The “click to cancel” rule would require companies to offer an easy way to cancel subscriptions and recurring memberships. Cancellation would have to be as easy as signing up. For example, the ruling would ban requiring consumers to call to cancel subscriptions that they’d signed up for online. 

The FTC’s proposed rule would apply to any retailers that sell products or services with subscriptions, automatic renewals, or similar systems. Retailers would also be required to give more information about subscription beginning and end dates and how to cancel. Retailers would also need to send annual reminders to customers for subscriptions that don’t involve physical goods.

“Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” FTC chair Lina Khan said in a statement. “The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.”

Subscriptions are a small but important piece of ecommerce

Subscriptions have long been promising territory for ecommerce retailers hoping to build a returning customer base. The global subscription box market reached $26.9 billion in 2022, according to Expert Market Research. The firm expects the subscription box market to reach $74.2 billion by 2028.

5.6% of retailers in the Top 1000 retailers in North America used a subscription model in 2022, according to Digital Commerce 360 data. That’s down slightly from 6.5% in 2021. 

Subscriptions are more significant in certain sectors. 36.1% of food and beverage retailers in the Top 1000 had a subscription model in 2022. That’s up from 27.8% in the previous year. In the Top 1000, 28% of health and beauty retailers had subscriptions in 2022, and 10.1% of specialty retailers. Pet supply company Chewy, for example, heavily relies on recurring subscription orders. Autoship orders made up 73% of sales in the most recent fiscal quarter, accounting for $1.98 billion of revenue. Chewy ranks No. 13 in the Top 1000.

Top 1000 Database

Leading 1,000 online retailers headquartered in North America. Access includes up to 5 years of web sales, company information, website traffic and features, technology vendor information and more. Web sales range from $41 million to over $373 billion annually.

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The legality surrounding automatic renewals is murky

The legality of automatic subscription renewals can be difficult to navigate, according to lawyer Robert Freund, who focuses on ecommerce.

Subscriptions and cancellations are governed by many laws across the U.S. The 2010 Restore Online Shoppers’ Confidence Act (ROSCA) requires retailers to provide “simple mechanisms for a consumer to stop recurring charges.” In 2021, The Federal Trade Commission issued a statement warning companies about employing “illegal dark patterns” to keep customers from canceling memberships.

Because the federal law is somewhat vague, many states have adopted their own, stricter laws. The combination of federal laws, FTC enforcement, and differing state laws result in a “patchwork of laws across the country” that are sometimes inconsistent, Freund says. “If you want to comply with every law in every state, it’s very difficult if not technically impossible.”

Automatic renewals can lead to “friendly fraud”

Retailers open themselves to friendly fraud when they automatically renew subscriptions or make them difficult to cancel, according to Chargebacks911. Chargebacks911 is a risk management software provider that helps retailers in billing disputes. 

“While no retailer wants to see their customers cancel services, having a tedious cancellation process could push customers to file a chargeback, or file a complaint with entities like the FTC — even if the retailer is fully compliant and following all payment processing guidelines that govern their merchant account,” Chargebacks911 CEO Monica Eaton told Digital Commerce 360.

Customers who forget to cancel a free trial or don’t recognize a recurring subscription charge on their bank statement can file a dispute with their bank. Retailers may then have to pay additional chargeback fees, or pay to fight the charges. Too many chargeback requests can lead to a retailer losing processing capabilities, Eaton says. 

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“We needed a global overview of our entire [pool] of consumers and their interaction with the brand,” says Yoed Negri, global director of digital transformation, SodaStream.

Yoed Negri, global director of digital transformation, SodaStream International

Negri says SodaStream understands that its customers interact with the brand through more than one channel: email, SMS text and social media posts. But they weren’t sure how those interactions lead to an increase in conversion, he says.

“We understood that the current marketing infrastructure we had was not enough,” Negri says.

SodaStream’s marketing software provider, Optimove, offers artificial intelligence software. In 2022, SodaStream began using the capability in six markets, which represents about 10% of countries where SodaStream sells its products, Negri says. SodaStream products are sold in store at retail chains like Walmart Inc., Target Inc., and others, as well as online. The retailer sells directly to consumers in 20 markets online.

Test campaigns show how likely consumers are to convert

One way SodaStream engages with SodaStream drinkers is by sending recipes to customers they know like Pepsi-flavorings, diet flavorings and other options based on past orders. The retailer wanted to see how its customers responded to the recipes when received via email, SMS text or through social media posts, Negri says.

The beverage retailer declined to disclose the specific flavors presented, but Negri says the results showed that ads appealed differently to consumers depending on the channel. For example, for email campaigns, SodaStream saw a 3%-5% increase in conversion and 15% increase in average order value.

SMS text conversion rates were 10%-15% higher compared with email depending on the market, Negri says.

