You might have experienced yourself that subscriptions for physical products like electronics, furniture, tools, bikes and more are on the rise. 

According to Juniper Research, consumer subscriptions for physical goods are expected to grow from $64 billion in 2020 to over $263 billion in 2025. And the the global subscription economy is projected to reach $1.5 trillion by 2025, marking a 435% growth over the past nine years.

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Take electronics, for example—companies like Grover, Samsung’s AI Subscription Club, and Lenovo TruScale are making it easier than ever to access the latest tech without the commitment of ownership.

The same shift is happening in mobility. Think of Swapfiets, Dance, or premium brands like Riese & Müller—all offering bikes as a flexible service rather than a one-time purchase.

In fact, by the end of 2024, circuly was powering subscription-based models in 17+ industries—from baby gear to industrial equipment and for a wide range of products from medical devices to camping gear. 

We’re witnessing this shift firsthand and with it, a broader evolution in how people talk about Product-as-a-Service, the circular economy, subscription-based business models, and the growing preference for access over ownership.

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So what kind of conversations are actually evolving?

• For some, it's about making premium products more accessible—offering customers the chance to try before they buy or upgrade anytime.
  
  
• For others, it's about extending product lifecycles through reuse, refurbishment, and reverse logistics.
  
  
• And for many, it’s a practical move to align with sustainability goals without compromising on convenience or profitability.

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With each new industry we support, one thing is crystal clear: Product subscriptions are fundamentally different from digital or consumable subscriptions.

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Unlike digital subscriptions (like Netflix or Spotify), where everything happens online, or consumable subscriptions (like HelloFresh or Dollar Shave Club), where the product is used up and replaced—product subscriptions revolve around physical items that need to be delivered, maintained, returned, and reused.

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Here’s a very practical operational example of what differentiates a physical product subscription from a digital and consumable subscription: cancellation.

• Digital subscription (e.g. Netflix): Cancel, and you lose access. No operations involved. No one is hoarding episodes of Stranger Things.
  
• Consumable subscription (e.g. HelloFresh): Cancel, and the next delivery simply doesn’t happen. No payment = no veggies.
  
• Product subscription (e.g. Grover): Cancelling means the product needs to be returned.
  From the customer’s point of view: either they return it and stop paying, or they forget—and payments continue.
  From the business side: you need to know what’s been returned, what hasn’t, and what to do when it hasn’t.

That’s why setting up a product-as-a-service model requires a completely different approach—operationally, logistically, and technologically.

While it's true that more and more companies are exploring how to integrate a service-based model into their business, the challenge of actually building and scaling this model still remains.

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Where does the complication come from

At first glance, running a subscription model for physical products looks a lot like running a traditional eCommerce business—especially in B2C. There’s a website, a product page, a cart, a checkout, and a payment.

So, it’s completely natural for many companies to start with the basics:
✅ A webshop
✅ A payment system
✅ Maybe an ERP to handle orders and inventory

Platforms like Shopify or WooCommerce even let you add a “Subscribe” button next to “Buy now” and offer recurring payments through your provider.
If all you want to do is charge customers on a recurring basis—yes, you can patch something together with those tools.

But that’s also where the complications begin.

1. Starting with spreadsheets

Many businesses begin by managing their subscriptions manually in Google Sheets or Excel—especially in the early days. It seems like a quick fix, but once you pass 50+ active subscriptions, it becomes a serious liability.

You’re manually tracking:

• Return dates
  
• Renewal dates
  
• Billing cycles
  
• Missed payments
  
• Subscription changes
  
  

And someone on your team has to keep it all moving—every single month.

This leads to the next hidden cost: You end up needing a disproportionately large customer support team just to keep everyday operations running.

That means higher operational costs, less time for strategic growth—and a business that’s harder to scale profitably. This is especially critical in product-as-a-service (PaaS) models.

Unlike traditional sales, where revenue is realised immediately, in PaaS the revenue is spread over time—often referred to as the “Swallow the Fish” curve. At the beginning, costs are front-loaded (e.g. product, logistics, setup) while revenue comes in gradually through monthly payments.

So, keeping operational costs low is essential for reaching profitability. A great example comes from Loopz Bike, a kids’ bike subscription company.

Their founder shared that after 30 months, the subscription model delivered 2.5x more profit than traditional sales. But that only became possible because they kept operational overhead low—especially in customer service.

