Subscription services are popping up everywhere for all kinds of products and services and are becoming increasingly popular. This McKinsey research states that by 2016 the largest retailers in the subscription e-commerce market were making more than a $2.6 billion in sales, and last year (2018) 15% of online shoppers had subscribed for one or more subscription services. These numbers have only increased over the last year, and there are no signs of this stopping anytime soon.
As you can see there's great potential for companies to create a successful subscription business, for many different products and services. This McKinsey research also shows though, that customers are also very quick to switch if a subscription service doesn't live up to their expectations.
That's why it's so important to know what unique benefit you could create for your customers by offering a subscription model. Here, I'll mention a few key trends that are currently contributing towards the rise of the subscription model. I'll also mention some examples of subscription services doing this right, and advice on how to capitalise on these trends with your subscription service.
A major reason why people are switching to subscription services is the ease and convenience they can provide. Subscription services can offer this in multiple ways:
Here are some examples of successful subscription services that have ease and convenience as their main selling point:
"Shave and grooming made simple" is their tagline. And that's what it does: if you sign up you can tell exactly what you need, and how often you want to get a restock. After that, Dollar Shave Clubtakes care of the rest and will keep sending you restock based on the interval you set, until you change your subscription.
Their strategy has proven successful: by 2015 Dollar Shave Club was projecting over 200 million in revenue, and in 2016 they were acquired for 1 billion by Unilever.
The Dollar Shave Club works really well because:
"Always a working bike" is what they promise, and they deliver on it by not only giving you a bike, but also providing maintenance in the form of dedicated bike repair & swap shops.
Here in the Netherlands this works especially well because:
And while renting a bike via Swapfiets is in the long run much more expensive than buying a second-hand one, Swapfiets has been hugely successful because of these benefits. The net result is that the company went in one year from 150 to a whopping 50.000 customers
In case you're interested to find out more, in this article I've written more on how Swapfiets optimises for the customer journey and makes it their big selling point.
Using ease & convenience as your main selling point when starting a subscription business
In the following cases you can make the lives of your customers much easier with a subscription service, and create a huge selling point:
Don't forget to make sure that you know your customer's journey inside-out so you can optimise for it, and not create unintended pains for your customers.
IKEA recently started a project that perfectly fits into this trend: renting out furniture rather than selling it. It's part of shifting their focus to providing services, while repairing and recycling products.
In the Netherlands, IKEA started a pilot project renting out furniture to students. This is a great target group as they're very likely to move places frequently and perhaps study abroad, compared to someone who settled down in a suburb. There are some other reasons why this is a great idea:
There are no numbers yet on IKEA's furniture leasing success, but I'm sure this initiative can pave the way for many other subscription services to come!
Another reason why people are switching to subscription services is because of a move towards owning less. This is partially due to people moving around more frequently, like expats and digital nomads do. There's also a trend of moving to inner cities where (living) space is often limited. And the emphasis has shifted from possessions to experiences.
With subscription services you can rent products for the time you need them and easily return them afterwards, without the product(s) piling up in your home. You can also easily move places without needing to sell your furniture and buy it again; an often costly and time-consuming process. With items (like couches) that need to be used for a long time to "earn back" their money, renting it is a great solution if you're only in one place for a few months.
Using minimalism as your main selling point when starting a subscription business
You can use minimalism as your main selling point when starting a subscription business when either:
You might fear it'll bring down your sales, but it can turn out to be your unique selling point in comparison to competitors!
The last big reason why subscription services are becoming more popular is because people are caring more and more about consuming in a more sustainable manner.
With subscription services products can easily be re-used and recycled. It also forces companies to focus on the long-term quality of a product, as they earn off the actual usage of a product and not just the selling. It encourages repair and refurbishment rather than throwing away.
Rent The Runway
Rent The Runway is a subscription service that lets you rent designer clothing, and rotate your wardrobe on a monthly or continuous basis. It means you can frequently freshen up your wardrobe, without the rest of your clothes ending up in the back of your closet.
As the clothing industry & fast fashion is one of the most wasteful industries around, this model can have a huge impact on the environment.
Why Rent The Runway works is because:
Using sustainability as your main selling point when starting a subscription business
When selling the following products you can greatly contribute towards a sustainable future when starting a subscription business:
Don't forget it's important to be consistent if when choosing how to sell your subscription service. Customers are more and more critical as well as, socially aware, and if one part of your business is sustainable, for example, but another one isn't, there's a good chance your customer will find out and look for something else.
If you've given the examples I've mentioned a second thought, you figured out that many of these subscription offerings actually make life easier, less cluttered, and more sustainable! There are many advantages to switching to a subscription service, especially in our society, and it explains why so many people are doing so.
If you're selling products and are seeing a decrease in your sales, take a hard look at your company and wonder if one of the trends I mentioned might be an explanation. How you can make a subscription model work to your benefit?!
If you want to test a subscription model for your products, without needing to put infrastructure in place yet, contact us. We can help you launch a subscription for membership models, like VerbouwMatch that match contractors with homeowners wanting to remodel, or a try & buy model like Philips Lumea where customer's test a product before deciding if they want to buy it! We make trying out a subscription service and testing the waters as easy as it can get... see how we can help your business grow!