By Dan Burkhart, CEO and Co-Founder at Recurly
With the 2015 holiday shopping season in full swing, retail continues to demonstrate the influence of the digital world as Black Friday deals, the traditional purview of brick-and-mortar, moved online. One of the factors fueling e-Commerce’s upward trajectory is the growth of subscription-based businesses. In fact, year-over-year growth of subscription sales in the holiday period has been outstripping that of retail sales.
Case in point: data from 2013 and 2014 shows that a market basket of consumer-facing companies’ holiday subscription billings spiked 45% between the months of November and December, and we expect this “burst” trend to continue in 2015. In contrast, the U.S. Census Market Report reported that the retail sales category spiked between 16% and 17% between November and December in 2013 and 2014.
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Given the season, gift-giving is playing a part in this increase. A wide variety of products are now sold via subscription from box-of-the-month consumer goods – food, fashion, cosmetics, personal care items, toys, you name it – to high-end electronics. Consumers save time and value the consistent delivery of goods and services, boosting consumer confidence in the subscription model. With a universe of compelling choices available at the click of a mouse, reliable deliveries and the delight of receiving something new – why not wrap up those benefits as a holiday gift?
In addition, subscriptions give consumers an appealing way to smooth out the “big-purchase butterflies” with smaller payments over a longer period of time. Notably, Apple is now offering a subscription plan for $32/month so that consumers can get the newest iPhone every single year. By taking advantage of subscription economics and the appeal of easily amortized subscription payments, Apple just brought its loyal customers one step closer – and increased the velocity of related purchases and customer engagement.
The subscription model focuses a powerful lens on economic loyalty. Merchants reap the benefits of predictable revenue driven by customer insights, creating opportunities for exciting business transformations. Businesses have the opportunity to demonstrate exciting changes in the way we think about pricing, packaging and serving our customers. Consumers enjoy the flexibility of pay-as-you-go economics and a stronger relationship with the brands they trust to deliver innovative experiences to them consistently over time.
Now that’s a gift that keeps on giving.
