Podcast

Lauren Stiebing 06 September 2021

How to Successfully Set Up a Subscription E-commerce Business

Today we have invited Amit Singhal to discuss with us how he and his team were able to Successfully Set Up a Subscription E-commerce Business. Amit is a Digital Commerce leader experienced in developing and driving revenue opportunities in Fortune 500 Consumer goods companies with expertise in all things digital – eCommerce, Direct-to-Consumer, B2B & Commercial Analytics. He led the creation of the highly successful Subscription-based Direct-to-Consumer business ‘Hill’s to Home’ in the USA for Hill’s Pet Nutrition, a division of Colgate Palmolive.

Topics Covered:

– The three key things to consider before trying to start a subscription business.

– The road to a successful subscription business may not be what you think.

– Starting a company inside is a large corporate isn’t easy, what’s the trick? 

LAUREN:

– Welcome of Amit.

AMIT:

– Thanks Lauren. I’m glad to be here.

LAUREN:

– I’m so excited about our conversation today on how to successfully set up Ecommerce subscription businesses. Subscription businesses, are one of the most sought after business models. Why do you believe that is?

AMIT:

– Well, it’s a great question. First and foremost, the way I see things, subscription has always been there. In various forms and fashions, for instance, your decision to rent a place versus buying a house, you are kind of getting into a subscription. Your decision to get into a job versus starting your own business, you are into a subscription, whereby you’re getting paid for the services you’re providing to the organization, so in some form and fashion, it has always existed. What has changed now is primarily subscription was limited to services in the past, but now, product companies are getting into subscription. So for instance, like for your cell phone connection, it was always a subscription. You pay on a monthly basis, but whether your decision to buy a says getting into a subscription where while you pay $60 a month and you get the latest iPhone at any given point of time, that is something which has changed.

LAUREN:

– Sure. Yes. Sorry, go ahead.

AMIT:

– No, so that way I would say that a lot is happening and particularly with the CPG companies getting into direct to consumer capabilities, et cetera, that’s something which has opened the doors for subscription economy as I call, which is becoming bigger and bigger and being adopted by a lot of organizations.

LAUREN:

– And what do you think are like, what are three key things that someone should know before starting a subscription business?

AMIT:

– Well, the way it works is like it’s a huge change in the mindset. So from a position of unit land grab, you get him to monetization of a usership, and this is essentially driven from the changing consumer behavior, people are no longer really interested to own the products, they want to use the product. So that’s the difference in buying the music versus taking a Spotify subscription. So that’s what is changing and from organization point of view, it’s like, instead of selling your products to an endless stream of strangers, you are essentially creating a club whereby, you know your people very well. And that’s what subscription business is all about, which is data enabled, which tells you to go with a customized offering, what your consumer is looking for, that’s something which has kind of changed significantly. And again, from an organization point of view, I would say that people see it as a option to build loyalty, for instance, in the products which are recurring consumed things like, your toothpaste, your packed food. So here, instead of looking at transaction every single time, if you can lock in someone into a subscription, thereby that part is automatically happening. And we call what you say, is auto-ship drives compliance, so every month your product is getting shipped, the consumer has no reason to switch unless until something goes wrong. So it’s a very way or a good way of ensuring loyalty. So and lastly, I would say that what is important is a different way of looking at your business financials. So for instance, Netflix, which is primarily a subscription driven company. Imagine a conversation on 31st of December, 2020 in the leadership team. So for them for 2021, 80% of revenue is already taken care of, give on the existing subscribers. It’s not that you sell every month, you sell every quarter. Likewise, so what they need to think of is how do I retain my existing subscriber to make sure that my revenue stream is on and how do I get the new subscribers. So it’s like the balance 40% this team is kind of focused on versus a regular conventional business whereby every month, every quarter you will live and die.

LAUREN:

– And sure. And I know that you’re involved in the Hill’s to Home project. How, how did you first get involved in this project?

AMIT:

– Well, I got, I was with Colgate Global Business based out of New York and Hill’s team was looking at creating a new direct to consumer subscription based business model. So this is something which was kind of fast for the organization. So they were looking for a person who is not only business minded, but at the same time, tech savvy as well. And I kind of fit the bill because I was responsible for creation of some new digital commerce platforms internally and that’s how I was offered, and which I gladly accepted. And then I moved from New York to Kansas, and of course, what happens next is a different story altogether.

LAUREN:

– Was it their first of subscription business or did they have one previously?

AMIT:

– So they have acquired businesses that subscription-based models, but in-house offer subscription-based business, it was the first in the business. So of course, since then we have got similar models in our other businesses, including our skincare and oral care business.

LAUREN:

– Okay, great. And what were some of the biggest challenges that you had to overcome?

