customers) for a particular sum of money paid at regular intervals.

This differs from service to service – some monthly, some quarterly and some yearly or for the duration of a season. Such is the case, for example, with opera and theater companies.

Subscriptions can be a very successful means for customer retention as well as building brand loyalty, since they’re often based on one-time sales becoming recurring sales. This is often done by providing freemium subscription services. This means you’ll get one month for free, after which you’ll have to pay for further access to the service.

That being said, there’s a lot of nuance to this topic. That’s why in this article, we’ll try to shed more light on the subject. We’ll cover some of the many different types of subscription models and also provide you with some valuable statistics and background info to back it all up.

What exactly does ‘services’ entail?

Before we delve into the types of subscription services, we actually want to say a few words about ‘services’ as a term, just to make sure there’s no confusion. 

Services can be used both as a more general term for subscription ecommerce businesses selling physical products, but also to describe memberships, products, and services that don’t necessarily have to be tangible. This is particularly relevant when we discuss digital subscriptions:

⚡️ About digital subscriptions
Keep in mind that digital subscriptions don’t include only streaming services – this is only a chunk of the field. There are also a variety of products and services offered by website platforms such as WordPress and the like, as well as products and services related to them in various ways: think of themes, plugins, and other types of tools created specifically to optimize sites.

There are also a number of web design services, site optimization services, digital marketing consulting agencies and other types of digital services. These digital products are generally offered on a subscription basis, billed annually, monthly or quarterly, although there are sometimes options for one-time purchases as well. 

In this piece, we’ll use both of these meanings which we hope will be properly understood within the context of the paragraphs in question.

BONUS: Want a short overview of what you need to know about online subscription? Read our article about the 7 most important things you need to know about subscription ecommerce, with plenty of examples and insight into the most popular subscription commerce categories.

What are some of the different kinds of subscription services?

Subscription models usually branch into 3 main types: 

  • Ecommerce subscriptions 
  • Membership subscriptions
  • Digital subscriptions
table with examples of different kinds of subscription services

Subscription Service Types: Cheat Sheet

These subscription models can sometimes be divided into subcategories, which we’ll also cover once we’re done outlining these three main categories.  

Before we begin, we’d like to say that these seemingly separate categories can overlap with each other. That means it’s not always so easy to set them apart in a very clear way. That being said, we’ll see loads of examples that show us how these subscription services often belong to more than one category/type simultaneously. 

Ecommerce subscription services

Hugely popular with millennials and “younger urbanites with money” as McKinsey reports, ecommerce subscriptions have grown by 100% every year in the past five-year period. 

Contemporary ecommerce subscriptions are aimed towards providing and delivering a whole new level of high-quality, customized, end-to-end customer experiences. For subscribers, this means getting to have a shopping experience that’s both personal and contemporary, as well as low-cost and more efficient in general. Young people nowadays have strong opinions, know what they want and are definitely not going to pay for a monthly beauty subscription service (for example) just because they need it. It needs to come with a particular story, or to somehow be relatable.  

📉 Reducing churn as a subscription business
In order for new ecommerce subscription service providers to avoid increasing churn rates, they simply have to prioritize customer retention, and make an effort to develop more personal and tailored relationships with their clients and consumers that are going to last for a long time.

The great thing about ecommerce subscriptions is that they provide mutual benefits. Both subscribers) and service providers get to have a nice slice of the pie. Whether it’s revenue or superb services, both parties can have the good life – customers get to have control over the products they get without too much effort, while subscription business operators enjoy to have a stable, recurring income and growth.

Ecommerce subscription types and examples

Ecommerce subscriptions are a vast field of their own, as you know by now. They involve a whole plethora of services that would take pages and pages to mark down, from style and fashion products to grooming products like the pioneering Dollar Shave Club. We also have the ubiquitous Amazon, which provides a variety of ecommerce services – although their Prime membership fee could be seen as giving access to a membership through which physical ecommerce products are bought (we told you there was a bit of a grey area here!)

Broadly speaking, ecommerce companies can be divided into 2 subtypes:

Curated subscription boxes 

Curated boxes are a type of subscription service that provides customers with a selection of curated products, usually on a monthly subscription basis.

The special thing about subscription boxes is that they always maintains the element of surprise from the first box, especially if the offering is versatile and varied, and gets regularly updated with new and exciting products. Of course, new boxes should ever be the same as the previous boxes (this isn’t about replenishment after all). Often, subscription boxes become more and more tailored and personalized as more and more boxes ship, the longer the customer maintains their subscription, eventually reaching the platonic ideal of the perfect subscription box.

They may begin with a starter kit – say a selection of basic teas in a tea subscription box, or a couple of the editor’s favourite books, for a book of the month subscription box aimed at avid readers.

On a different note, companies that curate products from third parties often get them at a lower price, which they can then pass on to their subscribers, who relish the ability to get high-quality goods at lower than retail value, such as small batch hot sauces, for example.

