The future of business is the subscription economy. People’s habits of buying things have changed a lot because of the internet. But the subscription economy is about more than just technology. It is a huge change in how people all over the world buy and use goods and services.
Because Australians and New Zealanders spend “an average of $660 AUD per month on subscriptions or recurring goods and services,” there has been a big change in many places. In the same way, Zuora points to a YouGov study that says 78% of the British population already subscribes to at least one product or service. Kimberly Whitler of Forbes uses to rent the Runway to show how the subscription economy helps consumers: “Why to buy a Prada when you can rent one and wear a different one next month?”
No matter what the product is, the same model works. For example, why would a customer buy a CD or DVD from a store when they can pay a monthly fee to Spotify or Netflix and watch or listen to almost anything they want? Why should they buy a book when they can read it on Amazon’s Kindle Unlimited?
These are great questions, and retailers who sell these products should be very worried about them. Even more so when Business Insider says that “3% of Americans will subscribe to at least two by 2018,” and that number could reach 62% by 2020, which shows the power of the subscription economy.
The effect of how popular these services are has already happened. Just go to the video store near you. Or, more accurately, just look at where it used to be. But the subscription economy affects more than just media stores. The subscription economy now affects almost every product in some way. Our customer, The French Cellar, is a great example, “The French Cellar’s model is buyer-centric” because they give customers “two bottles of wine chosen by a 3-star Michelin sommelier every month, along with a tasting guide.”
Buying your own wine at a store is obviously a very different experience from this. It makes things easier for the end user and gives The French Cellar a steady stream of business that is not based on what customers want each month.
In the same way, Chuck Longanecker at Entrepreneur says that software-as-a-service (SaaS) companies like Dropbox (and TradeGecko) are great examples of subscription-based businesses. Longanecker says that the success of these services shows “more than ever that customers like subscriptions.”
In a Medium post, Tien Tzuo says that 2017 will be “the beginning of the end of car ownership.” He says that traditional car ownership will be replaced by car subscription services:
You will not buy it; instead, you will sign up for it. It will be just like choosing a cell phone plan: you can choose your model online, choose between a 24- or 36-month plan, choose your upgrades, and then pick up your car at a dealership. No haggling over prices, no loans, and no back-office sales pitches.
Cars have been one of the biggest purchases that almost everyone makes in a product economy. If a lot of people stop buying these things outright, that would be a big change in the way money works. Also, car sales companies will fail if they cannot change to this new way of doing business.
So, if “results, not ownership” is what people want, businesses need to change their approach. It is no longer about selling someone a fish; it is about getting to know them so they can trust you to meet their fish needs in the future.
Checking the box to sign up
The subscription economy includes services like The French Cellar and subscription box services like Bark Box, Graze, and Loot Crate. Customers can get the same product in these boxes that they could buy in a store.
Shorr Packaging did a study in 2016 that showed there were more than 2,000 subscription box services in the US in 2016. The study also found that the number of people who visit the top website in this field has grown 3,000 times since 2013. Boxes are also available in a wide range of industries, such as:
- Cosmetics and other beauty items
- Food and drink
- Products for fitness
- Clothes and other items
- Pet products
- Tools for shaving
These services pose a big problem for retailers in those areas. With a subscription economy, your customers can get the same kinds of things you sell without ever having to come to your store. Also, they can make the customer’s experience a good one.
Subscription economies are a challenge for other retailers because they are tailored and personalized. After all, if your customers can get expert advice about the things you sell from the comfort of their own homes, why should they come to your store?
Because of this, many stores are moving toward the subscription economy. The problem is that you cannot just bundle your products, sell them at a low price, and be done with it. To really offer a subscription service, you need to get to know your customers on a personal level.
There are all of the important parts of the subscription economy. Customers can expect to save money, have their products delivered regularly, and get good products. But Dollar Shave Club has much more to offer than just this.
Customers can pick how many razor blades they want to be sent. They can also choose how often they get delivered. This shows how flexible many of these subscription services are: you can always upgrade or downgrade your membership. You only pay for what you need, which makes the experience more unique for each user.
Most companies will let you change the size of your subscription, whether you are getting razor blades in the mail or software-as-a-service online. This is nothing new. Think of the old-fashioned milkman, who would bring one or two pints of milk, depending on what the customer wanted.
So, this is what a subscription economy is and which can be a good deal for the retailers. To know more about such facts, visit zap inventory and get access to learn more of such things related to business and strategic decisions related to business expansion.