SAAS software businesses have been using a subscription model for years now, and for a good reason. Businesses with recurring revenue can often be valued up to 8 times that of a business without subscriptions. Ecommerce businesses are now catching up, with many ecommerce businesses using subscriptions to increase the revenue of their brand, and get a bigger asking price when they come to sell the business.
Subscription payments offer opportunities to increase sales that many ecommerce brands are missing out on. But subscriptions also raise questions for ecommerce business owners, such as how to manage recurring payments or what to do with failed payments.
In this guide, we will look at how you can optimize your ecommerce subscription payment processing to improve your bottom line and leave your customers happier, so let’s jump in.
What Is Subscription Payment Processing?
Subscription payment processing is an online payment method where businesses take payments at regular intervals, such as weekly, monthly or annually.
Ecommerce subscription businesses usually send customers products on a regular basis and charge their card automatic recurring payments for the products. Some charge a monthly fee, whereas others offer a discount for recurring payments.
The most common ecommerce subscription models are gift boxes such as TheraBox, hobby kits such as Mix Box, or consumables such as Dollar Shave Club. However, many different types of ecommerce brands now offer subscriptions, including fashion brands such as Rent the Runway.
Each of these brands will have a payment processing system that takes payments automatically on a regular basis, without the need to send invoices or reminders to pay. This makes it very efficient to take regular payments, leaving you to concentrate on business-critical activities such as marketing.
How Does Subscription Payment Processing Work?
- Customers choose a product, or set of products that they would like to be sent regularly.
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