Three examples of this model include:

  • HelloFresh – known for their easy-to-follow recipe cards accompanying their meal kit subscription
  • House Plant Box – who send out one or more houseplants in their monthly subscription box
  • Graze – a monthly box with aimed at people looking for a healthy, snack subscription

Replenishment 

With this subscription type, customers can get regular shipments of particular products for low prices that often cost less than their retail value.

Two of the best subscription boxes in this category are:

  • Dollar Shave Club – famous for their shaving subscription boxes
  • Cleen – who offer one of the best subscription boxes for refillable, eco-friendly cleaning products

The box subscription model can be enhanced with a subscribe and save option, a technique pioneered by Amazon which allows customers to save up to 15% on auto-deliveries and also includes free shipping.

Ecommerce subscription stats and trends

It’s evident that ecommerce subscription services aren’t going anywhere anytime soon. If anything, the number of subscribers is only going to get bigger as products and services become more personalized and more efficient in delivering just the right stuff to the customer’s front door – especially given the current numbers.

  • Globally speaking, the total subscription ecommerce market size is expected to reach $120.04 billion by the end of 2022, and as high as $900 billion by the end of 2026
  • The growth of subscription ecommerce is driven by an increase in the use of online shopping services, whose convenient, hygienic, lower-cost, zero-commute propelled them to the forefront during the pandemic.
  • Subscription businesses grew nearly 6x faster than the S&P 500 between 2012-2020, according to the Subscribed Institute.
  • A study from IBM found that consumers had twice as many subscriptions in the last quarter of 2021 compared to the first.
  • The trend rings true across the pond too – 21% of UK consumers aged 18-40 purchased a new subscription in 2020, a different survey quoted by IBM found.

Membership subscription services

Everybody wants to belong to a club. And that is what essentially membership is – whether it’s a gym membership, a supermarket membership, a sports club membership, a membership connected to some organization – even if it’s a free subscription industry Facebook group – or a newspaper or an online magazine. It all has to do with being a part of something, belonging to a group that shares your values, activities, and opinions. 

Most ecommerce subscription services offer a membership option. The membership aspect of the subscription product gives customers additional perks and benefits around the products and services offered by the particular subscription business, such as early access to upcoming offerings.

This means that customers can often get discounts to a range of products (or services) – like, for example, if you purchase an annual subscription to Costco’s membership you’d get to have some extra discounts and low, warehouse prices on their various products.

The subscription part of the whole ‘membership subscription’ concept has to do with the sum of regular interval payments that a customer agrees upon when becoming a subscriber to a particular service. The key here is the annual, quarterly or monthly revenue that’s being generated by customers, which in turn allows them to have all the membership benefits and options. Some companies opt to only offer annual subscriptions, while others opt for a monthly subscription.

Memberships vs subscriptions

Here’s a quick breakdown of what differentiates a membership from a regular subscription:

  • All memberships = subscriptions, not all subscriptions = memberships. Subscriptions have all the advantages of normal subscriptions with some other features/benefits.
  • Memberships often allow people to achieve goals, gain skills, indulge in a hobbies, or gain access to exclusive content.
  • Memberships have access to/focus on community
  • Memberships could be physical, digital, or a combination of products (Netflix, Costco, physical subscription + members only forum)
  • Membership businesses focus on acquisition based on INTENT, i.e. it’s not about always having enough coffee but about buying in to having rare, unique coffees that other people can’t access.
  • Membership subscription businesses focus on retention and lasting value/change to a greater degree than regular subscription businesses through privileges, premium value-driven positioning, product development in line with user feedback, and community building.

Membership subscription examples

The membership model is becoming increasingly more interesting as consumers look for how to get the most value out of their subscription service, with additional perks and benefits proving a massive incentive. Here’s a mix of bigger players and smaller, newer companies aiming to conquer the model:

  • Costco – whose offering is like having a meat subscription, a flower subscription, an underwear subscription, and more, all through one membership fee
  • Trends (from The Hustle) – a one stop shop for everything entrepreneurial, with heaps of new content released every week
  • ClassPass – one of the favorite subscription boxes of people looking for a flexible way to get in shape
  • In Style Membership – more than just a clothing box, access to a stylist is perfect for cultivating your personal style
  • Skillcrush – a great gift for anyone looking to make the leap to becoming a coder

Membership subscription stats and trends

Who knew so many people would be looking for membership services these days? The latest facts and figures paint an impressive picture of a growing industry that’s rife with opportunity for motivated founders.

  • A recent study found that only 38% of membership sites run by online creators have existed for over a year.
  • The highest proportion of people who started membership businesses did so for the potential for a higher income.
  • COVID was a hard one, with almost 26% of associations in the study reporting an increase in membership.
  • The biggest challenge membership sites face is getting new members, an issue reported by almost 2/3 of surveyed businesses.
  • Money-back guarantees and trial periods are still among the most popular acquisition techniques.
  • Almost half of membership sites offer coaching/consulting options.

