eCommerce is booming. But behind the scenes, many brands are struggling with skyrocketing customer acquisition costs, unpredictable cash flow, low repeat purchase rates, and growing pressure to prove they’re truly sustainable.

For most European eCommerce brands, the average CAC now sits between €70 and €100—up more than 40% over the past two years—as crowded ad channels and rising competition drive up costs .

The truth is, these problems aren’t new, and neither are the solutions. 

In fact, subscriptions have been a cornerstone of B2B business models for decades, precisely because they solve these kinds of challenges. 

Think of Philips’ “Lighting as a Service”, where customers pay monthly instead of investing heavily upfront, helping Philips accelerate sales cycles and stand out in crowded markets. Or medical equipment providers who use subscriptions to spread costs for hospitals and clinics, making deals easier to close while locking in long-term partnerships.

Want to see what companies like Philips, Riese & Müller and other companies learned from adopting a subscription-based business model? Read the case studies here: Product-as-a-Service Case Studies & Success Stories: Lessons learned from Philips, Riese & Müller, and More.

Why? Because subscriptions:

• make revenue predictable,
• reduce large capital hurdles,
• foster deeper customer relationships,
• and provide valuable usage data to refine offerings,

all while offering customers a more manageable, flexible way to pay. Learn more about the benefits of operating a subscription-based business model for consumer durable & physical products. 

In the past decade, these advantages have spilled over into the B2C world. 

Companies in the digital space, from software tools to e-learning platforms, jumped in first, using subscriptions to secure steady revenue, grow customer loyalty, and gather rich behavioural data. 

Then came the replenishment and consumable sectors: meal kits, personal care products, and household essentials that made subscriptions a consumer habit.

But when it comes to consumer durable products — like e-bikes, premium kitchen appliances, baby gear, and tech gadgets — many brands have held back. Often, they see subscriptions as risky or worry they’re only suitable for software or everyday consumables.

The good news? Those digital and consumable brands have already made subscriptions mainstream. Consumers today don’t just accept subscription models — they expect them. And a new wave of durable goods brands is proving how well this works. 

Companies like Bike Club, Grover, and Swapfiets have built thriving businesses on subscriptions and rentals, enjoying faster growth, higher customer lifetime value, and more sustainable, circular operations.

So if you’re an e-commerce brand selling physical products, subscriptions aren’t some risky experiment. They’re a well-tested strategy that’s already helped countless businesses — B2B and B2C — tackle exactly the challenges you’re facing. The only question now is how you can adapt it for your products.

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What are the biggest challenges e-commerce brands face right now?

• Customer acquisition costs (CAC) keep rising
• Retention rates are low, resulting in low customer lifetime value (LTV)
• Brands often lack clear retention strategies
• Inventory ties up capital and becomes a hidden cost
• Returns add another layer of operational and financial pain
• Many brands simply copy competitors instead of innovating
• Unpredictable revenue makes growth and forecasting difficult
• There’s increasing pressure to be genuinely sustainable, not just appear sustainable

To explore the topic in detail, we talked with Ollie Mowles, Laura Plumstead from Pivotal, and Scott Galvao from circuly. Laura & Ollie both work closely with a wide range of e-commerce brands across industries and shared firsthand what they’re seeing right now as the biggest challenges holding brands back — and what’s costing them growth, profit, and long-term customer loyalty. Scott is the CEO of circuly and has been working in eCommerce for over two decades now.

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Watch the full webinar for a detailed insight.

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Why are customer acquisition costs (CAC) climbing year after year — and how long can brands afford it?

The cost of digital advertising has surged over the past few years. As more brands flood platforms like Meta and Google, bidding wars drive up prices. Meanwhile, changes like Apple’s iOS privacy updates have made ad targeting less precise, so brands pay more to reach the right people. Layer on growing competition in nearly every category, and your cost per acquisition keeps rising. 

Laura from Pivotal confirmed this is exactly what they’re seeing across clients:

“The cost of actually acquiring a customer is just going up year on year on year. That makes it much harder to then make sure that first sale is profitable.”

In other words, you’re spending more just to win that initial sale, and the pressure is on to make it pay off over time.

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Why do so many eCommerce brands struggle with low retention and poor customer lifetime value (LTV)?

It’s one thing to get a new customer. It’s quite another to keep them coming back. In many verticals, online shoppers buy once and never return, often because brands lack a compelling reason for them to stick around. Without repeat purchases, you never recoup that hefty CAC.

As Laura put it:

“They're constantly paying for new customers, but not turning those one-time customers into lifelong buyers. There’s really low loyalty these days.”

Low LTV means the math behind your marketing starts to break down.

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Why is “loyalty” often reduced to just a points program, and why doesn’t that build real customer relationships?

In the rush to solve retention, many brands launch a loyalty program and call it done. But most of these are underpowered, generic, and don’t meaningfully engage customers beyond a discount after a few purchases.

Laura highlighted how common this shallow approach is:

“A lot of people think in terms of retention, it’s: oh yeah, let’s implement a loyalty scheme, and that’s retention. But there’s so much more to it than that.”

Loyalty needs to be about ongoing value and consistent experiences, not just handing out points.

