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Will subscription become more attractive than purchasing products?

By Will Gillingham

Chances are, you’re subscribed to something. Perhaps you’re the Netflix provider for friends and family, or perhaps you send a premium to Spotify every month for the ability to download songs for the commute. A gym card may be nestled in your wallet, or maybe a HelloFresh box will be waiting for you when you get home.

Whatever the case, subscription has established itself as an inextricable aspect of modern-day life. But is the subscription model expanding? Will we ever see a world in which people are merely subscribed to a variety of services, rather than ever buying individual products?

In a recent IMRG interview with Marks & Spencer, it was suggested that clothing could move to a subscription model in order to sustain fast fashion. From there, we decided to reach out to our community of experts to garner a rounded perspective of the phenomenon: is subscription likely to become more attractive than purchasing and owning products?

The Universal Nod

It has its potential, although it’s not without its caveats (we’ll get to those later). For now, let’s focus on the positives.

The Contractual Element

Subscription provides stability. If customers are signed on to receive products for a certain period of time, there isn’t quite the same need to market a new range of products to customers to ensure revenue flows into the business; the customers are already on board.

As Asha Harkness, Marketing Manager, Air Business, explains: ‘In retail, there’s no denying that subscription is a business model with huge growth potential and offers the benefit of recurring revenue streams. In our experience, as well as offering more predictable revenue patterns, this model is an opportunity lined with benefits for retailers as it offers them multiple touch points with their customers in which to engage them, hold their interest and retain their business.’

Of course, this necessitates a well-established appetite for your brand already being in place. However, with the right amount of interest and demand, subscription can provide a level of consistency which doesn’t currently exist.

Contract

Personalisation

Estimating the kinds of products customers might be interested in is an imprecise science. Products they’ve bought may have been one-off purchases or gifts for somebody else; in both scenarios, the products that might be recommended based on their purchase history wouldn’t be relevant.

Subscription would smooth this over: recurring instalments of certain products means that the customer must have a level of interest in that type of item, and thus more appropriate marketing could be employed.

As stated by Andy Cockburn, Co-Founder and CEO, Mention Me: Subscription retail is exploding due to both demand and supply. Offering a targeted subscription service for great products that people want or need offers long-term value in a world tired of ‘throwaway’ purchasing - buying from brands that we don’t have a relationship with. Customers increasingly desire personalised messaging and customer service, and so if executed right, subscription services for products can meet this desire and help build brand loyalty.’

The Millennial Mindset

It’s been widely reported that millennials aren’t overly bothered about owning things. House prices have skyrocketed in the past twenty years to the extent that many see owning a home as an unattainable target. Owing to this, there’s a lean in the younger generations towards spending on experiences, rather than saving for material possessions. Subscription moulds nicely to this view.

Jean-Yves Simon, VP Product of AB Tasty explains: ‘There certainly has been a big appetite for subscription-based services, especially among the Millennial generation that are more concerned, due to mentality and economic pressure, with experiences rather than material ownership (as recent Forrester research has shown). The Sharing Economy is still going strong, though the tenor of the discussion has changed and matured (concerns about discrimination, unfair competition and work culture, to name a few). I think that as this generation matures, they will continue to demand these services, and the latter will need to adapt to the changing needs and mindset of this cohort.’

So, three pertinent (albeit rose-tinted) reasons to take the subscription model seriously. But, before you stumble to replace your entire product-listings website with a single green ‘subscribe’ button, there are a number of strings attached to subscription.

Talking at a table

It’s Good, But…

It’s not perfect. Subscription has all manner of prerequisites and challenges associated with it which prevent it from being an ideal solution for retailers. These don’t detract from its viability, however (nothing is ever ideal, after all), but are worth bearing in mind all the same.

Cost to the Customer

Imagine a world in which there is no such thing as buying: you can only subscribe to various services to receive products. To the average customer, it’s entirely unsustainable; a sort of terminal velocity would be reached for the amount of subscriptions able to be active at any one time.

