The Subscription Strategy
Convenience, value and…sustainability?
This will probably come as little surprise, but the Covid-19 pandemic has led to a significant shift in online spending. Food stores have reportedly had the biggest growth, according to the Office for National Statistics. As a necessary spend, this trend is not unexpected. In 2020, Alvarez & Marsal and Retail Economics reported that approximately 17.2 million British consumers are expected to permanently make changes to their shopping habits and move online.
There is no better time to grow, optimise and develop online presence.
For many, the ability to offer collections or home deliveries has been a lifeline for supporting their services. Will Shu, the CEO of the takeaway delivery company Deliveroo, stated in late-2020 that “[…] initial analysis suggests that Covid-19 has accelerated consumer adoption of these delivery services by about two to three years”. Although the pandemic has been detrimental in many ways, by default, it has pushed innovation and technology further than ever before.
Yet, it’s not all about essential spending. With morale low and stress high, people are seeking out ways to treat themselves where they can. That’s where subscriptions come in. There are multiple advantages to this business model, least not because they provide a relatively predictable revenue stream.
From food to flowers, music to movies, beauty to books, the subscription is continually emerging as a popular means of consumerism. Revenue can come in numerous forms; a one-off fee, a monthly payment or a yearly one. Free trials can also be used to give the customer insight into the services on offer.
Forbes has cited four key reasons for growth in subscription services:
- Price — media services such as Netflix and Spotify increase the value perception of customers by allowing unlimited streaming for a set price. A bestselling CD can cost £10, why pay for one when you can have access to multiple at any time for the same cost? The same can be said for a DVD of the latest film. Coupled with ease-of-use and multiplied into a few hundred million subscribers…you can do the maths!
- Personalisation — another very customer-friendly feature. Many subscription services allow choice. Companies such as Awebox offer fully-customisable boxes. Not only do you get variety, but you’re made to feel unique. This is a neat option for thoughtful and easy gifting.
- Convenience — this speaks for itself really. Aside from online services like those mentioned earlier, direct-to-door deliveries are typically favoured as the distribution method for subscription boxes or services. In a time such as this when the world is mostly at home, instead of having to source your favourite things out and about, you can be beautifully lazy and float from sofa to door!
- Curation- like the personalisation aspect, this is refinement of what you are looking for. The algorithms that curate your perfect playlist, the inspiration, the recommendations, the mildly annoying adverts that pop-up everywhere shouting about the product you’ve had in your online basket for weeks. But, it works.
In my previous article, I mentioned the uplift in online exercise classes pushed by the pandemic. Fitness companies are getting more involved with subscriptions; Lululemon offers a loyalty programme for an item of clothing, experiences, free shipping and workout classes. Peloton offers live-streamed workouts on its app for a monthly fee. There are fewer and fewer items or services that aren’t available in subscription form. Everything from wine, games, sports — the list could just go on.
Another great example of where this business model works is beauty boxes. The mix of products offered, typically on a monthly basis, provides variety to the customer. It enables individuals to try products that they may not have otherwise bought and simultaneously promotes beauty brands. Usually, a win-win-win scenario for the provider, consumer and brand.
Nevertheless, the biggest question hanging over the future of subscription services, especially those where there is a physical product…
Are they sustainable?
Despite the many advantages of the subscription business model, there is a prevalent increased focus on sustainability, both in the environment and commerce. As a result, there are many questions to consider around the future of subscription-based businesses. Consumer expectations are surely higher if they are paying to get a product at a set time within a recurring period.
Questions are raised around reliability and quality of service for many businesses; is the pressure on those providing subscriptions higher? Can the supply-and-demand be continually met to a good standard?
CrateJoy reports that there has been a rise in curated eco-friendly products for subscriptions. As well as promoting environmental sustainability, they make it accessible. Not everyone recognises how they can alter their impact on the planet, considered subscriptions are a place to start. Likewise, biodegradable or recycled packaging are responsible, but also an additional selling point when sustainability is such a core consideration in business. Delivery frequency and methodology is a potential miss for physical subscription services, but this is a challenge for all online-delivery options. There is certainly still work to be done.
The future of e-commerce remains extremely bright, but now it is time to innovate. Protecting the welfare of the consumer, environment and business is critical.