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How is excess inventory quietly draining your resources, and why are so many brands stuck with warehouses full of unsold products?

When you forecast demand wrong or chase every new trend, you end up with unsold stock. That means more money tied up in goods sitting on your shelves, plus higher costs for warehousing, insurance, and even markdowns to move dead stock.

Ollie described how pervasive this is:

“Time and time again we speak to businesses that have products just sitting in their warehouse. That’s a cost — because not only has it not paid for itself, you’ve got to staff a warehouse big enough to stock it.”

Inventory isn’t just cash tied up — it’s also ongoing operational expense.

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Why do returns hit high-ticket and considered purchases so hard, turning once-sellable items into warehouse losses?

For big-ticket items with longer consideration phases — like strollers, furniture, or tech — returns can be devastating. A single open box can turn a brand-new product into something that’s hard to sell again at full price.

Scott shared a vivid example:

“A brand had this whole section of their warehouse dedicated to returned products. Nothing wrong with them except the box was open. They couldn’t resell them — they just sat there with no hope of monetisation.”

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Why do so many brands just copy competitors instead of trying something new, and what’s the cost of playing it safe?

When markets tighten, many businesses look to competitors for reassurance. If no one else in your space is trying new models, it’s tempting to play it safe. But that also means missing out on innovative ways to solve old problems.

Laura noted:

“Another one of the biggest challenges is brands just aren't willing to try anything new. They want to follow competitors. But the people we see succeed are the ones really changing how their industry works.”

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How does relying on one-off sales make revenue unpredictable and scaling risky?

Without recurring revenue, e-commerce brands live and die by seasonal spikes. The big payday comes on Black Friday or at Christmas, but what about the rest of the year? That roller coaster makes cash flow planning — and investing in growth — a nerve-wracking gamble.

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Why is it so difficult for brands to move from “greenwashing” to truly sustainable, circular models?

Today’s customers care about real sustainability. So do regulators. But most e-commerce brands still struggle to go beyond eco-friendly packaging. Keeping products in circulation longer — refurbishing, reusing, responsibly recycling — is hard to pull off without a model like subscriptions.

Scott explained it simply:

“So many brands know they need to go green, but how do you realistically do that as an e-commerce business? Tweaking packaging helps, but real sustainability is about process — like creating a subscription model that keeps products in use, not in landfills.”

Learn more about marketing circular business models without sounding like a sustainability cliche. 

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How subscriptions solve these challenges

• Lower the risk of high customer acquisition costs (CAC)
• Increase retention rates and customer lifetime value (LTV)
• Replace shallow loyalty tactics with real, ongoing customer relationships
• Turn inventory from a cost centre into a recurring revenue engine
• Make returns a built-in, profitable part of the business model
• Drive more frequent upgrades and higher overall product usage
• Create predictable, recurring revenue that stabilises cash flow
• Enable true sustainability and circular practices, not just greenwashing

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How do subscriptions reduce your customer acquisition cost (CAC) risk?

Subscriptions let you spread the cost of acquiring a customer across many transactions, not just the first one. Instead of hoping to break even on the first purchase, you can recover your CAC over several billing cycles — dramatically improving your unit economics.

Scott put it clearly:

“You may still pay a decent amount to acquire a customer. But with subscriptions, you're earning that cost back over time, creating long lifetime value. And if you're sending them an invoice every month, that's also another opportunity to upsell.”

By reducing the pressure on that initial sale, you unlock more sustainable growth.

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Why do subscriptions naturally drive higher retention and LTV?

Unlike one-off transactions, subscriptions build an automatic long-term relationship. Customers stay engaged month after month, which means more opportunities to deliver value — and more reasons for them to stick around.

Laura highlighted why this is so powerful:

“Subscriptions are designed to keep people connected to your brand. That means it’s not just about paying once and leaving — it’s about ongoing engagement.”

In other words, retention and higher LTV are built right into the model.

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Can subscriptions solve the inventory and returns headache?

Absolutely. Instead of products gathering dust in a warehouse, subscriptions keep inventory in circulation, actively generating revenue. Even when items come back, it’s not a financial dead end; it’s a planned part of the cycle.

Ollie explained:

“When you look at subscriptions, you get products out of your warehouse and into somebody’s hands. They're using it, which is why we’re all in business. And you’re cutting your own costs — no more warehouses that are a pure cost center.”

And Scott added:

“A phone or Thermomix that comes back isn’t worthless. Clean it up, refurbish it, and it’s essentially new again. That’s a revenue stream that would otherwise just be loss.”

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How can subscriptions actually increase consumption and upgrade cycles?

Subscriptions often shorten replacement or upgrade timelines. For instance, people might buy a new pair of glasses every 5–10 years — but on a subscription, they refresh every two years. That means more frequent touchpoints and more overall sales.

Scott shared a perfect example:

“One of our clients rents out eyeglasses. Instead of every 5 to 10 years getting a new pair, via subscription people come back every two years. More touchpoints, more chances to upsell, and more value for everyone involved.”

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Do subscriptions make revenue more predictable?