So yes—subscriptions can be more profitable than sales. But not if you’re drowning in manual work and support tickets.

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2. Applying existing operations and processes

The next common move is to try and fit subscriptions into existing operational workflows—usually the same ones used for sales, logistics, finance, and customer support.

But physical product subscriptions require new workflows, such as:

• Handling swaps, upgrades, and repairs
  
• Tracking assets over time
  
• Managing ongoing customer engagement
  
  

These aren’t just minor tweaks—they’re fundamental shifts in how the business operates.

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3. Using tools built for sales—not circular models

Even with established systems like ERPs, shop systems, or digital subscription tools, you're likely to hit roadblock as these tools are dedicated to one-time transaction based sales and linear commerce. 

The customer buys a product → you ship it → the transaction ends.

That model doesn’t work when the product stays in circulation, returns are expected, and the relationship with the customer evolves over time.

For example, a typical operational topic in subscription-based models is churn prevention and the strategies around it. 

Bike Club Germany, one of our customers, shared in an interview that during winter, they run a retention campaign to reduce churn. Customers who opt in are offered a discounted subscription fee for the cold months. Later, the price goes back to normal. That small pricing flexibility keeps bikes with customers and churn low—and it’s only possible because they can easily change payment terms mid-subscription, a common operation not supported technically with tools like shop systems and PSP. 

“While these systems have been tweaked to accommodate digital subscriptions, subscribe-and-save, or subscription box models, they aren't built to handle the complexities of physical product subscriptions or long-term rentals.” - Nick Huijs, CTO & founder of circuly 

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Real-World Proof: Bugaboo’s Experience

Take Bugaboo, a Dutch manufacturer of high-end strollers with over 570 employees.

In 2016, they launched their first rental pilot—and it failed.

“Our first rental pilot was unsuccessful because we tried to incorporate the rental business into our existing ERP tool and into our existing process of sales, finance, and logistics—which was a huge mess and didn’t work out.”
— Rolf Smeding, Director of New Business Development at Bugaboo

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Now that we’ve unpacked where the complications come from, let’s shift focus.

This guide is here to help you understand what makes subscription management for physical products unique—and how to choose a solution that’s actually built to support it.

From reverse logistics to flexible billing logic, you’ll learn what to look for, what to avoid, and how to set your business up for long-term success.

Are All Subscription Models Operationally Different?

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Operations you need to consider when running a physical product subscription business?

Running a subscription business for physical products involves more than just setting up recurring billing. It’s an entirely different operational model that requires rethinking how you handle orders, payments, renewals, and more. Below is a breakdown of the most important operations to plan for.

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1. Order Placement & Mixed Baskets

Customers often expect to combine different products and services into a single order—for example:

• A coffee machine (physical product subscription)
  
• A pack of coffee beans (consumable subscription)
  
• A coffee mug (one-time purchase)
  
• Insurance for the machine (digital subscription)
  
  

For the sake of a unified customer experience and clean internal operations, this should ideally result in one order, one invoice, and one delivery. But in most eCommerce platforms like Shopify or WooCommerce, that’s not how it works.

Many businesses and community members have shared challenges such as:

• Two separate orders being created
  
• Double shipping charges applied
  
• Inconsistent checkout logic or missing payment options for mixed carts
  
  

You can read community-reported limitations here:

• Shopify Community: Double shipping charges for mixed carts
  
• WooCommerce Forum: Issues with Buy Once or Subscribe
  
  

2. Recurring Billing

At the core, subscription billing seems simple: you charge a fixed amount on a set schedule (monthly, quarterly, annually), and send an invoice. If that’s all you need, most recurring billing tools can handle it.

But physical product subscriptions often require more flexibility. You might need to:

• Adjust the amount mid-subscription
  
• Change the start date (e.g. product arrived late)
  
• Modify the duration (e.g. customer extends from 3 to 6 months)
  
• Apply a discount due to damaged delivery or goodwill
  
  

All of this needs to be possible without cancelling and recreating the subscription—because it’s still the same customer, the same contract, and the same product.

A practical example:Bike Club Germany runs a winter retention campaign where subscription fees are temporarily lowered during colder months to reduce churn. Once winter passes, the price returns to normal. That’s only possible if the system allows modifying an active subscription, which most standard setups don’t support out of the box.