Even if only a few more subscription services come into play (clothing or cars, for instance), this problem may still be encountered. This is highlighted by Elise Karamujic, CMO, Proximis: Unlike the older generations, Millennials and Gen Z are not attached to property and are keen to subscribe to access different services. So yes, subscriptions are becoming the norm, but accumulating many subscriptions will soon lead consumers to having to prioritise some subscriptions.’

Louise Robertson, Marketing Director of Localz, agrees: Consumer subscription is a whole different level of retail, requiring consumers to regularly commit funds. As well as engaging with consumers, companies offering this will have to provide offers, product updates, and great customer service. Subscription will be challenged by consumers around pricing and quality, and service will play a big part. These services will appeal to those online shoppers who hate the shopping experience. After all, we are all individuals, and with so many choices, we know exactly what we want and when; we will choose subscription if it suits our lifestyle.’

And discussions on cost imply there is already a level of engagement with the retailer: a concept which is by no means certain.

Money in a wallet

Loyalty

For subscription models to work, retailers need to acquire and retain a sizeable customer-base. Without continually updating and innovating the subscription service offered, retailers could well be at risk of boring their customers (and thus losing their custom).

This is explained by Andy Cockburn: ‘Subscriptions in any sector don’t just roll on forever. People need to be persuaded to remain loyal. Just like a referral programme, subscription services offer brands a positive way to engage loyal customers, improving customer lifetime value. Even better, offer your customers a referral programme for your subscription service and you’re capitalising on the opportunity to retain these customers and win new ones. Additionally, subscription products are highly referrable as they are often unusual or up-and-coming brands that people are unlikely to have heard of before, so there is positive social capital associated with sharing the discovery with friends.’

This idea goes hand-in-hand with Jean-Yves Simon’s view that for subscription to be viable, it has to be highly personalised rather than generic. He says: ‘We might see a heightened expectation for highly personalised subscription services, or an ultra-smooth customer experience across all of the emerging channels of communication.’

Speaking of customer experience, an expected monthly (or even weekly) service relies on a prompt and efficient delivery mechanism.

Shaking hands

Delivery

The last port of call could well be the make-or-break in a subscription model. Late or damaged delivery in a recurring service will simply cause the customer to end the recurrence. As such, an exceptionally strong delivery offering is a necessity for a subscription model to be a success.

Asha Harkness explains: Accompanying subscriptions with personalised email marketing, that can be driven by business intelligence reporting, is an important factor in the success of product-based subscriptions, but the really important factor is the distribution channel. This has to be trusted and accessible in order to retain subscribers.

‘For retailers, there’s a lot more to gain from a subscription model and consumers are enjoying the personalisation, perceived cost-saving of repeat purchases, and regular deliveries to their door – when the journey is pain-free for them. The key to a happy subscriber is timely and damage-free delivery of their goods as well as communication, including updates and delivery options, throughout the parcel’s journey. It’s all about convenience for the consumer.’

Subscription isn’t retail’s gold rush. There are many factors which need to be optimised for it to succeed. But, with these in place, it could certainly be a viable and lucrative avenue of commerce, and the obstacles which need to be bypassed are by no means insurmountable.

Woman sitting in home

In Summary

Subscription is on the rise; there’s no doubt about it. It’s a good avenue for retailers to further personalise marketing, appeal to a younger generation, and secure a consistent revenue stream. Expect to see more subscription services springing up over the course of the next year (and beyond).

Whether it will overtake buying and owning products is another question. Subscription is hindered by cost to the consumer and the need to be continuously innovative, not to mention the fact that people may simply not need products in such regular instalments.

A hesitant ‘no’ is offered: people are likely to still be owning things for many years to come. But who truly knows? If it comes about that we are all subscribing to most everything in the near-future, then I give you, reader, the privilege of reminding me of this article and the comical hubris contained herein.

Will Gillingham, Content Executive, IMRG

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