For social media posts, Negri says it’s important to note engagement and conversions.

“We see 7%-10% increases in engagement for personalized content and 5%-7% increase in conversions,” he says.

SodaStream conducted the tests over a period of four to eight weeks in late 2022, Negri says. Optimove’s AI software learns how consumers are responding to ads within six to eight weeks, Negri says.

Using AI to anticipate conversion

When deciding which campaigns to propose to which customers, Optimove’s software uses the data it collected to determine the best campaign for each, says Pini Yakuel, CEO of Optimove.

A retailer might decide to send a marketing campaign or a promotion, such as a birthday promotion, via email, SMS or a combination of both methods. Optimove’s AI determines the best combination for each customer base, Yakuel says.

Digital marketers also use Optimove’s analytics for the following:

• The likelihood to convert.
• The likelihood of becoming a top spender.
• The risk of churn (the measure of how many customers stop using a product).
• Likelihood of reactivating (also known as re-engagement, where retailers reach out to people who have previously expressed interest or engaged but have since disengaged with communications).

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The reasoning behind a desired shift varies. Some survey respondents want to move to the cloud. Others want to leave the cloud and host the platform on their own servers. But the top response (35%) was a desire to find “commerce software adapted for us and hosted externally in a single-tenant environment.”

Those survey results are just a small part of the 2023 Ecommerce Platforms Report, the most comprehensive guide to the state of the platform space available. In the report, you’ll read about the battle for tech talent. You’ll also encounter the emerging concept of composable platforms and the latest in platform functionality. You’ll also find stories of how some major players in both retail and B2B are choosing among platforms. And we offer some guidance on what you need to know before changing to a new platform vendor.

The report includes hundreds of metrics, scores of data points, profiles of the leading platform providers and shows which platforms the Top 500 Retailers use.

Included in the 2023 Ecommerce Platforms Report: 

• Detailed descriptions of the leading platform vendors, including pricing information on their products.
• Surveys of retailers and B2B sellers. They ask about planned investment, interest in changing platforms, and what they want from a new provider.
• A complete list of the platforms the Top 500 retailers use.
• Tips on how to choose a new ecommerce platform.
• An explanation of the technology involved in composable platform architecture.

View the table of contents

The 2023 Ecommerce Platforms Report is available as a downloadable PDF for $399. It is also included in our Gold and Platinum memberships, which provide full access to all of Digital Commerce 360’s published reports and certain online retailer databases.

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AI image analytics show what people like to see on screen

Roman Vorobiev, director, design and artwork management. Mars Petcare

Vizit’s software produces a score on a scale of 0-100. The higher the rating, the more appealing an image is to a group of online consumers. Vorobiev wanted to link how these scores could lead to higher conversion rates.

Online shoppers prefer different details

In Mexico, online shoppers prefer green and yellow colored packaging for Pedigree dog food.

Using AI in design

Harvesting images

Quick changes using AI

What is image analysis in AI?

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Facebook pixels traffic off existing customers, he says. Finn turned to artificial intelligence software vendor Proxima to help identify consumers beyond its customers based who are most likely to be interested in purchasing Finn’s dog supplements. There are two categories Finn wanted to reach: interest-based and existing customer/lookalike-based audiences. Interest-based groups are dog owners. They might be interested in a specific breed, or category, such as dog food or dog toys. Lookalike-based audiences are repeat/existing Finn customers. 

How does AI impact digital marketing?

Over time, the machine-learning technology identifies purchase behaviors. Finn wants to advertise to consumers likely to buy pet products. Proxima’s software maps out consumer purchasing behaviors. The algorithm takes into account the different categories consumers purchase from — consumers who also buy pet items, such as clothing or home goods. It incorporates where they live, whether West Coast, East Coast, etc., and pulls together separate audiences, which are consumers that share similar traits. 

Finn runs these groups inside Facebook’s application programming interface (API). Finn can decide how much to spend on an ad and adjust the budget for the different audiences within Finn’s Facebook ad manager account. Proxima runs a “feedback loop” to track ad performance. This includes tracking where the cost of acquisition (CPA) — the fee a retailer pays for an advertisement that results in a sale — is lowest, for example. The algorithm adjusts in real-time, reconstructing, or fine-tuning, the audiences based on successful periods to better reach potential customers.

Proxima recommends merchants spend a few hundred dollars a day driving traffic to these audiences to see who responds and what traits these consumers have. By using the same advertising, the algorithm can remove some of the variables to see what resonates and what does not.

“Think of it as an intelligent game of Battleship,” says Alex Song, CEO and founder of the AI marketing software vendor.

Finn invests more of its marketing budget to attract new customers

The online brand launched in the midst of COVID-19 in Sept. 2020. At that time, Finn focused mainly on its Amazon store. In mid-2022, the online retailer wanted to shift focus to petfinn.com, Stainton says.