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3. Renewals & Subscription Extensions

There are two common renewal models:

• Rolling monthly subscriptions that renew automatically until cancelled
  
• Fixed-term subscriptions (e.g. 3, 6, 12 months) that may offer extensions at reduced prices
  

For the rolling model, many companies implement a notice period—for example, customers must cancel within the first 15 days of the month to avoid being charged for the next. This is often driven by how payment schedules are generated and how much lead time the system needs for cancellation to take effect.

For fixed terms, businesses often offer loyalty extensions. If a customer has already paid off the product value, they can continue using it at a lower monthly fee—encouraging longer retention.

Again, Bike Club’s model is a good reference: after the initial contract term, customers can continue at a lower price, helping increase lifetime value without creating new subscriptions.

4. Payment Retries

Payment failures are common in long-term subscription businesses—cards expire, banks reject charges, or customers switch payment methods.

You need a system that:

• Automatically detects failed payments
  
• Retries them multiple times on a schedule
  
• Sends automated notifications to the customer
  
  

Most failed payments resolve themselves within the first or second retry attempt—manual tracking becomes impractical once you pass a few hundred subscriptions.

5. Debt Collection

When retries fail, the next step is debt collection. This can be handled:

• Internally, through follow-up emails or phone calls
  
• Externally, by working with debt collection partners or buy-now-pay-later providers with integrated recovery systems
  
  

At this point, it's important to distinguish between customers who simply missed a payment and those who are deliberately unresponsive. The approach and tools differ accordingly—especially when high-value assets are still in the field.

6. Identity & Credit Checks

Because physical products are involved—often expensive ones—it’s common to verify the identity or creditworthiness of customers before handing over the product.

Approaches vary:

• Soft credit checks during checkout
  
• Micro-deposits to validate payment method
  
• ID verification at pickup (e.g. Swapfiets requires ID when picking up in-store)
  
  

The right method depends on your risk profile, customer base, and how you deliver your product (e.g. shipping vs. local pickup).

7. Asset Tracking

In physical subscriptions, you still own the product—so tracking its status and history is essential.

Most consumer-facing products don’t include built-in GPS or IoT tracking (and doing so may not even be legal in some countries), so other methods are required:

• Serial numbers linked to the subscription
  
• Tracking key product data such as:
  
  • Usage cycles
    
  • Repair history
    
  • Revenue per product
    
  • Last customer
    
    

This also becomes critical for:

• Swaps and upgrades: when a customer receives a new product, the system should update the subscription and inventory logic accordingly
  
• Damage claims: linking a specific product to a specific customer helps resolve disputes
  
  

Asset tracking isn't just about logistics—it's tied to financial performance and customer experience.

8. Return Management

When a subscription reaches the end of its minimum period, and the customer chooses not to renew, the product typically needs to be returned.

That involves:

• Triggering customer communication: “Would you like to return or extend?”
  
• Monitoring whether the product has been returned
  
• Stopping recurring payments only after the product is confirmed as returned
  
• Continuing to charge if the product is not returned on time
  
  

This flow needs to work reliably and automatically in the background to avoid revenue leakage or customer dissatisfaction.

9. Backend Order Creation & POS

Depending on your setup—online shop, retail partnerships, or physical stores—you may need the ability to:

• Create or edit orders manually from the backend
  
• Support subscription creation at the point of sale (POS)
  
• Enable retail partners to create subscriptions that sync with your system
  
  

For example, if a product is subscribed to in-store via a retail partner, that order should connect directly with your subscription management and fulfillment logic without manual intervention.

10. Customer Self-Service Portal

Customers expect control and transparency. A good customer portal allows them to:

• View current subscriptions
  
• Update personal or payment info
  
• Initiate returns, swaps, upgrades, or cancellations
  
• Download invoices
  

This reduces support burden and improves customer experience.

11. Buyouts and Product Purchases

Some businesses offer customers the option to buy the product they’re subscribing to—either by default or on request.

Operational considerations include:

• Calculating the buyout price (often subtracting paid amounts)
  
• Communicating the offer and price clearly to the customer
  
• Updating the subscription and product status
  (e.g., subscription ends, product is marked as sold, stock levels adjusted)
  
  

12. Swaps, Upgrades, and Downgrades

Offering flexible swaps or upgrades can improve retention—but it adds complexity.

