Several prominent businesses like Bellabox and Rocksbox closed their subscription-based models. This raised questions about the viability of the subscription model in retail.
However, industry experts suggest that while the landscape is undergoing a shift, there’s still room for growth – but only if businesses are willing to adapt.
Subscription models: what the experts say
Erik Almadrones, EY Asia Pacific consulting customer and growth leader tells Insider Retail Australia that “subscription fatigue” is observed more often these days.
Subscription overwhelm
This is backed up by a Bango survey that found approximately 81% of subscribers in India and Southeast Asia say they are dealing with “too many” subscription services.
Almadrones says consumers are “increasingly discerning, prioritizing value in their purchasing decisions as costs of living remain a top concern.”
Meanwhile, Elie Ofek, a Harvard Business School professor, warns that a poorly designed strategy can drive customers away
Weak subscription model strategies
Ofek highlights the importance of well-thought-out subscription model strategies. Without it, your subscription model will get lost in chatter.
This ties in with subscription fatigue, which according to Ofek, sets in when companies assume that charging customers monthly will guarantee a steady revenue stream.
Instead of just putting your model out there and hoping for the best, he says it’s vital to think about thoughtful pricing structures. Businesses should think about how to align their models with what customers actually want.
So, what are retailers to do?
Well, they’ll have to adapt to survive. Businesses would need to rethink their entire approach.
Key points to consider:
- Differentiation: Offer something unique, something of value to stand out from the crowd.
- Flexibility: Consumers want personalization so give them customizable plans.
- Transparency: Clearly communicate billing cycles, cancellation policies, and data practices.
- Tech integration: Use AI and machine learning ethically to personalize consumers’ experiences.
- Financial routes: Look at services like Buy-Now-Pay-Later to make it easier for consumers.
The future of subscription models
Despite challenges, the market shows resilience.
According to the Subscription Economy Index (SEI), companies that subscription models still outpace traditional businesses.
In fact, their revenue increased 3.7 times faster than S&P (Standard & Poor) companies since 2012.
The report states: “Over the past 11 years, subscription-based companies in the SEI have grown 3.7x faster than the companies in the S&P 500, which have historically represented more traditional, product-based businesses.”
In addition, the compound annual growth rate (CAGR) was 17%, compared to 4.6% for the S&P 500 over the same period.
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About the author
Cheryl has contributed to various international publications, with a fervor for data and technology. She explores the intersection of emerging tech trends with logistics, focusing on how digital innovations are reshaping industries on a global scale. When she's not dissecting the latest developments in AI-driven innovation and digital solutions, Cheryl can be found gaming, kickboxing, or navigating the novel niches of consumer gadgetry.