AMIT:

– Oh, challenges. Okay. Where to start Well, so in challenges, I would say the first and foremost is, your value proposition. So when we initiated the plan, we taught that this is how the business model should look like, this is how the value proposition should look like. But once we got deep into the insight exercise with the consumers and our customers, we figured out, no, they are looking for something else. So like, to change the plan and we have to repurpose all the resources planning, et cetera. So the whole idea was about agility. And the whole idea was like, how do we create something which resonates with our consumers, give them a reason to not only get into it, but also stick with us. And that’s where we landed up in a different business model, a kind of industry first, I would say. And that of course opened a host of new challenges in terms of looking for external partnerships, because many of the capabilities we don’t have in-house. And then of course, a lot of internal communication alignment, with a larger team, in terms of selling out the vision, calling out what do we need to do, why we are doing this and getting the stakeholders engagement and what role you are going to play into it. And I think that was very, very critical. So but I’m glad it had given me a much learnings and I think it was a very fulfilling experience for me.

LAUREN:

– Yeah. Did you launch it as an MVP or how did it go to market initially?

AMIT:

– We did launch it as a MVP because it was a race against time, as you all can imagine. Of course, so we thought that we need to have, I would call a MVP is minimum viable product, but I would call it as a business viable product. So something which is good enough for us to get started, something which has takers and then built from there in terms of more sophisticated benefits and features.

LAUREN:

– Okay. All right. And what was it like to launch a kind of startup within a large corporate environment?

AMIT:

– Well, it was really a lot of fun and a lot of action. So as I was sharing earlier, the first and foremost piece is to call out the vision and establishing what we are trying to accomplish, and what is the role of the stakeholders? More importantly, you need to take the leadership for sure, and come out very confident because there’s a lot of ambiguity when you’re trying something new. And oftentimes you go one pathway, it doesn’t work out, you need to retrace steps back and then go with plan B. So you need to ensure you need to give the confidence to the team that guys get on track. We know what we are doing and we will get there. So that piece is super important. And as the leader of a startup, it’s important to get the senior executive’s trust. You need a lot of autonomy. You cannot run the people for every single decision. You’re making this as an on the go. And this will come in and only if your leadership has a hundred percent trust in you and your team. So that way I would say, was very important to get to that stakeholders buy-in and support. And another piece is like oftentimes, large organizations are more comfortable in a predictable environment, very, very confident, comfortable in a controlled situation. But here, we are dealing with so many different external people looking at what’s best out there and being in a very agile approach of trying out, seeing failure and then moving on kind of stuff. So here, the team needs to get very comfortable in a environment where you’re okay with losing control. And trust the experts, of course, different partners bring in different expertise, different skillsets and different So you need to see that, how do you bring everything together? Which one is the relationship between us and one partner, one is they call the different partners come together as a team to get you to deliver that user experience, the best class user experience, which are gunning for keeping the consumer at the heart of everything you do. I think that’s what is the most critical part and in a large organization where you require a lot of autonomy, but at the same time, high level of dependencies, be legal team, taxation team, marketing team, and likewise, there this effort, but what’s doing it.

LAUREN:

– And how did you design your organization? Because I imagine there weren’t so many internal capabilities as you would have for other projects.

AMIT:

– Yes. Oh, great question again. In a particularly in our subscription-based digital commerce business models, so yeah, there are two parts of the team. One was the business team, which is responsible for customer acquisition and retention. So it’s a leaky bucket, there’s a churn happening all the time and you need to make sure that you retain your subscriber while you’re gunning for getting new. So one side is this whole team, which is targeted as a actual business delivery, user experience, customer support and likewise. The other side is the solution architecture or platform enhancement itself, which is highly technical in nature, where you rely on IT resources and external partners because things are changing. Whatever Amazon is offering is something which is expected as the bare minimum from the consumer. So you need to give a similar level of user experience, so it’s like running on a treadmill, you have to run fast to even stay at the same place. So that way, you need to have a separate team, a separate radical, which is once I said, understand business requirement at the same time, they’re super committed to deliver a best in class experience. And that’s how your all structure evolves. So product team on one side and the business team on other side.

LAUREN:

– Okay. And any other learnings that you had to take away from the overall experience?

AMIT:

– I would say that, like the biggest thing here is one, you need to be very clear in terms of why you are here, why you are getting into it. So if it is something, it should not be something that everyone is into it, you also need it. It has to play a very important role in your commercial status because the base subscription business play out is it drives not only revenue on the business model itself, but it has a huge positive catalytic impact on the overall business as well. So you get a lot of, if you’re giving a great experience, you will get a lot of amplification impact in your overall other channel businesses as well, your brand presence online improves and everything. So that way I think this is definitely worth doing, but again, keep the consumer at the heart of everything you do. That’s the mantra.

LAUREN:

– Sure. Well, I mean, thank you so much for joining us. And I think this has been very insightful for our listeners, so I appreciate you getting here.

AMIT:

– Thank you, Lauren. It was a real pleasure talking to you.