There are very few parts of the eCommerce customer experience that feel quite as personal as subscription services. One a month, or twice a month, or every other month, or even every week depending on which subscription we’re talking about here a package arrives on your doorstep that is simultaneously a fun surprise and also exactly what you were waiting for. Herein lies the magic of the subscription economy. Is there any other trend that manages to toe the line between being a constant, guaranteed experience while also being a completely customized, original experience?
It is due in large part to this balancing act that the subscription economy has boomed in recent years from being a relative unknown blip on the vast radar that is ecommerce to being the industry behemoth that it is today. Not too long ago, subscription boxes and services were a new, quirky gift idea for you to give the aunt you randomly got assigned to in Secret Santa or for the endlessly picky sibling who you can never seem to surprise with a present.
Subscription services were a way to turn one aspect of a person’s personality into the perfect gift. Your aunt loves to read? There’s a subscription service that will deliver a selection of curated books to her doorstep on the first of every month. Your older sister has begun thinking about going to culinary school? Sign her up for a subscription service that delivers delightful recipes and fresh ingredients to her apartment every two weeks. Your younger brother is always complaining about not knowing what to wear? There’s a subscription service for him as well
What once was viewed as a unique gifting opportunity has quickly evolved into a powerful corner of the ecommerce industry, and the best part is— all signs point to this just being the beginning for the subscription economy. Let’s take a closer look at some of the causes for this meteoric rise and what it all means for the future of the subscription industry.
Why the Subscription Economy is Taking Over
This boom in the subscription economy isn’t without cause. In fact, if we were to take a step back and give the entire industry the 'ole’ look up and down then it would be clear to see the root of this seemingly (but not actually) sudden popularity.
If subscription services were going to write thank you notes to their biggest supporters, they would start with Gen Z and Millennials— the two generations that have shown the most support, and shelled out the most cash, for subscription services with 92% of young Americans saying that they use at least one active subscription service. This shift from paying for individual items on a needs-based schedule to receiving everything from meals to household products to beauty and fashion staples on a regular schedule is due in large part to the fact that young people prefer convenience, customization or personalization, and a curated experience.
Additionally, subscription services are often a delivery that fulfills some sort of niche need of the consumer. To find a service that fulfills one of these needs feels like a special gift tailored directly to each person’s specific identity and desires. For example, the popular makeup and beauty subscription service Ipsy is known for how well they curate their offerings based on each subscribers unique taste and preferences, leveraging quizzes to learn more about new subscribers up front.
COVID-19 and the Subscription Economy
To put it lightly, the COVID-19 pandemic had a monumental impact on all things eCommerce. In fact, the events of 2020 contributed an additional $105 billion in U.S. online revenue and subsequently accelerated the entirety of the ecommerce industry by two years.
One area that was impacted was the subscription economy, with 22.5% of companies that offer subscription services seeing their membership rates accelerate over the past year as the entire world shifted even further into the virtual realm.
Now, enough talk about the past. Let’s see what the future has to offer for the subscription economy.
10 Stats About the Future of the Subscription Economy
To keep your finger on the pulse of the subscription industry, let’s start our peek into the future with these ten stats.
1. The subscription economy has grown more than 435% in the last 9 years.
If you’re doing the math, that ends up being nearly 6x growth in less than a decade. With numbers like that, it’s hard to argue with the fact that subscription services are less of the new frontier for eCommerce organizations, and more like the proven, established frontier.
2. 78% of international adults currently have subscription services.
This number is up from 71% in 2018. Which just goes to show that while the growth of the industry overall has surely slowed, it hasn’t halted completely and there is still an audience of subscribers out there looking for new brands to make a splash.
3. 75% of respondents believe that in the future, people will subscribe to more services and own less physical “stuff”.
Of course, the need for this so-called physical “stuff” is not going to disappear overnight. But it is important for eCommerce organizations to take note of this shift. As the demand for subscription services continues to increase, the market will expand as well. To really make your mark on the subscription industry, you’ll want to consider beginning to craft your subscription model strategy sooner rather than later.
4. Subscription businesses have consistently grown 5-8x faster than traditional businesses.
Just another reminder that there is room for everyone in the future. However, if you’re looking for increased scalability then all roads lead to subscription services being your ticket to growth in the upcoming years.
5. 64% of respondents say that they feel more connected to companies with whom they have a direct subscription experience versus companies whose products they simply purchase as one-off transactions.
Ahh, that coveted consumer connection. Without it, you’ll have a harder time boosting your customer retention rates and may find yourself struggling to reach new audiences. Subscription services offer a streamlined response to this potential problem by having customer retention as a primary component of their innate structure.
6. By 2022, 53% of all software revenue will be generated from a subscription model.
To pivot away from the eCommerce sector real quick— allow me to quickly highlight the full power of subscription models by pointing out that even the software and tech industry is embracing subscription models with 53% of all software revenue projected to be generated from subscriptions by the end of this year. Which industry do you think will embrace subscriptions next?
7. 70% of business leaders say subscription business models will be key to their prospects in the years ahead.
Don’t mind me, just another stat reiterating the importance of pivoting to a subscription model. Of course, the popular choice isn’t always necessarily the best one for your organization. You shouldn’t transform your business into a subscription service just because there is a flood of statistics and projects telling you to do so. Instead, take the time to determine if a subscription model is the right one for your organization. But hey, it doesn’t hurt to know that if you do decide to incorporate a subscription model you will be in the good company of 70% of business leaders.
8. 28% of subscribers said that a personalized experience was the most important reason for continuing to subscribe.
Marketing strategists know that personalization is a coveted aspect of every corner of the ecommerce world. From personalized customer support to personalized marketing to a post-purchase customer experience tailored to the shopping and behavior patterns of customers, personalization is everywhere— and with good reason. (Bonus statistic incoming!) After all, 80% of consumers are more likely to make a purchase from a brand that provides personalized experiences.
9. In the U.S, 42% of men and 28% of women have 3 or more subscriptions.
While it’s true that the majority of subscribers only have 1 primary subscription service that they pay for each month, it’s important to note that nearly half of the men and over a quarter of the women in the U.S. are juggling 3 or more subscriptions. This just goes to show that there is room for everyone in this ever-expanding industry.
10. The subscription industry is a market estimated to be worth over $240 billion globally by 2022.
Last but certainly not least, the most influential projection of all. Following the monumental boost in the industry I mentioned earlier, it comes as no surprise that as we look to the future the subscription economy is projected to be worth over $240 globally by 2022. That’s quite a chunk of change that shouldn't be ignored by any brand looking to grow their awareness in the upcoming years.
Are you ready to take the first steps toward crafting a subscription business model for your brand? Get started by learning the ways that eCommerce brands can use SMS for retention marketing.
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