How COVID-19 Changed the Subscription Economy
As everyone knows, the spread of COVID-19 has had a damaging effect on the global economy. However, amongst the operational disruptions, supply chain restrictions and tougher trading conditions generally, subscription businesses and subscription based economy have proved to be resilient.
The pandemic, which resulted in national lockdowns and restriction of movement,has given many subscription businesses around the world a large boost in income, as consumer habits have changed.
How large is the subscription economy and how quickly is it growing?
A reliable reference is the analysis from ‘Juniper Research That provides a comprehensive yearly analysis titled ’Subscription Economy: Future strategies & market forecasts 2022-2026’.
The Juniper Research is built upon data from 27 countries and according to the report, the collected global subscription economy in 2021 was at $224 billion dollars. That number is expected to grow to $274 billion dollars in 2022. These numbers alone are undeniably large and it’s interesting to look at the growth from 2021 to 2022, which on its own is $51 billion dollars! In other words, an increase of 23% – in one single year! It is clear from the report that the Covid pandemic has created a societal shift in the way consumers buy goods and services.
Subscriptions the ratios are shifting towards physical products
One of the more interesting metrics is the share of physical product subscriptions. Normally when we think about the subscription based economy, we think of the digital subscriptions on software and streaming services. The Juniper Research report highlights however that physical product subscriptions account for 45% of the collected global subscription economy and it is one of the categories that has been fastest growing during the pandemic.
Growth in physical product subscriptions has been driven by the pandemic since consumers all over the world have felt a need to get goods delivered to the door and here, the subscription model has come to fruition. Namely, because it adds an important element of convenience for the modern consumer. The common term now used for these types of subscription services is ‘subscription boxes’ and this term can encompass for example regular deliveries of food, make-up, craft kits and we have even seen vinyl record boxes on subscription here at Billsby.
Make a move to the subscription economy
Flexible consumption requires an entirely new business model that fundamentally alters how products and services are sold and to whom. Moving to a subscription economy business model may call for changes to business capabilities, operating models and enabling technology platforms.
In order to make the transition to (or expansion from) a more traditional model, executives first need to determine what this “new'' business model should look like. It starts with understanding where your business is at currently and then determining where you need to get to,in order to respond best to customer requirements and market shifts.
However, getting that level of clarity requires more than simply asking whether it is time to switch to a subscription model, or to start unbundling your current offerings. You need a clear understanding of how your industry is evolving, where competition is most likely to surface and where disruption could happen. Then you need to test all aspects of your future business model to make sure it is going to get you where you want to go. We see many companies start a small pilot business model which is fleshed out as they learn and find out more about how consumers or business react to a recurring payment or subscription proposition.
Worth doing? Absolutely. Subscription economy business models can be a key enabler to help businesses to thrive again during and after the crisis, creating sustainability in the long run to generate more predictable and recurring revenues.
You can also read other blogs on our website to gain more insights on what is pro-rating and four simple ways to reduce customer churn and choosing the best recurring payments system for your business.
Source: subscription economy