This decade’s most significant business and marketing trend is the exponential growth of subscription-based business models. The subscription industry is a market estimated to be worth over $240 billion globally by 2022. Subscription marketing was hot, so brands jumped at the chance to build subscribers. Still, in the process, they are wearing out consumers who have come to realize that the costs add up and, in some cases, it’s almost impossible to cancel subscriptions online.
Josh had a problem. His credit card bills had gone up almost every month got to the point where I was paying an extra $700 a month”? When he reviewed his charges, he found that his subscription for everything from food to vitamins was eating him alive. Welcome to the era of subscription marketing.
Not too long ago, marketers realized that having someone pay a monthly charge was money in the bank. No, you can get subscriptions to just about any product, and some online brands only offer a purchase with a subscription. Unf, fortunately, it’s costing consumers a lot of money.
The subscription e-commerce market has grown by more than 100 percent over the past five years. The largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011. Fuel d by venture-capital investments, start-ups have launched these businesses in a wide range of categories, including beer and wine, child and baby items, contact lenses, cosmetics, feminine products, meal kits, pet food, razors, underwear, women’s and men’s apparel, video games, and vitamins.
The majority (roughly 80% ) of the US population is subscribed to something, research shows, yet half of US consumers are put off by the increasing number of subscriptions they are tempted to opt-in for. E-co erce subscribers tend to be younger urbanites with money. Compared with the general US population, they are more likely to be 25 to 44 years old, have incomes from $50,000 to $100,000, and live in urban environments in the Northeastern United States. These subscriptions particularly appeal to women, who account for 60 percent.
For those who subscribe, the model can be pretty appealing. The median number of subscriptions an active subscriber holds is two, but nearly 35 percent have three or more. Male shoppers are more likely than women to have three or more active subscriptions—42 percent versus 28 percent, respectively—suggesting that men particularly value automated purchasing and the ability to limit store trips.
The most popular services are
Amazon Subscribe & Save (consumer packaged goods)
Dollar Shave Club (razors), which have nearly twice as many subscribers as the next services on the top ten list
Blue Apron (meal kits),
and Birchbox (beauty)
Both men and women, buying for themselves or others, use many leaders. Still, women are more likely to subscribe to beauty and apparel services, including Stitch Fix (apparel), AdoreMe (lingerie), and ShoeDazzle (shoes). Men, y contrast, are much more likely to gravitate to razors (Harry’s is the third-most-popular service for men but the seventh overall), video-gaming gear and collectibles (Loot Crate), and meal-kit or food-delivery services (Home Chef and Instacart’s subscription delivery option, in addition to Blue Apron and HelloFresh).
Consumers do not have an inherent love of subscriptions. If anything, the requirement to sign up for a recurring one dampens demand and makes it harder to acquire customers. Instead, they want a great end-to-end experience and are willing to subscribe only where automated purchasing gives them tangible benefits, such as lower costs or increased personalization.
A recommendation, including word of mouth and positive online reviews, is a crucial trigger for consumers to sign up with a subscription service, particularly those for curation and access. Subscribers to both also want something new and innovative. In contrast, replenishment subscribers are more motivated by financial incentives, such as discounts and a strong product need.
Consumers are quick to cancel services that don’t deliver a superior experience, such as poor product quality, dissatisfaction with the assortment, or a lack of perceived value. Curat on and access subscribers also cancel when they don’t feel they are getting a deal for the money, probably because these services offer more discretionary products. A key challenge for all subscription e-commerce providers is matching supply and demand; consumers are much more likely to cancel when products pile up, or they can’t customize order volumes to match their actual requirements (for example, if they are going on vacation or need less product in a given week or month). In these situations, subscribers say they would prefer to buy the products when they need them, either in stores or from transactional e-commerce services, instead of subscribing.
9 Stats About the Future of the Subscription Economy
- The subscription economy has grown more than 435% in the last 9 years.
- 78% of international adults currently have subscription services.
- 75% of respondents believe that in the future, people will subscribe to more services and own less physical “stuff”.
- Subscription businesses have consistently grown 5-8x faster than traditional businesses.
- 64% of respondents say that they feel more connected to companies with whom they have a direct subscription experience versus companies whose products they simply purchase as one-off transactions.
- By 2022, 53% of all software revenue will be generated from a subscription model.
- 70% of business leaders say subscription business models will be key to their prospects in the years ahead.
- 28% of subscribers said that a personalized experience was the most important reason for continuing to subscribe.
- While it’s true that the majority of subscribers only have 1 primary subscription service that they pay for each month, it’s important to note that nearly half of the men and over a quarter of the women in the U.S. are juggling 3 or more subscriptions.
While subscription marketing is hot, some, like Peloton, are finding it’s got drawbacks. Some consumers become quickly overwhelmed by their monthly purchases and often find it difficult to cancel subscriptions without talking to a customer service representative.
If anything, fatigue may be worse among media companies than their subscribers. It is easy enough to subscribe for a while to a streaming service and then switch off again — what is known as churn.
In addition to subscription fatigue for products, many find that too much content is behind paywalls. Subscr ing to multiple news sites can quickly add up, especially when they bill by the quarter.
My opinion? Subscription marketing is going to come back to Earth. Media companies like HBO and Disney have the dollars to provide value but do people really want monthly vitamin subscriptions? Meal delivery services have also increased dramatically, but cancellation rates are very high as customers tire of the small portions and lack of options/