What is a “phygital” subscription?

Phygital subscriptions intentionally blend physical products and digital experiences into a single, ongoing offering. The term fuses “physical” and “digital” to describe models where recurring shipments are sold and fulfilled together with digital access—apps, memberships, coaching, or content—and where access, delivery, and billing are managed by the same brand.

In commerce, phygital models bridge the gap between offline ownership and online interaction. For example, nutritional supplements paired with workout videos, or a skincare brand that combines physical refills with digital coaching, both operate within a phygital framework.

Phygital subscriptions do more than pair a product with an app: they require integrated entitlements (digital access tied to subscription status), coordinated fulfillment and billing, continuous engagement loops, and cross-functional orchestration across logistics, product, and billing systems.
In essence, the phygital model transforms commerce from a one-time purchase into an evolving ecosystem—where physical ownership and digital access work together to drive retention, revenue, and brand affinity.

What does business-to-consumer (B2C) mean?

Business-to-consumer (B2C) transactions involve businesses selling their products and services directly to individual consumers. This model includes various industries like retail, ecommerce, hospitality, and entertainment, encompassing both small businesses and large brands, as well as brick-and-mortar and online retailers. B2C businesses have greater control over the customer experience, allowing them to target customers with customized marketing campaigns and refine product development. Online selling enables B2C brands to build loyalty through online communities and increase brand awareness through search engine optimization.

While many use B2C and direct-to-consumer (DTC) interchangeably, DTC is often considered a subcategory of B2C. It is distinct from business-to-business (B2B) ecommerce, where businesses sell to other businesses, such as software-as-a-service (SaaS) companies. B2C enterprises use channels like websites, social media, and physical stores to connect with their audience, drive sales, and foster brand loyalty, showcasing the fusion of commerce and consumer-centricity in the digital era.

What does business-to-business (B2B) mean?

Business-to-business (B2B) refers to transactions or interactions occurring between two or more businesses, rather than between a business and its consumers (business-to-consumer). In the multifaceted B2B landscape, enterprises engage in the exchange of goods, services, or information to support their operational needs, expansion goals, or value chain efficiencies.

B2B interactions encompass a spectrum of industries, ranging from manufacturing and wholesale to professional services and technology solutions, underpinning the global economy’s intricate framework.

What is recurring commerce?

Recurring commerce refers to a business model where customers purchase products or services on a recurring basis, typically through subscription-based or membership programs. In this model, transactions occur at regular intervals, such as monthly or annually, with customers committing to ongoing payments in exchange for continued access to goods or services. 

Recurring commerce is characterized by its focus on fostering long-term relationships with customers, leveraging subscription models to create predictable and sustainable revenue streams for ecommerce businesses.

Recurring commerce plays a pivotal role in shaping ecommerce strategy, offering a pathway to sustainable growth and profitability. By shifting the focus from one-time transactions to ongoing relationships, ecommerce businesses can cultivate a loyal customer base that generates consistent revenue over time. This predictable revenue stream provides stability and allows businesses to forecast and plan effectively, facilitating strategic decision-making and investment in future growth initiatives.

How can recurring commerce drive ecommerce success?

Implementing recurring commerce strategies can yield a multitude of benefits for ecommerce businesses. Firstly, it fosters customer loyalty and retention by incentivizing customers to engage with the brand on a continuous basis. Subscription-based models encourage customers to become long-term advocates, driving repeat purchases and referrals through positive word-of-mouth.

Additionally, recurring commerce offers opportunities for upselling and cross-selling, allowing businesses to maximize revenue per customer and increase customer lifetime value. By prioritizing recurring commerce initiatives, ecommerce businesses can build resilient business models that thrive on strong customer relationships and sustainable revenue streams.

What is DTC (direct-to-consumer) ecommerce?

DTC ecommerce (direct-to-consumer ecommerce; also referred to as D2C ecommerce) is a business model where merchants sell their products and services online, directly to their end customers, rather than involving third-parties like wholesalers, distributors, and large online marketplaces. By establishing a sales channel that involves selling directly to customers, direct-to-consumer brands can have greater control over the customer experience, paving the way for stronger customer relationships. 

Online sales & the customer journey of DTC brands

As opposed to brick-and-mortar stores, online stores allow consumers the convenience of purchasing products and services in a matter of minutes seconds, without having to travel to a physical store. Conducting business online also allows an ecommerce website the opportunity to increase brand awareness and build brand relationships through social media platforms. Customers may also find greater ease and convenience with managing their orders online via a customer portal or through strategies like transactional SMS.

