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The subscription market has experienced remarkable growth, expanding by more than 435% in the last nine years. In the U.S. alone, 42% of men and 28% of women have three or more subscriptions, illustrating this market’s sheer size and potential.
This surge in subscriptions, initially popularized by digital services like music and video streaming, has extended to physical goods, ranging from everyday consumables to durable products.
With the advent of the internet and reduced transaction costs, subscriptions for tangible items such as vegetables, razor blades, clothes, and even high-tech gadgets like laptops have witnessed significant growth, reflecting a shift in consumer behaviour towards convenience, lower risk, and the appeal of always having modern, up-to-date products.
However, this growth also brings distinct challenges, especially for businesses managing subscriptions for physical products like Whizz, whose CTO Artem Serbovka shared his insights on this hot topic.
Unlike digital subscriptions with negligible marginal costs per user, physical product subscriptions involve more complex logistics, from delivery to maintenance and replacement, creating a unique set of operational demands.
One major challenge in companies like Whizz, dealing with, for example, electric bike subscriptions, is developing an internal system that could efficiently handle these complexities — from logistics and billing to security and customer service. Initial attempts to integrate various market solutions for each specific task soon revealed their inadequacy, highlighting the need for a more tailored approach.
This led them to create their comprehensive, custom-built system, designed specifically to address the multifaceted nature of managing physical product subscriptions, a trend increasingly embraced by consumers valuing flexibility and service over outright ownership.
Tackling the uncharted territory of physical product subscriptions
The entry of the electric bike rental market has highlighted the clear distinctions between standard rental services and subscription models. Unlike traditional rentals, which are typically short-term and transactional, subscriptions in this sector represent long-term relationships that can be seen as alternatives to outright purchase.
A subscription service extends beyond mere rental; it usually involves comprehensive customer care, including maintenance, repairs, replacement, and sometimes delivery and technical support.
Recurrent payments, a hallmark of subscription models, are structured to ensure ongoing customer engagement and service continuity. Furthermore, while traditional rental companies are often small-scale operations, the subscription model is geared towards scalability, aiming to manage a large inventory, potentially involving hundreds of thousands of items. This difference in scale and service scope means that the systems designed for one-time, simpler transactions, common in traditional rentals and sales, are inadequate for managing subscription services’ more complex and ongoing nature.
For instance, these bikes are always in circulation: as they are rented and returned, each requires inspection and sometimes repair before being leased out again. Breakdowns, such as flat tires, are common occurrences. Effective subscription services in this sector typically include provisions for quick servicing, allowing customers to have their bikes repaired or replaced as needed.
Additionally, the financial model for such subscriptions often mirrors digital services with a monthly billing cycle. A crucial aspect of managing this model includes addressing late payments and ensuring the return of bikes after use. These operational complexities demonstrate that standard CRM solutions often fail to address the unique challenges of physical product subscriptions, leading to significant impacts on revenue due to inadequate data management.
Engineering Whizz’s bespoke subscription management system
With a market saturated with solutions designed primarily for one-off transactions or digital-only subscriptions, Artem and his team identified a significant gap in managing physical items like electric bikes within a subscription framework. This was not merely a challenge but an opportunity for their internal innovation. They realized the inadequacy of existing rental and physical goods sales systems in meeting their unique operational needs.
To address this, they embarked on developing their bespoke system, tailored specifically for managing the intricate dynamics of subscription billing, logistics, customer reliability assessment, and the continuous rotation of physical products. This in-house solution aimed to streamline their internal processes, ensuring a seamless, reliable operation capable of adapting to and anticipating their business model’s evolving demands.
They have developed a multi-functional system to manage the electric bike subscription service, encompassing modules for recurring payments, inventory management, a CRM system, a powerful analytics block, debt collection tools, and integrations with GPS services and marketing tools. The system includes a lead management module, a loyalty program, client-side subscription management accessible via web and mobile apps, and an electronic document management and queue system to streamline operations and customer service.
Streamlining operations: From manual processes to automated efficiency
To illustrate the impact of their system, consider this example: previously, a client’s in-office service time averaged 40 minutes, which was inefficient. They optimized these operations by implementing electronic document processing and a digital queue system. The result dramatically reduced service time to just 20 minutes per client. It’s about solving such challenges through automation rather than relying solely on manual efforts, demonstrating their comprehensive system’s effectiveness in enhancing operational efficiency and customer experience.
The implementation of Whizz’s custom system has exemplified the power of bespoke solutions and delivered tangible results. The system has slashed their costs by up to 35%, enabled the launch of new locations within a week, and facilitated the management of thousands of bikes with remarkable ease. Their decision-making process is now entirely data-driven, leading to an impressive 90% fleet utilization rate. Moreover, the system has significantly reduced theft and fraud risks while providing exceptional customer service. Success in this field typically stems from thorough engagement in every aspect of business processes. Systems developed by many players in the market often address only partial needs.
In contrast, a deep understanding and involvement in the day-to-day operational nuances enable them to create solutions that are not merely functional but highly efficient. This approach reflects a trend where detailed knowledge of customer interactions and business dynamics is key to developing systems finely tuned to the complexities of the subscription model. The journey might be challenging, but the outcome — as their experience shows — can be advantageous and effective.
