Over the past few years, the subscription economy has grown to new heights. While subscriptions have been an option for consumers in a number of retail environments — from apparel and pet supplies to media consumption — the COVID-19 pandemic accelerated the adoption of subscriptions in a variety of industries that turned to payment technology to adapt their business. The digital transformation of commerce and the major shifts to subscriptions were crucial for companies in all markets to find a way to survive beyond the pandemic and create new channels to thrive.
What Makes Subscriptions Appealing?
The subscription business model is growing increasingly attractive for businesses hoping to bring in more predictable revenue streams every month, while also accounting for customers’ preference for convenience.
The recurring revenue associated with subscriptions helps businesses that are easily impacted by financial fluctuations, or changing customer sentiments, continue to keep their organization afloat. Subscriptions give businesses access to predictable revenue, increased customer retention and a higher level of brand loyalty.
The benefits of subscriptions for consumers are just as clear. Above all, subscriptions help make the shopping or buying process much more convenient. Subscriptions also offer customers the ability to personalize and customize for their needs, all while choosing how frequently they receive their subscription and whether or not they will renew. This additional flexibility makes customers feel valued, and improves the nature of the customer-business relationship.
How All Industries are Taking Advantage of Subscriptions
Given the many benefits of the subscription model and the need for businesses to evolve how they go to market, it isn’t surprising that many industries, even non-traditional ones, are embracing subscriptions. McKinsey reported that ecommerce subscriptions generally fall into one of three categories: replenishment (commodities and consumables); curation (subscription boxes and apparel sets); and access (memberships). While these categories were made to focus on goods typically seen at retailers, the same benefits ring true for other industries such as the education, automobile, and healthcare industries, among others.
In the education industry, the COVID-19 pandemic forced educational organizations and academic institutions to turn to remote schooling. With this shift to online learning, these organizations had to pivot to using educational tools and edtech solutions to continue engaging with their community, including online subscriptions. Subscriptions weren’t uncommon in the education industry prior to the COVID-19 pandemic, whether this was through tuition and loan repayments, after-school activities and clubs, or online classes. However, many academic institutions improved their existing subscription models through payment technology to move the previously in-person payments through checks and cash to online channels and portals.
The automotive industry also embraced subscriptions recently, with many businesses in this industry pointing out changing consumer behavior as one reason why they’ve fully incorporated subscriptions into their business model. Many have found that consumers are leaning toward leasing cars for short-term use as opposed to owning their own for long periods of time. This caused major players in the space (like BMW, Audi and Jaguar) to introduce car subscriptions so consumers had the ability to test out certain models before making the decision to purchase their own or try something new. Subscriptions also started becoming more popular for car payments through dealerships or resellers.
Finally, the healthcare industry also embraced subscriptions through the pandemic to offer lower point-of-service costs for patients and their families. MDVIP is a great example of a company that provides healthcare subscriptions by charging annual subscribers an annual flat fee instead of having to pay for prescriptions/health services via insurance or out-of-pocket. Their subscription covers preventative checkups and additional benefits like custom meal and fitness plans, and exclusive access to physicians.
The Subscription Economy is Here to Stay
While subscriptions were popular in a number of industries prior to the pandemic, many non-traditional industries are embracing the subscription business model to address the rising consumer need. As businesses continue to build strategies that will help them maintain strong, long-term relationships with their customers, it’s becoming more and more clear that subscriptions will play a big part in the next wave of commerce. The subscription business model helps businesses bring in steady revenue streams while building a loyal customer base and providing consumers with the convenience they need from their transactions.
Ralph Dangelmaier is CEO of BlueSnap. BlueSnap helps businesses accept payments globally, with the All-In-One Payment Platform designed to increase sales and reduce cost for all businesses accepting payments. With more than 30 years of experience in the payments industry, Dangelmaier is at the forefront of ecommerce innovation, using his expert knowledge to grow public and private companies via innovative payment solutions. Dangelmaier also serves on the boards of BlueSnap, MineralTree, Electronic Transaction Association, and Stonehill College. Prior to BlueSnap, Dangelmaier served as the President of ACI Worldwide and is the former CEO of P&H Solutions, the pioneer of web-based cash management. He also has the honor of being named one of the Top 50 SaaS CEOs by The SaaS Report as well as a finalist in the Ernst & Young Entrepreneur of the Year program.