ReCharge: The Subscription Economy – The Case for Recurring Payments & Disrupting Traditional Business Models (Chase Alderton, Growth Marketing Manager)
ReCharge: The Subscription Economy – The Case for Recurring Payments & Disrupting Traditional Business Models (Chase Alderton, Growth Marketing Manager)
In this episode of the Storesome podcast, I spoke to Chase Alderton, the Growth Marketing Manager at ReCharge.
ReCharge’s mission is to empower stores by making subscription payments easy, with their payment integration allowing merchants to easily add recurring billing options. In this episode, you’ll learn Chase’s views on the impact of COVID-19 on the subscription space, the different types of subscription models that are available to retailers today, and finally how brands can get started with subscriptions.
Use this link if you’d prefer to listen to the podcast live:
Graham: Welcome to this season’s focus on the fintech industry with Storesome, today we’re joined by Chase Alderton, Growth Marketing Manager at ReCharge Payments. Welcome Chase! I’m really looking forward to your thoughts and insights into the payment sector. This is a great opportunity for us to learn more about yourself and also the ReCharge platform. So, before we deep dive into the interview itself, it’d be great to hear more about you and ReCharge.
Chase: Absolutely. Thank you for the intro. My name is Chase Alderton, Growth Marketing Manager at ReCharge. I have a passion for psychology and making people think, so my marketing background is producing content, running webinars, doing podcasts, all those activities. It’s exciting to interact with other people or to hear some new viewpoints and grow everyone’s thinking together.
As far as ReCharge, we are a subscription billing platform. So, all subscription programs, all subscription types are run through our system, and our fully customisable API really gives merchants the power to create and grow their own businesses via subscriptions.
Graham: Fantastic. That’s great. And just for everyone’s benefit, I’m Graham Broughton, I’m the co-founder and Managing Director of Storesome. From a personal perspective, I’ve been in the marketplace industry for just over 10 years.
I first set up my own business selling car parts and automotive components on eBay and Amazon, and within two, three years, generated seven-figures in annual sales. I then joined a company called We Are Pentagon group, who specialize in helping brands and retailers gain access to online marketplaces. We’ve worked with the likes of Dyson, Next and Sports Direct, both domestically and internationally, as well as Canon, BMW, and more.
This year, we launched a new solution, which is a SAAS platform solution called Storesome. Storesome enables large brands and retailers to effectively build their own marketplaces.
As part of this fintech series, we’re talking to game-changers in the market of fintech. What really interests me as part of ReCharge is that you guys are doing something, which is what Amazon have been trialling for the past few years.
So, let’s kick off. COVID has really impacted the digital enablement piece, the subscription revolution, and I can see ReCharge making a huge impact in this space. How do you see e-commerce brands and retailers embracing this subscription model at the moment?
Chase: I think the big thing that COVID did from an e-commerce perspective is just fast forward into the future, but the last 8 to 10 years have already been moving this direction; everything is going online. The term multi-channel and omni-channel is popping up a lot, and brands are moving away from brick and mortar and moving more towards online sales.
I think for people who are in the Gen Z or Gen Y area, they’ve grown up with subscriptions, they’ve grown up on e-commerce, so not a lot has changed for them. The big changes we’re seeing now is with Gen X, with the Baby Boomers area. A lot of them are coming online for the first time and they’re buying things online, learning how this whole shipment process works, learning about shipping times and texts and fees and all these kinds of things.
Subscriptions, ultimately, offer a convenience factor. That’s ultimately what it comes down to. There’s a long list of benefits and we can get into acronyms and LTV and AOV and these kinds of things, but ultimately what it comes down to is convenience. For the end buyer, they’re getting the products that they need and not just that.
They’re getting the products that they need exactly the timeframe they need it, on their schedule and delivered to their door. You don’t have to leave your house. It’s convenient, it’s easy, it’s simple. It’s easy to manage. It’s all customized. The user is in control of everything, they have all the power. We’re moving into the future, faster.