Questions to define operationally:

• Can customers swap freely or only within a predefined range?
  
• Is this available in self-service or only via support?
  
• How are swaps tracked against product and customer lifecycle?
  
  

Each swap also requires updating inventory, billing, and product history.

13. Referral Programs & Loyalty Discounts

Many subscription businesses encourage referrals by offering:

• Discounted future payments
  
• Bonus months
  
• Loyalty milestones (e.g., reduced rates after 12 months)
  
  

Even small incentives can boost lifetime value—but they need to be tracked and managed automatically to scale.

14. Key Metrics and KPIs

To improve and scale, you need to monitor the right data. Important metrics include:

Customer-related:

• CLTV (Customer Lifetime Value)
  
• Referrals made
  
• Active vs. churned subscriptions
  
  

Product-related:

• Number of rental cycles per asset
  
• Repair costs per asset
  
• Lost/stolen/damaged products
  
  

Revenue-related:

• Monthly Recurring Revenue (MRR)
  
• Failed payments vs. recovered
  
• Refund rates
  
  

15. Refunds

Whether it's due to late delivery, product damage, or customer goodwill, refunds are a core part of any subscription model. You’ll need:

• A clear refund policy
  
• Internal workflows for approving and issuing refunds
  
• System logic to tie refunds back to specific billing cycles or products
  
  

16. Cancellations

Clear rules and automated flows are critical here:

• When can a customer cancel?
  
• What happens if they cancel but don’t return the product?
  
• Is there a notice period?
  
• What notifications are sent (e.g., confirmation, reminder to return)?
  
  

Automating these flows helps reduce confusion and minimise revenue loss.

17. One-Time Charges

You may occasionally need to charge for extras like:

• Out-of-warranty repairs
  
• Delivery attempts
  
• Product damage
  
  

These need to be linked to existing subscriptions or orders and tracked for reporting.

18. Full Lifecycle Overviews

For true operational clarity, your system should provide visibility into:

Customer lifecycle:

• How long someone has subscribed
  
• Total revenue generated
  
• Referrals or upgrades made
  
  

Product lifecycle:

• Revenue per product
  
• Repair history and costs
  
• Number of customers served
  
  

Subscription lifecycle:

• Duration of subscription
  
• Changes made over time (pauses, swaps, extensions)
  
  

Payment lifecycle:

• Payments collected, failed, or refunded
  
• Number of retries
  
• Outstanding balances
  
  

19. Bundling and Multi-Item Tracking

Bundling is common—e.g., a bike + helmet + lock. Even though they’re shipped together, each item may have its own ID, pricing, and return policy. You’ll need to:

• Track each item individually
  
• Associate them with the correct customer and subscription
  
• Manage swaps or replacements at the item level
  
  

20. Product Exchange Logic

Some businesses offer flexible exchanges (“any product in this category”), while others define a set of allowed swaps. You’ll need to define:

• Eligibility rules
  
• Price adjustments (if needed)
  
• Availability of replacement products
  
  

21. Localisation: Tax and Shipping

Selling in multiple countries brings challenges like:

• Different VAT or sales tax rules per product type and region
  
• Varying shipping costs depending on location, product weight, and cart value
  
  

Your system should apply taxes and shipping rates automatically based on these factors.

22. Automated Transactional Emails

To keep customers informed, automated emails should cover:

• Order confirmation
  
• Subscription activation
  
• Upcoming renewals
  
• Payment receipts
  
• Return instructions
  
• Cancellation confirmations
  
  

These communications not only reduce confusion but also help build trust and improve transparency.

Conclusion: running a subscription business for physical products isn’t just about billing

As we've explored, running a subscription business for physical products is fundamentally different from digital or consumable models. It’s not just about recurring billing—it’s about managing the full lifecycle of the product, the customer, and the subscription itself.

From returns and swaps to asset tracking, buyouts, and customer self-service—every operation requires a system that goes beyond one-time sales logic. And while traditional eCommerce tools can help you get started, scaling a physical product subscription model calls for infrastructure built to handle the realities of Product-as-a-Service.

Whether you’re just exploring the model or actively looking for solutions, the most important step is understanding what’s required behind the scenes. Because the success of your subscription business won’t just depend on demand—it will depend on your ability to run smooth, scalable, and intelligent operations.