By 2025, The Subscription Economy Is Expected To Grow To $1.5 Trillion.
Subscription services are quite popular with customers. The growing number of subscription businesses entering the market is evidence of this. Consumers’ ever-increasing desire for recurrent items has led to the popularity of subscription services.
We have loved the subscription economy over the last ten to fifteen years. The most common software business model in B2B (and even among retail users) is now software-as-a-service. Subscription box offerings, dealership vehicle repair offers, meal kit sales, and video streaming services are examples of emerging trends.
These services were created to give customers individualized experiences and foster enduring relationships. In this article, we will look at why it is becoming the new trend.
Growing Importance of Subscription Services
The size of the global subscription e-commerce industry is anticipated to rise from $72.91 billion in 2021 to $120.04 billion in 2022. By 2026, it is anticipated to reach $904.2 billion, an increase from the current year’s about $784 billion.
What started as a way for newspapers and magazines to draw in readers has developed into a plan for retail businesses to reach a wider audience. The need for subscription e-commerce has grown due to the ease of recurrent purchases and the quick satisfaction of services.
Current subscription brands saw a 31% increase in their total client base in 2021 alone, indicating that consumers value subscribing to services rather than making straight purchases of goods, services, or information. Customers can obtain what they desire at a reasonable price through subscription boxes, digital content subscriptions, and service subscriptions.
Amazon was the first company to profit commercially from subscription shopping, and many others, like BarkBox, Birchbox, and FabFitFun, followed suit because of this, many shops, producers, and publishers are using the subscription model these days to expand their audience and build enduring client relationships.
Subscription Growth Over Years: Mind-Blowing Statistics
According to 2019 research from the Subscription Trade Association (SUBTA), the e-commerce subscription business has expanded steadily over the past five years at a pace of 17.3% annually. By 2023, 75% of the companies that sell directly to consumers online will provide membership and subscription services. Furthermore, according to UnivDatos Industry Insights, by 2025, the worldwide e-commerce subscription industry is expected to reach $478.2 billion.
More than two-thirds of consumers (69%) in the US are using multiple subscription services at the same time. 28 percent have four or more. This is by no means a phenomenon that only occurs in America. The majority of people who have multiple memberships are Canadians. The countries with the next-highest subscriptions per user are Austria, Germany, and the UK
Different Types Of Subscription Services
- Subscription Boxes
During the Covid-19 outbreak, consumers resorted to internet shopping from the comfort of their homes, which resulted in a spike in the demand for subscription boxes. Furthermore, in 2021, 79% of consumers indicated that they would be interested in auto-replenishment services, which could account for the popularity of subscription boxes that include household and beauty products.
Subscribers to the women’s lifestyle subscription FabFitFun can pay quarterly or annually for carefully picked boxes containing six to eight full-size products. The corporation’s 200 million subscribers have a selection of products, including beauty, wellness, exercise, and fashion.
According to a recent survey, 80% of customers are more inclined to purchase a business that offers a personalized experience. FabFitFun follows this trend by letting subscribers customize the products in their quarterly boxes. Revenue rises, and customer retention is encouraged when premium memberships are used to personalize the customer experience.
- Digital Content Subscriptions
Publishers, authors, and content producers are using digital subscriptions to generate income, and this trend is growing. Unlike social media and traditional media platforms, a subscription model enables producers to own their material and audience to offer curated and members-only content. The digital subscription industry, which is prevalent now, was made possible by Netflix.
Using software plugins like Memberful, creators, entrepreneurs, and publishers are starting membership businesses to sell items, produce newsletters, and grant exclusive access to podcasts and other digital content. Subscription and membership-based business models give brands a more direct line of communication with their customers while enabling them to develop and maintain sustainable revenue streams.
Furthermore, brands can avoid the internet’s gatekeeping issues, such as algorithms, third-party cookies in advertisements, and rivalry in an already saturated market, thanks to direct access to clients.
- Service Subscription
Over 200 million subscribers worldwide enjoy numerous benefits from service subscriptions like Amazon’s. Over 79% of subscription members in the US receive same-day or next-day shipments thanks to Amazon’s cultivation of a membership experience that includes quick and free shipping.