Conducting DTC business allows brands to form direct business-to-consumer relationships with their end customers. A direct-to-consumer brand can shape the shopping experience for customers at every stage of the customer journey, and can also have more direct access to customer feedback and data. By strategically measuring this feedback and optimizing their business around key learnings, DTC brands can provide a highly customized experience that grows with their customers, leading to potential for increased engagement and higher customer lifetime value.

What is B2C?

B2C is an acronym for business-to-consumer, a retail model where businesses sell directly to consumers. B2C commerce is used by a wide range of companies, including both small businesses and large brands, as well as both brick-and-mortar and online retailers.

Because B2C businesses serve as direct sellers to their end customers, these brands have greater control over the customer experience. Their direct access to customer data enables them to target customers with highly customized marketing campaigns, and even can allow them to hone their approach to product development. When B2C brands practice online selling, they have the opportunity to strengthen brand loyalty by creating online communities around their products and services. They can also use marketing efforts like search engine optimization to reach a wider pool of potential customers, increasing brand awareness. 

Business-to-consumer vs business-to-business vs direct-to-consumer

Many people use B2C and DTC (direct-to-consumer) interchangeably, though some consider direct-to-consumer selling to be a subcategory of the B2C business model. B2C ecommerce should not be confused with B2B (business-to-business) ecommerce, where businesses sell directly to other businesses—for example, software-as-a-service (SaaS) companies.

What is product as a service?

In the PaaS (product as a service) business model, the outcomes produced by a product are sold, rather than the product itself. Unlike a traditional purchase model, where ownership of the product is transferred, with the product as a service business model, companies may enter into a service contract with their customers.

Here, customers subscribe to the product and pay recurring fees for continued access to its services. Physical products might be accompanied by digital products, such as software to monitor the customer experience and enable predictive maintenance and repair services. Service providers are then responsible for maintaining the quality of the product. 

Product as a service isn’t a new business model, but takes different forms today than it has in the past. For example, in the 1960s, Rolls-Royce implemented PaaS with their “Power by the Hour” model for charging an hourly fee for power from jet engines.

How can the PaaS model strengthen customer relationships?

When offered in a subscription format, the product as a service model provides businesses with a consistent revenue stream, allowing for easier and more accurate forecasting and a steady source of recurring revenue. Due to the recurring nature of subscriptions, businesses can improve customer satisfaction with a more personalized experience, leveraging data analytics to continually hone the customer experience and fortify the big-picture customer relationship.

What is disintermediation?

Disintermediation refers to removing intermediaries from a process, distribution channel, transaction, or supply chain. It is informally known as “cutting out the middlemen.” As a business strategy, disintermediation allows producers to sell directly to consumers, and consumers to deal directly with those producers in return. This can lower prices around servicing customers, increasing the overall profit margin for a business. It can also give businesses greater control over the customer experience, as they have a more direct relationship with the end consumer. However, this strategy may at times increase shipping costs when businesses ship directly to individual consumers rather than a centralized location. 

Examples of the disintermediation business model 

Disintermediation occurs in a variety of industries and appears in a multitude of forms. While this concept originated in the financial industry, it is frequently used today with regards to online retailers and the DTC (direct-to-consumer) business model. Producers who choose to stop selling to third-party sellers and instead sell directly to customers are practicing disintermediation. When a traveler chooses to book hotel rooms directly from the hotel, rather than via a third-party hotel bookings website, this is also an example of disintermediation.

What is the subscription economy?

The subscription economy refers to the increasing presence of subscription-based businesses in today’s ecommerce landscape. In subscription-based business models, companies sell products or services that recur on a set cadence, paving the way for lasting customer relationships that can lead to revenue growth and increased customer lifetime value. As subscriptions can take a multitude of forms and involve a wide variety of product offerings, many industries feed into the subscription economy, including the software industry, food and beverage industry, and more.

Best business practices for subscription services

As more and more subscription businesses enter the ecommerce landscape, subscription companies must provide their customers with ongoing value that goes beyond their products or services. By responding to consumer needs, listening to consumer attitudes, and collecting customer feedback, subscription companies can foster long-term relationships with their subscribers that lead to increased lifetime value, increased brand loyalty, and greater brand awareness. Another important strategy for subscription model businesses is to make offerings as flexible as possible in terms of product swaps, delivery dates, add-on products, and more.

What is a one-time purchase?

A one-time purchase is when a customer makes a single purchase of a product or service via a one-time payment. For example, when you pay for the latest version of your favorite sneakers via a one-time fee, this falls under the one-time purchase category. Meanwhile, signing up for monthly fees in exchange for a gym membership falls under the recurring purchase category. 