Graham: Excellent. So, in terms of what ReCharge’s solutions offer as opposed to competitors, how do you differ in this sector?
Chase: In that respect, what’s different about the ReCharge proposition is that we’re trying to push the boundaries a little bit more. It’s a little bit confusing because we try to open up a lot of different options for merchants, because every business is different.
Whether you’re selling toilet paper, versus coffee, versus meal delivery kit versus, or soap for your dishwasher, every business is totally different. So, it’s really hard to say, like, here’s our new solution. Boom. It’s out, everyone. Go get it. But we’re trying to open up our APIs and we’re trying to allow merchants to build for themselves.
One of the things that we’ve been talking about for a little while now that really starts to differentiate us is this membership model. So, taking a step back, we have three different subscription types that we like to talk about.
Replenishment is the first one. This is kind of just your classic subscription model. Let’s stick with the bag of coffee as an example. You know you like your coffee, so it ships the same time every month. It’s the same cost. It’s the same thing over and over again. They just replenish what you already have.
Curation is the second one. Think, subscription box. Sort of like, “hey, we’re going to ship you a couple of snacks or food” or, you know, whatever it may be, but it’s usually a curated section. You, as the buyer, don’t really know what you’re getting for every shipment. It’s more of just, “hey, I love your product. I love what you guys stand for. Ship me, you know, your products.”
This last one, we kind of call it access. There are a few different ways to enable that. But a membership model is, is the big one. For example, we have a brand on ReCharge called Freshly Picked. They do mother and daughter moccasins (shoes), which is not usually a subscription product that you would think of. It’s not a consumable.
Their subscription model isn’t actually selling products. They give you access to their membership model. It costs you $10 a month. They actually credit your account for $10 immediately, so you’re not losing any money in there. They give you free shipping. They give you a 20% discount across the entire store. And then they can actually gate certain products and certain items. So, when they have new releases, or flash sales or things like that, you only get to see those if you’re part of this membership program. It boosts retention like crazy, it’s through the roof. Customers stay subscribed for months and months. It’s predictable revenue for the merchant. It just goes back to this convenience idea.
This way, you know, you’re part of a club, and that kind of plays into that psychology idea. You’re part of the team. It’s very Amazon Prime focused, actually. You’re not actually buying anything on Amazon Prime, but you buy access to that membership and then you get all the benefits associated with it, like free or fast shipping.
Graham: That’s really interesting, there’s a lot of benefits to the brand and the customer there, across all those different types of subscription models. Could you share an example where one of those subscription models has revolutionized a business that you’re working with?
One of my favourite brands, and it’s a super unsexy business model, it’s prescription supplements. It’s not just one of these classic “buy our collagen, buy our protein” or any of that kind of stuff, they actually run a doctor’s office and they see patients every day and then based on what they find, they prescribe certain supplements for there.
So, when they revamped their site and relaunched, the agency that was helping them rebuild their site suggested subscriptions. It’s a natural way to fulfil prescriptions. It presents a huge opportunity for the merchant, because not only can they forecast and project their revenue months in the future, they can plan inventory in advance, and all those kinds of things, but it also boosts the efficacy of the actual program, because people who need these supplements for health reasons, they’re getting these things exactly at the cadence that they want. It’s a win-win for both the buyer and the merchant.
Graham: That makes total sense. So, let’s say I’m a business and I’m looking at potentially implementing some kind of subscription-based model, or I’ve got existing products that generate regular repeat custom. When is the right time to offer a subscription model?
Chase: I apologize in advance for being a little vague, but again, it comes back to what your product is. If you’re selling something that’s consumable, whether that’s food, or if you’re selling a bathroom product, in fact we usually say kitchen and bathroom are the really, really good fits for subscription. If you’re selling trash bags, if you’re selling soap, toothpaste, all these things, it’s not a sexy product, but it’s something that people need every day. So, if it’s a consumable product that people consume regularly, literally flip it on tomorrow.
