There is a great line we recently heard: The subscription model is one of the oldest ways of conducting business, yet over the last five years it’s making consumers look at products in a completely brand new way.
Roughly a year ago, we reported on how the subscription model is experiencing a revival, which is signaling a demand for recurring payment merchant accounts. There is tangible proof everywhere – Dollar Shave Club, Spotify, Netflix – with more and more niche companies and products finding success through subscriptions. According to e-commerce analyst Hitwise, 10 of the top subscription businesses worldwide received a combined 37,000,000 million visits in the month of April 2017 – business models such as beauty products, kitchen goods and clothiers. A similar study by ING revealed that 5 percent of all spending by European consumers is devoted to subscriptions – about €350 billion per year.
There is a common factor that is driving subscription businesses in the U.S. and abroad: convenience. It makes complete sense. Of all the generations, millennials are all about convenience, accessibility and speed.
Why not subscribe to a service that will send shaving gear to the house on a regular basis?
Popular goods by subscription
Think about the products our parents, the Baby Boomers, subscribed to when we were younger in the 1970s and 1980s: Newspapers, milk, magazines and record albums (remember Columbia House and BMG Music Club?). The whole subscription model has expanded to other products that simply make sense: shaving kits, beauty products, toilet paper, diapers, vitamins, food for pets; basic, everyday necessities that consumers need not worry about forgetting to buy at the grocery store or pet store. Even retail clothiers are taking advantage of subscription models.
Why we think subscription billing is going to grow in popularity
We recently read some statistics regarding the demographics of consumers who have opted for subscription services for certain products: Millennials and Generation X consumers on the younger side; more females than male; household income above $100,000; with children no older than 7-8 years old. Most order from their smart phone, if not a tablet or desktop computer.
Why subscription billing is considered high risk
While subscription services are convenient for consumers and, obviously, a terrific revenue generating scheme for merchants, such models can be magnets for chargebacks and cases of friendly fraud. For example, a consumer receives the wrong vitamins or supplements, makeup or dog food. Most consumers today – if not presented an easy return process – will simply file a chargeback with their credit card issuer and be done with it.
Some advice about recurring payment merchant accounts
Recurring payment and subscription billing merchants need to follow the Zappos example: ship products as if they are expecting the consumer to make a return, with easy packaging, address sticker and free shipping. Not only are merchants avoiding a chargeback, they’re likely maintaining a customer by making the return process easy.
Additionally, we believe there is one critical element in managing recurring payments and subscriptions: communication with your customer. We’re all for e-mails containing receipts and other key bits of information such as delivery status and arrival, which underscore the importance of your customer’s order. We’re also fans of live chat and (our personal favorite) telephone calls.
Good communication, however, begins with having a clear and easy-to-read return policy and contact information on your website’s home page.
Recurring payment merchant account solutions found here
Instabill has built a large network of acquiring banks that embrace high risk industries, including those that require recurring payment merchant accounts. We also offer live customer support and match your business with the best acquiring banks we know for recurring billing. Merchant account experts are on hand at 800-530-2444.