Retail

How Digital Innovators Capitalize On Subscription Businesses

subscription

To serve a wide range of consumers in the digital age, innovators are rolling out subscription offerings ranging from news content to gaming. Some providers are capitalizing on the concept by launching new services that offer access to premium content such as newspapers and magazines in exchange for a monthly fee.

With subscriptions gaining ground in areas such as digital media and gaming, according to the PYMNTS Subscription Commerce Tracker, telecom firms are capitalizing on the popularity of these offerings.  These companies are using partnerships with video streaming services to set themselves apart from rivals while adding unique incentives to their product assortments.

From Netflix to FabFitFun, digital innovators are adopting recurring payment models to provide consumers with access to entertainment and apparel along with other products and services. These are just some indications of the popularity of the subscription business model — and how different innovators are using it to their advantage:

The projected value of the U.K. subscription box market by 2022 is £1b. And eCommerce innovators around the world are providing these kinds of offerings: Los Angeles’ FabFitFun delivers boxes full of products from different categories such as fashion, food, technology and wellness. Each box contains eight to 12 products. Customers are said to receive roughly $200 worth of products for $49.99 in a seasonally-decorated box. At the same time, FabFitFun has progressively grown its subscriber/member base to over 1 million. The company’s early days, however, were not in commerce: FabFitFun began as a newsletter that developed into a blog and online magazine, and diversified in a wholly new direction with the launch of subscription boxes six years into the journey.

The share of Americans aged 14 to 21 who subscribed to internet-based video services in 2018 is 80 percent. And consumer use of on-demand video subscription services is one the rise: Netflix, for instance,  added 1.5 million memberships in the U.S. in the fourth quarter of 2018 (although it added 7.3 million internationally). Netflix CEO Reed Hastings said during the company’s post-earnings video interview session with executives earlier this month that time spent consuming Netflix content represents some 10 percent of total time spent watching TV, at least in the U.S. Netflix paid net subscriptions increased 33 percent for the full year 2018 to reach 29 million, the company said in its latest financial report. At the same time, average paid memberships grew 26 percent year over year.

The portion of surveyed consumers subscribing to a media service is 20 percent. And some companies that offer subscriptions are enhancing their offerings: Apple, for instance, recently said it would provide a more powerful online news subscription service. It would now include some 300 magazines — not only newspapers — for a monthly fee of just under $10 at $9.99. While the service would reportedly offer recommendations for other news stories, the tech company reportedly said the service wouldn’t let advertisers track what users read. However, that arrangement means no targeted ads based on consumed news stories, which is the case with social media.

The average time it took to sign up for a subscription in Q4 2018 was 146 seconds. Some subscription companies are offering features designed to get consumers to sign up for their offerings: Steeped Coffee, for instance, has a program where people can sign up for a link to get a free two-pack sample. Consumers do need to sign up for a trial of a subscription, although they can cancel at any time. According to the company, the feature helps convert customers to a subscription. It offers specialty brew with teabag-like packaging and blends including a light roast, medium roast, dark roast, French roast and decaf roast.

The average number of payment options accepted by subscription platforms is 5.3 as of Q4 2018. And some subscription services are allowing payments through other platforms: For Charge Running, payments are made directly through the App Store. The company, which has monthly or yearly subscription plans, provides live fitness classes that customers can access from anywhere in the world. Through the service, trainers provide runners with live feedback. A trainer, for instance, can say a runner is doing a great job at a nine-minute pace but that another user is coming up behind them. Users can use the app’s offerings more than once a day, as the company hosts several live daily runs.

From CHARGE Running to Netflix, subscription services are catering to a wide range of consumers with offerings in spaces from fitness to entertainment. At the same time, some service providers are bundling video streaming services with their offerings heading into the future to attract new customers by harnessing the power of subscription offerings.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. Check out our April 2019 Unattended Retail Report. 

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