Digital subscription services

Digital subscription refers to ecommerce services that can only be provided digitally, i.e. primarily and exclusively through some sort of online platform. The categories of digital music subscription and digital video services (also often called subscription-based media) are probably the prime examples in this category. In fact, 46% of people, according to the McKinsey analysis, are subscribed to a digital media service of the likes of Netflix or Amazon Prime Video. 

Digital subscription examples

A lot of services transfer to the world of online platforms, making digital subscription one of the most successful subscription types. It also makes it one of the most promising ones when it comes to generating future revenue. The companies here here are among the most successful enterprises in the field of digital subscription services:

  • AppleTV – a streaming service straight from the tech giant itself, with new releases, original content, and more
  • YouTube Premium – Google’s ad-free, perk-filled YouTube experience, perfect for binge watchers
  • Netflix – the definition of a weeknight during the pandemic, Netflix has been at it for longer than anyone else
  • Amazon Prime Video – an incumbent from digital powerhouse Amazon
  • Apple Music, Spotify, Deezer, and other similar digital music services 
  • Digital newspapers and magazines – such as The New York Times, Financial Times, or The New Statesman.
  • Trade associations with annual fees – such as SUBTA.

Note that while the other types of business above are relatively self-explanatory, video services are a bit more nuanced. The most popular type of digital subscription is VoD services, i.e. the aforementioned Netflix, Hulu, Youtube Premium, AppleTV and the like. Streaming media content for a fixed price billed monthly, or the SVoD model (or Subscription VoD), is the most popular one from the three main VoD models – the other two are the TVoD, or Transactional VoD, which means you pay per piece of content delivered, and also there’s the EST or electronic sell-through, which means that customers get permanent access to a piece of content.

Digital subscription stats and trends

The market for monthly shipments of digital content is also on the rise, with streaming services chomping at the bit for a bigger slice of the consumer pie, spurred by an increased number of people spending more time at home, among other factors.

  • A recent report noted that the current market for digital subscriptions is worth $650 billion, and is expected to reach $1.5 trillion by 2025, well over double its current size.
  • Gannett reported a 46% YoY increase in digital subscriptions, while Hearst reported a 50% increase, both during 2021.
  • The success of the creator-specific model (think Substack and Patreon) is opening up tons of opportunities for publishers looking to partner with new voices in the media world, but also creating a lot more opportunities for competition.
  • In 2020, a study noted that the biggest focus for all digital publishers was their subscription revenue.
  • According to Statista’s analysis, there were 1.2bn SVoD users in 2021 alone, which is expected to increase exponentially over the years to come. 

Adding a subscription service to your business: why and when?

Subscription services aren’t the easiest of models to run. Mention to a customer that they’ll have to pay every month for a product and you’ll see their hair stand on edge. But, it’s not like a subscription model doesn’t come with a whole set of its own particular positive sides, both for owners and for customers as well. Subscription services usually:

  1. Generate more data which can be used to understand customers on a deeper level and make better decisions
  2. Improve the strength of their customer relationships
  3. Create communities around their products
  4. Find it easier to predict revenue, which can lead to higher valuations
  5. Operate more smoothly thanks to an integrated business model
  6. Delight their customers much more frequently due to their curated offerings
  7. Enjoy a higher customer lifetime value

However you’re planning to implement a subscription model, it’s important to create and maintain the perfect balance between offering new and cutting edge products that pique your customers’ interest, while also plying them with with additional value that enhances the constant quality of the products and services they already enjoy and are used to. 

For entrepreneurs already running a transactional business, the best time to add a subscription offering is… now! The quicker you integrate it, the more you can reap the benefits, but don’t rush the process and don’t just make the subscription offering an option, otherwise it will never reach its full potential.

The final verdict

When it comes to subscription services, the key thing is to convince clients and customers that they’re receiving a superb end-to-end experience which delivers tons of additional value, including and beyond saving money in the process. The services must also be able to provide a customized shopping experience and offers that are highly relevant to individual customers. In that regard, McKinsey calls this the “heartbeat of modern marketing”, which says enough about the importance of personalization in contemporary online businesses.

Product recommendations, replenishment offerings, back in stock reminders, personalized discounts, and loyalty rewards are an important part of maintaining a successful and relevant subscription service in this day and age, and in the (near and not so near) future.   

An easy to use website, good online reviews, word of mouth recommendations as well as regular recommendations are also part of the equation of success (this is especially important when it comes to the access and box/curation ecommerce subscription models). 

In the end, consumers like consistency and once they find their thing, it’s very likely that they’ll be there for the long run. 

If you have the patience and the determination to endure an initial period of uncertainty, subscription services are certainly a worthy run for your money, since you’re very likely to reap the benefits for a long time to come! Afraid of the challenges involved in starting a subscription business, or can’t fathom the idea of creating your own box? Not to worry! Read more about the practical solutions for common challenges in the subscription business and start your next subscription services adventure without any fear – or dive straight in to your 2-week Subbly free trial and see for yourself.

By Zaki Gulamani
Editor-In-Chief at Subbly