Yes — perhaps the single biggest advantage. Instead of living from one flash sale to the next, subscriptions create steady, recurring cash flow. That smooths out the spikes and dips, making it far easier to forecast, hire, and invest confidently in growth.

This is exactly why B2B industries embraced subscriptions decades ago — and why it’s now becoming a lifeline for B2C brands too.

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How do subscriptions turn sustainability from marketing slogan to real practice?

Because you keep ownership of the product, you control what happens at the end of each cycle. Items can be refurbished, rented again, or responsibly recycled — building a true circular business model.

Scott pointed out:

“So many companies know they need to go green, but how do you do that as an e-commerce brand? Packaging tweaks help, but a subscription model is a realistic way to market yourself as actually going green — not just greenwashing.”

It’s also what customers increasingly expect — and a powerful brand story.

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What products work best for subscription models?

Not every product is made for subscriptions. Like any smart strategy, they work best when your products and customers fit a certain profile.

If you want a more detailed way to figure out whether a subscription model is right for your business, we’ve put together a practical guide that walks you through all the key questions to ask.

👉 Check it out here: Key Questions to Determine if a Subscription Model is Suitable for Your Business

For a quick overview, continue reading

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Ideal candidates for subscriptions

Where subscriptions work best:

• High-value, durable products. If your products are built to last and carry a price point that makes monthly payments attractive, subscriptions are a natural fit. Think e-bikes, smart kitchen appliances, high-end baby gear, or DJ equipment. Customers appreciate lowering upfront costs while still accessing quality.
  
  
• Products customers want to upgrade or swap out regularly. Subscriptions shine when people enjoy having the latest model or style. Categories like tech, wearables, or even specialty eyewear see customers happy to exchange products more often under a subscription than they would ever repurchase outright.
  
  
• Items that can be refurbished and reused. A key advantage of subscriptions is keeping products in circulation. If your goods can be easily cleaned, maintained, or refurbished to near-new condition, you’re set up to monetise them across multiple customer cycles — extending product life and boosting profitability.
  
  

Where subscriptions usually don’t make sense:

• Low-cost, low-barrier products. As Laura from Pivotal put it:
  
  “If a customer can buy your product for 34 euros, they’re not going to pay that every month to rent it.”
  
  When ownership is already cheap and frictionless, subscriptions add no real value.
  
  
• Fragile products with short lifespans. If your items break down quickly or aren’t built to handle multiple usage cycles, you’ll end up spending heavily on replacements and repairs, eroding any margin a subscription might offer.
  
  

A gut-check question to ask

Ollie summed it up well when he said it’s about honestly assessing fit:

“Have an honest conversation: are you set up to do this? And if not, is it something you’re willing to invest in?”

It’s better to answer that now than get six months down the line and realise subscriptions simply don’t suit your products or operations.

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How to start exploring subscriptions for your brand

By now, it’s clear that subscriptions aren’t just a clever pricing tactic — they’re a strategic way to solve core e-commerce challenges. But how do you actually begin to test if this is the right move for your business?

Here’s how to start smart.

Validate fit with your customers

Start by talking to your existing customer base. Would they welcome a subscription option — either to reduce upfront costs, get easier upgrades, or try before fully committing?

Laura suggested looking beyond just your loyal customers:

“You’ve probably got a small set of customer champions who’d be happy to answer a few questions or jump on a quick call. But also think about the people you didn’t convert. Was price the reason? Would they have moved forward if it was a subscription?”

This gives you real signals before you change anything operationally.

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Align your team around the model shift

A subscription business means you’ll handle products differently. Returns aren’t losses anymore — they’re planned parts of the cycle. Marketing messages change. So do cash flow expectations.

It pays to have an honest internal conversation early on. Ollie put it plainly:

“Are you set up to do this? And if not, is it something you’re willing to invest in?”

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Assess your operational and tech backbone

Subscriptions for physical products are more complex than simple SaaS renewals. You’ll need to:

• Manage product-level tracking (where each item is, what condition it’s in)
• Handle credit checks and dunning processes
  
  
• Build flows for cleaning, refurbishing, and repackaging
  
  

Learn more here in this guide: Six pillars of a subscription business for physical products

Scott cautioned against relying solely on basic plug-and-play apps:

“Those apps might work for consumables. But with physical products, you need serious systems. That’s where a platform like Circuly comes in — we make sure the backend actually supports your subscription promises.”

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Start small and learn fast

You don’t have to overhaul your whole business at once. Many brands pilot subscriptions with a single product category or a carefully chosen customer segment. This keeps risks low and learnings high.

Bring in expert partners

From managing credit checks to automating returns and refurb workflows, a specialised partner like circuly helps you avoid operational pitfalls. That means you focus on growing your customer base, while we handle the subscription infrastructure that makes it all run smoothly.

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A final thought: why now is the time

Subscriptions have been solving these exact challenges in B2B for decades, and they’ve become second nature in digital and consumable B2C products. Now, durable goods are catching up — and customers increasingly expect flexible ways to pay and use.

Ollie summed it up well:

“Ultimately we’re all here to get more of your products into your customers’ hands. Subscriptions make that process frictionless — and more profitable. Keep an open mind and don’t let perceived barriers stop you from at least exploring it.”

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