Top 8 Challenges That Stop Your Subscription Business From Scaling

October 18, 2021

Introduction

When it comes to identifying challenges faced by a company running a subscription business, some are rather obvious, and some are not. The obvious ones being finding customers who want to subscribe instead of buying, having a better product offering than your competitors and maybe even changing customer psychology towards subscribing instead of buying,

This is especially true for car subscriptions and rentals because the general customer attitude leans more towards owning a car than subscribing to a mobility service.

Even though there is no denying the fact that car and mobility subscriptions are on the rise and many big players are entering the market given the opportunities in the industry, there still needs to be mass awareness about the possibility of subscribing to a car itself.

Coming to the not-so-obvious challenges, both established companies and startups face challenges often not discussed in the subscription space.

In theory, the concept of offering a physical product as a service, such as a car or a bike, sounds uncomplicated and pretty straightforward. It isn’t until a company goes through a few orders and increases the customer base that they realize, “Oh Shit, what do we do now? And how do we manage that.”

The obvious thing to do is, of course, ask Google. Google knows EVERYTHING.

But what do you do when there is not much information out there about a specific topic because the topic itself is new.

Well, then you soldier up and think, “to hell with it, I will learn by doing”. I would say a decent approach as long as the business is small, but you can’t afford learning by doing when you want to scale, and I mean truly scale.

‍That’s the exact cause why you need to familiarise yourself with use cases in the subscription space and learn from the mistakes of other subscription companies.


Before we get started, let’s look at a straightforward business model of a car subscription company.

Challenges that stop a subscription-based e-commerce

1. Customer Experience

Keyphrases:

  • All about customer experience
  • Renting should be as easy as buying.
  • Simplified renting processes

Recall some of your best purchase experiences. What was a standard variable in all of them?

If I am talking about myself, it was probably how fast I was able to get through the website in searching for a product that I want, adding it to my cart and clicking buy (amazon even lets me skip the “add to cart” step and allows me to click buy directly).

My task is done, and now I have to just wait for my doorbell to ring and for the delivery guy to say, “I have a package for >Insert Name<”.

And that is the core of buying online. It’s all about the customer experience.

Your customers don’t care about what you have to do in the backend. They also don’t care about how complicated it is actually to make the service available to them.

For them, the experience needs to be satisfying.

If you are making your customers fill a form to get a quote, your digging a grave for your own business.

Renting or subscribing to a product needs to be as easy as buying even though they are not even two sides of the same coin and have totally different processes.


2. A CMS Is Not Enough

  • A CMS is necessary but not enough
  • A CMS is not built for subscription/rental operations

CMS or a content management system like Shopify, WooCommerce or Shopware are an integral part of creating that ultimate shopping experience.

But that’s the thing, they are an integral part of creating a “shopping” experience and not a “renting” or “subscribing” experience.

A CMS is for anyone who doesn’t want to develop a webshop in-house and just wants to get started without familiarizing oneself with running code.

Though necessary for running any kind of webshop, a CMS is not built to deal with the typical operations of a subscription/rental business.

A CMSs functionality is limited to selling a product and sending an invoice for the same but not for tracking the product, dealing with returns and sending monthly invoices.

A subscription-based e-commerce business needs a CMS, but only to create 40% of the perfect customer experience. It needs a subscription management software for the remaining 60%

Read more about all the operational activities a CMS is unable to do for a subscription/rental business model.


3. Customers Can Buy in Seconds. Why Rent in Days?

Most subscription businesses face the problem of not having enough customers and therefore not earning enough revenue to scale.

Where is the problem? Lack of awareness is not so much of a problem as it is the lack of automation of operational activities.

If I go online right now and look for car subscriptions on Google, half of the search results will be from websites that completely destroy the customer experience.

To simply subscribe to a car, I need to write a few emails, wait for someone to respond to my email, ask for a quote, wait for the answer and send a response. This can take days, if not weeks. And honestly, most customers like me run away from platforms like that.

It’s not like subscription companies want to make the process slower deliberately. But what can they do with the limited manpower that they have?

Click! Click! Done! That's what the customer is used to now!

This brings us to the next challenge faced by mobility subscriptions/rentals.

4. Manual Operations

For most subscription/rental businesses, an excel sheet in the background is often doing the heavy lifting of tracking, payment dates and billing cycles.

An employee with intermediate to advanced excel skills spends at least some hours of his working time punching numbers manually and tracking orders. Maybe also often setting up reminders in the calendar to send invoices to the customer and payment reminders.

As a result, the company calendar looks something like this:

So instead of focusing on capturing more leads and working on overall customer value, there are often “n” number of people involved in just dealing with day-to-day operations.

That doesn’t really look like a roadmap that will help a subscription business scale and earn more revenue.

5. Billing and Invoicing

Well, this one is rather obvious, isn’t it?

An E-commerce business has to send an invoice once, but a subscription-based business has to send invoices often on a monthly basis until the contract’s conclusion.

On top of that, there are sometimes even payment reminders that need to be set in place. The invoicing and billing operation for any kind of e-commerce platform needs to be automated.

If you simply do the math, having ten customers means spending 100 minutes per month on making invoices and if you have 100 customers, that’s 1000 minutes (16 hours) gone making invoices.

You probably know that making invoices is not a priority for a business rather a mere operational task that needs to be done. The focus is to create consistency through automation in day to day operations and focus on vital business activities.

6. Lack of Awareness

Well, this one is true for many products and services out there, but in the subscription space, lack of awareness among the users is more of an opportunity because companies who are able to position themselves early-on in the market and provide value to its customers while building trust are going to profit from it in the longer run.

But in order to focus on the marketing and sales aspect of a subscription business, all the operational activities need to be automated and that is usually an anchor for subscription businesses.

7. System and Platform Integration

Up-selling and cross-selling are great ways for earning additional revenue from already paying customers. But for a subscription business running over an CMS platform, that is often not possible because traditional CMS doesn’t allow subscribing plus buying on the same checkout page.

So imagine that even though in theory it would be possible to upsell a car with additional features and cross sell with new seat covers, and bank that additional revenue, your CMS platform is just not built to let you do that.

8. Adding New features

A subscription business for physical products has specific needs. These needs are often not met by a CMS. For example adding a calendar tool for selecting a delivery date based on your inventory or changing subscription pricing based on length of subscription duration.

The next best option is to develop something in-house, but often additional resources and technical knowledge are required to do so.

Conclusion

As a subscription-based e-commerce business or perhaps a company planning on entering the space, where do your priorities lie? If most of your time or your employees time is spent keeping up with the excel sheet and tracking everything there then your business is losing to younger businesses and service providers who have embraced automation through a subscription-management software.

Answer these questions for your business before you move on to some other task:

  1. Are the operational activities of a subscription-based e-cmmerce business same as that of a regular e-commerce business?
  2. Do you want to spend majority of your time in keeping up with excel and tracking subscription orders in thousand of rows and columns of excel?
  3. Can you scale your subscription business like this?

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