The Onslaught Of The Subscription Economy:

You may use it for all manner of things! Beer, bread, vitamins, watching films or for simply reading books on Amazon. The subscription economy is becoming quite the phenomenon with people now questioning whether our country of shopkeepers has now become a nation of subscribers?

What is the subscription economy?

Simply put, it is the network of consumers paying a fixed monthly price for a product they know they are going to keep using. The premise is that If you know you are going to need something regularly, then why not pay a simple monthly subscription to take the hassle out of the need. So, if you know you’re going to keep shaving, for example, you might subscribe to buying razor blades. Yes – they really have thought of everything!

How has it been received?

Unsurprisingly, with so many people scared to venture out during lockdowns, the subscription economy has boomed. The latest research from Barclaycard indicates that it grew by almost 40% in the UK alone last year. So, it’s now worth a whopping £323m per annum.

The research also showed that:

  • Almost two-thirds (65%) of UK homes currently use a subscription service, with an average of seven subscriptions per household.
  • The average spend per individual is £46 per month. Men spend, on average, £57 per month, while women spend an average of £35 per month.
What does it mean for the future?

Clearly statistics like this represent a big opportunity. There is a potential market, as well as a challenge, for retailers. In fact, we know that one in ten retailers launched some form of subscription service during lockdown to keep themselves afloat.  Furthermore, one in five say they will continue to develop their subscription service now that the restrictions have been removed.

Amazon boss Jeff Bezos has branded the new, subscription focussed consumer the “divinely discontent customer.” And indeed, it is clear that companies and brands now need to do more than just meet demand. According to Bezos, if they are going to keep their subscribers, they need to anticipate and shape demand as much as respond to it.

So, will the subscription economy continue to grow? It seems highly probably! We have to bear in mind that the UK subscription economy is only a fraction of that worldwide, which has grown 435% in just under a decade. Some commentators are even hailing it as ‘the end of ownership.’ Whether or not that will be the case remains to be seen. But, for now at least, growing consumer preference for subscribing over ownership looks set to stay. 71% of international consumers currently have a subscription service. Meanwhile, 75% believe that in the future people will own less physical products.

And why not? The subscription economy is more than just boring old razor blades. You can get cat litter on subscription, snack boxes and newspapers that only focus on good news. It’s a veritable emporium of just what you need. Why, for example, settle for Christmas just once a year? But, do remember to read the small print – they do turn up on your doorstep, not down the chimney…

 

As always, if you would like to speak to an adviser, please do call us on 01243 767 469. Alternatively, you can email us from our contact page, and someone will be in touch.
Ben Griffiths

Written by Ben Griffiths

Ben is a financial planner from our Whiteley office. While he specialises in pension planning, Ben is also able to generalise into all other areas of financial planning.

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