Technology of the week – two different types of subscription models


Technology of the week – two different types of subscription models

How can a retailer keep a price-sensitive customer? And how can a company make sure they have the right products in stock? A possible solution is the subscription ecommerce business model. Consumers take a subscription on a certain type of product and receive it every month. The added comfort of getting a product delivered to your home without having to search for it makes up for the lack of choice or potentially higher price. In addition to product-based subscriptions, consumer can subscribe to additional services an online retailer has to offer.

Amazon Prime

An example of a service-based subscription model is Amazon Prime. It was initially founded to decrease the delivery time for shipping goods. However, now it provides users with additional services, like for example a Netflix-like application, free e-books for a Kindle e-reader and a subscription to the Washington Post. The retail business and the subscription service co-exist, since Amazon is making enormous losses on Amazon Prime, however Amazon Prime subscribers create two times the revenue of a normal Amazon client.

Outfittery.com

An example of a product-based subscription model is outfittery.com. This online company provides a solution for men who do not like, or do not have time to go shopping. The idea of outfittery.com is simple; the customer creates a profile on the website of Outfittery and fills out a survey about their personality, style and sizes. They complete this with an upload of a picture and making an appointment with a personal style-expert. These experts will contact the customer to get a more personal, complete profile of the customer.

Comparison of both models

An important strength for both of the models is that it truly creates value through their services, which has great advantages over conventional (e-commerce) models. One important advantage of the model used by Outfittery, is that once you subscribe, there are no further actions you have to take to fully exploit your membership. This is different compared to Amazon, where you have to take subsequent actions to maximize the profit out of your membership. An advantage of Amazon Prime’s model over the one of Outfittery, is that the products they provide can be bought without the membership as well. Another an advantage of Amazon Prime is that the consumer can decide which product will be bought. Lastly, Amazon is more dependable on third parties to adequately execute its major proposition. Delivery speed covers a significant part of the service customers pay for, and Amazon cannot control quality accurately.

Future of subscription models

To conclude, the subscription model will be the future. It provides companies with a continuous and in advance known flow of income. In a world where time is getting more and more valuable and we want an experience. This model can give companies economic stability for companies As a result this will be the model that is going to be applied by a lot of major companies.

Fabian Dekker 332721

Mitch Houthuijsen 356092

Victor Noya 360681

Rinke Raven 358516

Robbert-Jan Wanna 329761

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