Additionally, by giving customers the option to Subscribe & Save at checkout, Amazon has expanded its subscription offerings beyond Prime. Subscribe & Save helps retailers streamline the customer buying experience by enabling users to manage thousands of items from the Amazon dashboard and automate delivery. Customers’ ability to cancel item subscriptions through Amazon helps allay any concerns they may have about being locked into a plan and allows them to regain control.
Impact of Subscriptions Services
It has been demonstrated that providing customers with subscription memberships increases customer purchases, and the long-term effects of increased subscription revenue are significant. This subscription revenue stream should help merchants with cash flow, budget forecasting, and business value.
Both customers and retailers can profit from the subscription business model. Subscriptions allow customers to access services and content for less since they provide a fixed monthly expense that simplifies budgeting. Customers have also demonstrated that, besides the financial advantages, they are prepared to pay for a subscription membership to access premium products, services, and information because it is convenient.
Through subscription commerce, businesses may offer a direct-to-consumer experience that draws in, keeps, and benefits clients over the long run. Merchants that provide their customers with subscription alternatives will realize substantial long-term benefits as the subscription commerce sector expands.
Why Consumers Love Subscription Services?
1. Convenience
Convenience is one of the most well-liked features of a membership. When you subscribe to anything, you make a tiny, long-term investment that will pay off. This entails remembering to purchase shampoo each time your existing bottle runs empty. The idea behind subscriptions is to make it simple for customers to have their replenishment needs satisfied regularly.
Besides personal hygiene products, CPG items, including canned soups, pasta, rice, sauces, and pet supplies like kitty litter and dog and cat food, are ideal for subscription services. Dollar Shave Club-style deals work well in this case in terms of convenience. The main goal of convenience subscriptions is to allow users to have what they need on hand without the inconvenience of frequent store trips.
2. Worth
The product brand only influences 22% of the purchasing decisions made by online shoppers. These days, the value proposition is the main focus of much of their attention. Value-sensitive clients are drawn to clubs and services that offer their patrons a high sense of value. Although branding is still important, there are other considerations to consider. This is especially true given how fiercely competitive retail sales are becoming across all channels (physical, online, and marketplaces).
Consequently, companies have realized the value they can provide to clients. Unique material, member-only prices, unique discounts, and other benefits are some of the ways they achieve this. Businesses that let users subscribe to their services have a higher chance of satisfying consumers, who develop into devoted, lifelong patrons. Additionally, clients may find it simpler to plan and budget when they know they will only be billed for the items or services they use or desire regularly. It becomes customary and accepted.
Unbelievably, providing subscription services can ultimately result in financial savings for your clients. For $20 a month, you can give a juice box subscription service for office breaks. In six months, the consumer saves $180 by not purchasing single-use packages, which cost $2.50 daily!
3. Curatorship
A key factor in the success or failure of the subscription business is curation. Birchbox was successful because its clients trusted its curatorial tastes, which were intended to produce a particular look and feel for the customer’s fashion requirements. Additionally, curation (and a feeling of exclusivity) has shown to be incredibly successful for wine subscription services. A 2019 WineDirect poll found that the clubs with the highest average number of members offer progressively pricey wine bottles.
For instance, clubs with an average of 2,646 members often offered wine bottles valued at over $100. Conversely, the average club membership for those whose wines were priced at under $20 per bottle was 1,407.
This brings us to the startling realization that effective curation can increase your customers’ share of your wallet and grow your club membership base. Avoid the misconception that clubs will just lower your profit margins. It is plausible that your most devoted consumers are those who subscribe to your service and are willing to pay a higher amount of money than other clients.
Conclusion
There won’t be a pause in the rapidly expanding e-commerce subscription business. Customers adore subscription services. They benefit customers, brands, and retailers alike. Subscriptions provide customers value, ease, and well-curated products that suit their preferences.
Establishing subscription services improves cash flow for businesses, brands, and merchants. It also increases sales volume, brand loyalty, and the consumer’s share of the wallet.