As with every business model, you’re not going to really see a huge impact until you put some money behind it and until you have a strategy behind it, so I think the membership model is a huge one. But if you’re looking for a more in-depth model, it really does involve looking at some strategy, and figuring out how you’re going to work the placement on your website.
A couple brands that we’re seeing now that have been really successful in growing really quickly have a strategy to talk about subscriptions on their homepage, kind of first and foremost, you hit their landing page, and you see the subscription as the first thing. People are starting to get comfortable with that and familiar with that.
So, having people understand that, saying okay, I can get this, it’s a great product, I wanted this once, but now I can get this month-over-month. That’s a good way to prime people.
The other one is the onboarding quiz idea, similar to Stitch Fix. It takes a little bit more time and more strategy upfront to set up, but have someone hit your landing page instead of directing them to a specific product, like a shirt, and instead put them through a quiz and say, what kind of things are you looking for? If we stick with clothes, are you looking for tops, bottoms? Are you on Zoom calls, so you don’t care about bottoms, you just want comfortable sweaters? What do you usually wear?
That’s all customer data that you can then store on profile and you understand what people are wanting day to day, then when you actually ship them things like Stitch Fix, you’re way more likely to ship them something to actually want, rather than, you know, here’s a pants and a shirt and a pair of socks. When actually, I was looking for a jacket.
Graham: Understood. That’s going to make your subscription more valuable and improve your retention, if you have an understanding of what your customer wants from you, and if they trust your brand and like your clothing, they will trust you to deliver on what they want.
The replenishment part is interesting, because with Amazon, for FMCG brands they usually have to ship a three-month supply which Amazon will then bundle. Amazon works it out on their end, but for independent retailers, there must be a sweet spot in terms of the average selling price that you need to hit for this to be effective. Can you share any information on what that looks like, for retailers who are successful with the subscription model?
Chase: Absolutely. I love this question. I’m not going to be able to give you an actual dollar value because all products are different, but the direction I’d like to go for this question is owning the brand and owning the experience. The experience is something we talk a lot about.
Frankly, we are competitors with Amazon. They sell thousands of thousands of products. I don’t need to brief anyone on what Amazon does, but if you’re looking for the cheapest, simplest bag of coffee and you don’t care about being in a community, and you’re not interested in where the coffee came from, or any of that stuff, go to Amazon.
That’s fine. There’s no problem with that. There’s no issue with buying something cheap and just getting it for the replenishment and getting exactly what you need. No problem. The brands that we like to support and the brands that really see success with subscriptions are ones that own the experience.
Let’s stick with the coffee example. One of the brands on ReCharge is called Atlas Coffee. The cool thing that they do is they have this whole onboarding quiz, as we spoke about earlier. They let you pick out exactly the coffee you want, from the grind, to how frequently you want the coffee and the quantity you want, all these kinds of things, but the coolest part about it is once you actually purchase from them, you’re in their portal, and you can see the next shipment that’s coming, or the previous shipment that you got, they have an education section. It shows you, for example, this type of coffee came from this region in Colombia, it was grown this specific way, you should taste these kinds of flavours, or here’s a great way to pair this with some sort of milk or foam or cream or whatever you’re trying to do. Next month, we’re going to ship from this region of Brazil, and here’s the tasting notes, all those kinds of things. It’s an experience.
I kind of avoided your question a little bit on pricing, but people generally are aware of this experience. In our experience, a lot of these customers look to be part of a community, to really understand the quality of a product. It’s not really all about price.
Graham: That’s a great answer, because what you’re effectively saying is that the customer of today is changing, you mentioned Gen Z and Gen X who say, actually, it’s not just about price, but it’s beyond price. They’re asking, is this sustainable? Is it ethically created? Where is my dollar going? And then you layer on the convenience part, and that’s where your solution comes into play, so the brand can focus on building the experience, and you can fulfil the subscription model and the technology in the backend for that.
