Benchmarks for Subscription ECommerce
The subscription ecommerce market has grown by more than 100 percent a year over the past five years, according to research firm McKinsey. How these businesses structure their offerings has a direct impact on how well they’re able to take advantage of this incredible growth.
Companies have a number of options in terms of subscription plan length and product mix. Recurly Research has developed benchmark data on the popularity and usage of these options. Our study included data from over 900 B2C ecommerce sites and was conducted over a two-year period.
These benchmarks will help you make decisions on how best to structure subscription plans to find the mix of options that is right for your business.
Plan Length and Structure
The majority of businesses—68%—in our study offer more than one plan-length option to their subscribers. Our study found no business that offered only quarterly plans and very few that offer only annual plans.
Providing subscribers the choice of different plan lengths may encourage both subscriber acquisition and retention. Offering longer plan lengths can provide your business with longer-term, more predictable revenue. Often, the subscriber benefits from a lower cost in return for a longer commitment.
Breakdown of Plan Length Options
- Monthly Only
- Annual Only
- Multiple Plan Types
All Industry Segments
27%
5%
68%
Digital Services
17%
6%
77%
Physical Goods
34%
2%
64%
Consumer Goods
Box of the Month
Consumer Services
Education
Healthcare
IoT
OTT
Publishing & Entertainment
SaaS
60%
50%
40%
30%
20%
10%
0%
38.0%
3.0%
16.5%
11.8%
1.2%
29.5%
Monthly Only
Annual Only
Monthly & Annual
Monthly & Quarterly
Quarterly & Annual
Monthly, Quarterly & Annual
Plan Type
Key Takeaways
- Industries where physical goods, such as beauty products and subscription boxes, are more prevalent tend to have a higher proportion of monthly-only plans. This is also true of the healthcare segment.
- Industries with a higher proportion of monthly plans tend to experience higher churn (see Churn Rates by Industry, below). This is probably due to the more frequent cadence of recurring payments.
Distribution of Products
We found that 70.4% of businesses in our study offer more than one subscription product or service. For example, a box of the month for pets might have boxes for both dogs and cats or a beauty box might have a men’s and women’s version. Offering additional subscription products or services can be an effective way to grow revenue and provide more value to subscribers, thus building a loyal customer base.
Overall
Digital
Physical
Consumer Goods
Box of the Month
Consumer Services
Education
Healthcare
IoT
OTT
Publishing & Entertainment
SaaS
29.6%
31.9%
38.5%
1 product29.6%
- 1 product
- 2-4 products
- 5+ products
Key Takeaways
- Businesses that sell physical goods are much more likely to offer five or more products than their digital counterparts. This is also true of the healthcare and education segments. This is likely due to an increased demand in this segment for curated offerings and the greater need to minimize customer churn.
- OTT is the most likely to offer only one product. This category typically bundles a number of entertainment channels together as their core offering, as opposed to selling access to a variety of entertainment channels individually.
Hybrid Business Models
Adopting multiple revenue streams, such as one-time, non-recurring offerings, is a great way to expand your business.
Percentage of Businesses Offering One-time Purchases
50%
40%
30%
20%
10%
0%
16%
44%
41%
40%
20%
23%
13%
38%
18%
10%
Digital
Physical
Consumer Goods
Box of the Month
Consumer Services
Education
Healthcare
OTT
Publishing & Entertainment
SaaS
Industry Segment
For this benchmark, we included only industries that tend to offer one-time transactions. As a result, the IoT segment was not included. "One-time purchases" do not include add-ons (which are defined as something added to a recurring item) or gift subscriptions.
In the OTT segment, one-time offerings usually refers to pay-per-view events.
Percentage of TPV From One-time Purchases
20%
15%
10%
5%
0%
3.8%
14.4%
13.1%
15.2%
8.5%
1.9%
2.1%
1.5%
5.4%
4.9%
Digital
Physical
Consumer Goods
Box of the Month
Consumer Services
Education
Healthcare
OTT
Publishing & Entertainment
SaaS
Industry Segment
Key Takeaways
- While one-time events in the OTT segment are popular, these do not generate significant TPV. However, due to the exclusive nature of these special events, they can be an effective subscriber acquisition tactic.
- Subscription businesses selling physical goods benefit from a selection of well curated goods which boosts TPV, increases engagement and aids retention. Box of the Month and Consumer Goods are good examples.
Subscription Benchmarks
Top Payment Decline Reasons for ECommerce
Over 2,000 things can go wrong with a credit card transaction. How effective is your decline management strategy? Compare involuntary churn and payment recovery rates to find out.
Churn Rates
Breakdown of Churn Rates by Industry
Overall Median
7.02%
Digital Median
6.63%
Physical Median
10.11%
25%
20%
15%
10%
5%
0%
Consumer Goods
Box of the Month
Consumer Services
Education
Healthcare
IoT
OTT
Publishing & Entertainment
SaaS
Industry Segment
Key Takeaways
- Our data showed higher churn rates for physical goods compared to digital goods.
- Industries that tend to have seasonal or cyclical purchase patterns also experience higher churn rates than the overall average.
- Churn rates were particularly high among Box of the Month and Consumer Goods.
- Allowing subscribers to pause their subscription can be an effective way to reduce voluntary churn.
Summary
These benchmarks demonstrate how ecommerce companies utilize options such as plan lengths and product mixes across a variety of segments. Our data also shows how different segments experience varying rates of churn.
Comprehensive benchmark data can help businesses make informed decisions. When critical decisions are guided by data, acquisition, retention, and revenue can increase significantly.
Understanding how ecommerce businesses structure their offerings—and their results—is the first step.
Taking action is the next.
Methodology
We examined a sample of over 900 e-commerce sites which used the Recurly subscription management platform. The study encompassed a period of twenty-four months, from January 2017 to December 2018. All data was aggregated and anonymized. Our study uses median, 25th, and 75th percentile values to eliminate outliers and provide a more accurate representation of the data.