Why merchants need subscription-management tools

Not only are consumers being drawn to subscriptions in droves, but merchants are, too. From meal kits and pet food to streaming entertainment, offering subscriptions provides businesses with a reliable revenue stream while creating a more consistent relationship with their customers. 

The global subscription e-commerce market size is expected to increase from $72.91 billion in 2021 to reach $904.2 billion by 2026.¹ A recent survey conducted for Ethoca by Datos Insights found that 56% of merchants currently offer some form of subscription, while the remaining 44% expect to do so in the next one to two years.²

The soaring growth in subscriptions presents an opportunity for merchants to offer consumers subscription-management tools that provide more visibility and control over their recurring payments—such as the ability to cancel or pause their subscriptions with the click of a button. At the same time, merchants will benefit from these tools as well.

Here are three reasons offering subscription-management capabilities makes sense for merchants:

1. Merchants want subscription-management capabilities. 

Now that so many merchants offer subscriptions—or plan to—many of them have also expressed the need for tools to help them better manage them.

In fact, subscription management was the second most popular feature that merchants were interested in, aligning with their business priorities, according to the Ethoca survey.¹ The survey also found that merchants are interested in subscription management being offered through online and mobile banking applications, including giving customers a self-service tool that allows them to pause, resume, upgrade and downgrade their subscriptions.² 

2. Subscription controls can drive revenue and enhance customer experience.

New customer acquisition and increasing revenue are top priorities for merchants.² But to draw in customers and generate more revenue, they have to offer consumers the experience they want. Increasingly, consumers seem to want and need subscription controls.

Another survey for Ethoca by Datos Insights found consumers want subscription controls through their digital banking apps, and many are even willing to switch banks to access them.³ Thirty-five percent of consumers surveyed consider canceling or pausing a subscription to be somewhat or very difficult, with 22% saying merchants have required additional information to do that.³

Merchants may worry about giving customers too much control over the subscription process for fear of increasing attrition, but ultimately, they could lose loyal customers if they don’t make customers’ subscription-management experience easier. As subscription controls become more commonplace, consumers will expect them from the merchants and issuers they do business with. Moreover, by automating subscription-management activities through consumers’ digital banking apps, merchants can reduce the costly burden of managing them. 

3. Subscription management is very expensive for merchants.

As is, merchants spend a lot of time and money managing customers’ subscriptions—fielding calls, emails and online chats asking that subscriptions be paused or canceled. In fact, 70% of merchants surveyed reporting spending 11 to 40 hours per week managing subscriptions, an Ethoca survey found.² 

Moreover, 86% of merchants with revenues between $250 and $999 million reported having more than 40 employees assigned to subscription management, as did half of merchants with $1 billion in revenue.² 

This suggests that a self-service tool that lets customers easily pause or cancel their subscriptions without needing to contact the merchant would help reduce operational costs significantly.

Why the time to provide subscription management is now

The growth of subscriptions is not likely to stop, and as more get introduced, it will be important for merchants and issuers to find ways to let consumers self-manage their subscriptions. Failing to do so could lead to more cardholder disputes over recurring charges and, in turn, higher operational costs and a poor customer experience.

Ethoca Consumer Clarity^TM can provide subscription controls through issuer-delivered digital receipts—shifting merchants’ subscription management activities to customers’ digital banking application.

To learn more about how subscription controls work, read our blog post.

Sources:

1. PR Newswire, The Business Research Company, “Subscription Ecommerce Market Growth Rate Reaches A Whopping 65%,” April 27, 2022.
2. Datos Insights. Merchant Perspectives on Digital Receipts and Digital Banking.
3. Datos Insights. Digital Banking and Consumer Clarity: Q4 2023 Survey Findings.