Chase: You’re spot on. The crazy thing about this that we need to keep in mind is that there are a hundred variables, probably even more, that go on in this buyer journey. Are you looking for something that’s the best quality? Are you looking for something that’s the cheapest price or something that has the fastest shipping, or the cheapest shipping? There are all these kinds of things. Price is a big hurdle, it’s obviously a variable that a lot of people have a hard time getting over, but if you can get all of those variables in the right place, there is a customer market for you somewhere. Price is just one thing.
Graham: Before we start to wrap this up, it’d be really good to understand how ReCharge has been affected by the COVID pandemic. Has it been an accelerator for your business? Have you had more people reach out? What’s been the impact for you guys?
Chase: We have grown quite a bit, actually. Since this hit, we definitely saw a dip initially. I think people were just shocked in and unsure about what was going on. I think this entrepreneurial movement of everyone trying to be their own boss and start their own thing and really own something which came afterwards, that was a huge benefit for us. We have seen a lot of companies, kind of pop up overnight and say, you know what, okay, I was let go from this job or whatever, but I’ve always wanted to do this with my life, and people start businesses and they’ve grown them very quickly. We enabled a lot of those companies to help go from zero to the one thousand subscriber mark. We have seen things grow really, really fast.
Some of the verticals are pretty common. You’d assume that these things would grow. We see a lot of food and beverage growth. Actually, we saw alcohol in the beverage category surpass non-alcohol in April for the first time in ReCharge history, so take that for what you will! Also, a lot of home goods, we’ve kind of been talking about this like toilet paper, but coffee’s one of them, and cleaning products, cleaning products were huge.
A lot of those things have been blasting through the roof. Since then, we’ve kind of seen things level off. I think we saw a dip initially; we saw a spike right after that, and then it’s kind of normalized since then, but the growth has definitely been higher than our projections, and I think it’ll only continue to grow as time goes on.
Graham: Fantastic. What I like to ask our interviewees, as the final question, is for one key takeaway piece of advice for our listeners, from your experience working with brands and within ecommerce and the subscription model, what would it be? What one key message?
Chase: For brands, it really is to focus on the experience. If you’re selling a product for the sake of selling a product and simply trying to make money off of it, it’s not going to work. People are going to go to Amazon. They’re going to find a cheaper, better way to buy that.
Focus on building a community. Membership offers one way to do that, but build a community, find the group of people that actually are interested in your product, and genuinely interested. Not only are those people going to be subscribed for the longest period of time, but they’re your greatest brand evangelists too.
They’ll be the ones who are telling their friends, telling their family, creating user generated content, putting that on social media, generating you more followers, and more subscribers. That’s the best way to do it. The brands I’ve seen grow pretty significantly over the past few months are the ones who have built these communities.
Graham: That’s brilliant. I’d like to thank you once again, Chase, talking to us. I think we’ve covered a phenomenal amount of ground. I’ve definitely learned a lot.
It’s been great to understand the different types of subscription models available today, from the standard replenishment model, to curation, and even the emerging access or membership model. I’m really interested, too, about how subscription models can help retailers in terms of their cash flow component pieces, inventory, and to allow them to forecast their revenue and understand what they need to do.
So, this is your final plug to kind of say, if anyone wants to get in touch, who should they contact and where should they go?
Chase: Feel free to email me directly firstname.lastname@example.org, otherwise feel free to connect on LinkedIn or Twitter. I’m happy to connect. I’m happy to talk about this stuff all day long. I love nerding out about all things subscription and it’s been great talking to you.
I hope you enjoyed this piece and many thanks to Chase for contributing his insight.
If you’d like to learn more about ReCharge, you can learn more on their website https://www.rechargepayments.com.
If you’d like to learn more about the future of retail marketplaces and trends within the industry, we’d be glad to help you. Get in touch today and book your free 90-minute discovery session.