Currently, 60% of Finn’s overall online sales come from its Amazon store. 40% of online sales come through its website, Stainton says. A direct-to-consumer (DTC) average order value is about $43, compared with Amazon orders at $37. These haven’t shifted much since launching the brand in Sept. 2020, Stainton says. What has changed is that Finn decreased spending for customer acquisition on Amazon and, instead, is investing more in paid social marketing for its DTC website.

In January 2022, 80% of Finn’s total advertising budget went toward promoting on Amazon and 20% toward promoting the DTC website. In January 2023, they reversed the ratio, Stainton says.

“The reason we’ve been able to make that switch is because Proxima allowed us to expand the breadth of our ad spend on Facebook and Instagram,” he says.

Urban Millennials and Midwestern housewives

Finn’s demographic of shoppers are primarily female, ages 35-55. There are two behavioral, or audience, types. There is what Stainton refers to as the Urban Millennial, who are typically women buying for their first dog and live either on the West or East Coast of the U.S.

The other type are Midwestern housewives. These are young couples where the female typically makes the majority of household purchases. This region spans from Minnesota to Texas. 

Proxima allowed Finn to split groups into a younger Millennial bucket of 35-45-year-old shoppers and the other into the housewife bucket of 45-55 year old female shoppers.

Without Proxima, Stainton could have built and tested different buckets of customers over time, he says. And once he had a big enough record of each, Stainton could create and start segmenting advertising budget toward each bucket, he says.

Instead, the software allows him to create the buckets now. 

“We don’t need to have 100,000 customers to create a good audience because Proxima is identifying those customers for us and helping us to create those audiences,” he says. “We have an approximate audience for Millennials and one for housewives that differs from what we get from Facebook.”

Finn uses AI to lower advertising costs

Finn devotes about 30% of its advertising budget to its Proxima campaigns. Of that, Finn allocates the majority (80%) for marketing toward interest-based audiences who have yet to shop at Finn. 20% is devoted to lookalike customers.

“Interest-based audiences are so much broader,” he says. “There’s a lot more dog owners than there are [Finn] lookalike customers of ours.”

Finn’s shift in strategy appears to be working. Over time, ad costs have decreased, Stainton says. Finn’s CPAs have dropped significantly to $42 in December 2022 from $72 in March 2022. Stainton attributes this decrease to the brand’s overall advertising efforts, including using Proxima software.

Where does the data come from?

In early 2021, Apple’s iOS 14 changes gave consumers the option to opt out of online activity tracking. Facebook parent, Meta, lost visibility for a large portion of consumers. It could no longer tell when someone clicked on an ad that converted into a sale. The social media company told investors in February 2022 that it estimated the iOS change resulted in the loss of about $10 billion in sales.

Proxima has data from more than 15,000 businesses and retailers that have shared customer database information with one another. Smaller brands pooled their customer data together. Retailers also provided Proxima access to their email service and SMS providers.

“When I barter my audience for yours, I don’t pay anything to anybody,” Proxima’s Song says. “I’m trading something I already own.”

Merchants also provide encrypted transactional information from a retailer’s website store through the payment processors (e.g. Stripe Inc., PayPal Holdings Inc., Venmo, among others). The information is encrypted, “anonymous,” Song says. It is coded so it can be recognized when shared with Meta, TikTok, or other social media platforms, allowing Proxima’s algorithm to track progress.

What it costs Finn to use AI

Finn maintains a yearly contract with Proxima and declined to share what it pays for the service.

The online retailer runs its website using Shopify. Stainton says he is interested in trying Shopify’s software, which also uses AI to test different audiences. Shopify’s plugin price starts at about $2,000 a month but is currently only available to Shopify Plus merchants.

Stainton says Finn is not ready to upgrade to Shopify Plus yet, but plans to do so in the next couple of months.

“The gains that we see off those campaigns have to cover the extra percentage we’re paying Proxima and the base fee — which they do,” Stainton says, without revealing how much they pay.

Social media strategy in 2023

Moving forward, Stainton says the brand intends to expand its reach on social media in 2023. For example, the online retailer has learned that videos that perform well on TikTok almost always perform well on Facebook, “but not the other way around,” he says.

So, once something performs well on TikTok, Finn adds it to Facebook and begins tracking results with Proxima.

“When we get a winner there [TikTok], we dump it straight into Proxima at scale, instead of dumping it in and seeing how it performs, [paying] more day over day and spending two weeks to scale it,” Stainton says. “We can drop it in and have a high degree of confidence that it’s going to perform in those audiences.”

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About 75% of shoppers searching for freestanding grills or outdoor accessories from BBQGuys do so from their mobile devices, Wheeler says. “So we want to make sure they have a great mobile experience,” he says.