Often, on an ecommerce website, one-time purchase options are displayed alongside subscription options for certain products. This gives customers the flexibility to choose the option that best fits their budget and other needs.

Combining one-time purchases & subscriptions

Although a one-time purchase option differs from a purchase made via subscription, subscription brands will often combine the two billing strategies within their business model. When subscription brands offer personalized one-time purchase options to their customers as a supplement to their existing subscriptions, this strategy is known as cross-selling. 

Best practices for cross-selling

Cross-selling is a valuable tactic that can increase average order value, customer lifetime value, and customer satisfaction. This strategy gives subscribers greater flexibility over their purchasing experience and provides them with targeted product recommendations that they may be more likely to enjoy.

When cross-selling, be sure to make the experience as convenient as possible for shoppers. Ensure they can access your recommendations on whatever device they’re using, be it a desktop computer or mobile phone. Offer cross-selling recommendations at multiple stages of the shopping journey, such as on the account page or customer portal, on product detail pages, and on the checkout page. Most importantly, personalize your recommendations to increase their likelihood of success, using customer segmentation to help back up your suggestions with data.

What is the subscription business model?

In the subscription business model, businesses sell their products or services on a recurring basis. Subscription services can include subscription boxes, software as a service, gated memberships, and more. The subscription revenue model is becoming increasingly popular for both merchants and consumers, with the subscription economy projected to reach nearly $500 billion by 2025.

Benefits & risks of subscription business models

Because subscription businesses benefit from a reliable recurring revenue stream, they can also experience greater ease with key business processes like forecasting and inventory management. Additionally, the recurring nature of a subscription product or service has the potential to form strong customer relationships over a long period of time, increasing customer lifetime value.

However, customer acquisition costs can be high for subscription businesses. This makes it especially important for these brands to focus on their retention strategies, and balance their customer lifetime value with customer acquisition cost. Depending on their product offerings, certain businesses may also risk subscription fatigue on their customers’ part, increasing the likelihood of churn. This can be mitigated by conducting proper data analysis and collecting customer feedback to ensure the right balance of products is offered. 

Subscription model success strategies

To set themselves up for success, subscription model businesses should be sure to make their offerings as flexible as possible. Enabling subscribers to manage their own orders by skipping deliveries and swapping products can improve business performance by reducing customer churn and increasing customer loyalty. To increase average order value and improve customer satisfaction, subscription services can also offer one-time purchases alongside their recurring offerings.

What are subscriptions?

Subscriptions involve the selling of products or services on a recurring basis for a specific period of time, rather than as one-time purchases. Subscription prices can either be paid as a lump sum upfront for a specific subscription period (i.e. an annual subscription to a magazine), or as recurring payments that are made on a regular cadence (i.e. a monthly subscription for a gym membership). There are three main subscription business models: curation subscriptions, replenishment subscriptions, and access subscriptions.

What is an example of the subscription life cycle?

Let’s put the subscription life cycle in more concrete terms with an example. After seeing that a subscription coffee company offers a free trial period for new customers, a customer decides to sign up for a subscription. They select their desired subscription products and delivery frequency, then enter their payment method details, shipping address, and other required information. On the billing date, their credit card is charged, and they then receive a delivery of their chosen subscription product. This cycle continues on the next billing date unless the customer decides to cancel their subscription. 

Customers can also take actions to manage products in their subscription. For example, a merchant might enable customers to skip a delivery or pause payments and deliveries for a set time period—a strategy that both improves satisfaction and reduces unnecessary customer churn. Merchants might also enable customers to upgrade their subscription to a more premium version (upselling), or add on complementary one-time purchases to an existing subscription (cross-selling).

How do subscription business models benefit merchants and consumers?

Consumers are drawn to subscriptions for their convenience. They can sign up and input their payment information once, “setting and forgetting” their subscription service to receive their favorite products and services. Additionally, the subscription business model often provides a huge value draw for shoppers, as businesses will often offer discounts for recurring purchases as opposed to one-time purchases. This can be seen in the “subscribe-and-save” (replenishment) subscription model, but businesses often also offer free trials or other price discounts to incentivize subscribers to sign up.

For brands, subscriptions offer a reliable source of recurring revenue, which enables more accurate forecasting. Due to their recurring nature, they facilitate customer relationships over a longer period of time, allowing businesses to collect valuable product feedback and hone their product offerings to improve customer satisfaction. When subscriptions are seamless and flexible, businesses benefit from higher LTV and AOV.