“Conversions online are growing for us,” Wheeler says. “Customers are coming back to us because they want a new tool set, or they’re buying other items after their initial purchase.”

Shoppers are using their mobile devices to shop online for home goods, according to a Digital Commerce 360 and Bizrate Insights home goods survey of 1,113 shoppers conducted April 2022. 46% of respondents said they use their mobile device while researching and purchasing home goods.

BBQGuys.com ranks No. 243 in the Top 1000, Digital Commerce 360’s database of the largest North American e-retailers by web sales.

In-home services are an opportunity for BBQGuys

Home services are supplemental services that support a customer’s online purchase. The retailer or a third party can supply the services, such as in-home installation and assembly, in-home product repair, in-home tech support and other product support services completed at the customer’s residence.

Of the 114 home goods retailers listed in the Digital Commerce Top 1000, 36 offer in-home services.

Areas where longer lead times remain in 2022 include assembly services, Wheeler says.

“We try to help our customers find good professionals that can help them complete their outdoor space. But it’s backed up,” Wheeler says. “In-home services is a huge opportunity for everyone in the home goods sector.”

The retailer partnered with Handy, an in-home assembly services company, to offer “white-glove” service to customers. Handy charges BBQGuys customers $99 to assemble items like free-standing grills. Wheeler says plans are in the works to establish an in-home services option for its more involved outdoor kitchen/patio-area set-ups.

“We’re looking at piloting a white-glove service really soon that would apply to the heavier lift-type kitchen set ups,” Wheeler says. “We’re looking at how to connect with contractors or even a referral program we can refer contractors to as well.”

Customers spend more when working with BBQGuys sales reps

Average order value for BBQGuys’ higher priced items is approximately $900, Wheeler says. Plus its AOV increases when shoppers interact with a BBQGuys sales representative.

“That amount doubles for customers working with a sales representative,” he adds. “And customers working with recommended local professional installers’ [for customized orders], AOV is about $5,000.

“People want to bring indoor living spaces outside, and that’s where we’re seeing the opportunity,” Wheeler says.

Wheeler anticipates that demand will continue through the end of 2022.

*This article is an excerpt from the 2022 Online Home Goods Report available to Silver, Gold and Platinum Members ONLY. To access this analysis and other exclusive ecommerce research and data, learn more about Digital Commerce 360 Memberships.   

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According to Digital Commerce 360’s Digital Technology survey, conducted from September to October 2022, three-quarters of surveyed retailers (76%) plan to increase their investment in technology to attract new and retain loyal customers in 2023.

The next question retailers need to ask themselves is whether to outsource technology or build it themselves. According to the survey, 70% plan to outsource the task rather than attempt to build a tech stack in house.

What technology is important for retailers?

Online retailers are prioritizing which technologies will have the most impact. They want to automate where possible and learn how to decipher and use data to their advantage. That requires investment. Three in four retailers expect to increase spending by 15% or less. Meanwhile, 39% predict they will spend 10.1% to 15% more.

When asked to narrow down their top priorities, nearly half (46%) said investing in an ecommerce platform topped their list. Other priorities included customer relationship management technology (34%), online marketing (30%), and 27% cited content management and customer service software, respectively.

Technology must be easy to implement and use

Learn how PacSun is retrofitting its 15-year-old legacy enterprise software with updated technology to link its online and in-store customer journeys as well as update its shipping and fulfillment strategies. Digital penetration is about 35% of the entire business, says Shirley Gao, chief information officer. By deploying various technologies, PacSun is figuring out how to cut costs while providing the fast shipping turnaround customers expect.

It’s important to more than half (54%) of retailers that any new software is easy to implement as well as use. Learn how Jen Partin, Hickory Farms’ senior marketing manager, email and SMS, uses email software to automate and collect data on open rates. Hickory Farms’ web sales increased 59% in 2021 compared with pre-pandemic 2019. To capitalize on its newly acquired customers, Hickory Farms invested in software to minimize bounce rates. Bounce rates nearly tripled leading up to the holidays — its busiest time of year — in 2021.

“You’re fighting for room in the inbox and sending four emails a day — and it’s Dec. 12. You need to figure out how to get noticed,” Partin says.

Retailers want to automate where possible. Learn how technology allows retailers of all sizes to free up personnel to tackle more complicated tasks.

Included in the 2023 Leading Vendors Report:

• Case studies and interviews with retailers
• Survey data indicating what factors are most important to retailers when investing in technology
• In-depth looks at online advertising and marketing, social media, email, omnichannel, fraud and affiliate marketing strategies

The 2023 Leading Vendors Report is available as a downloadable PDF for $399. It is also included in our Gold and Platinum memberships, which provide full access to all of Digital Commerce 360’s published reports and certain online retailer databases. Learn more here.

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