Value may outweigh convenience when it comes to recurring subscriptions, as consumers seek any and all avenues to cut costs.
Consumers are digging deep to find ways to save as inflation continues to distort most shoppers’ budgets. Subscription plans experience some of the steepest drop-off in this pullback of discretionary spend. While just 14% of consumers cite savings as their top reason for continuing a retail subscription, cost is the top reason why 56% of consumers cancel general retail subscriptions. The subscriptions that remain are often value-driven.
Amazon Prime and Walmart+ may slightly fall prey to this mindset, as illustrated in proprietary research prepared for PYMNTS’ “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down.”
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Although the Walmart+ subscription rate dropped 5 percentage points from April to May for consumers annually earning between $50,000 and $100,000, the generation leading this steep decline across demographics for both subscriptions is Generation Z.
Data shows drops in subscription rates of more than 10 percentage points for both Amazon and Walmart among this cohort. Millennials were the next most likely to have dropped these subscriptions, but those drops were comparatively small: 2 percentage points for Amazon and just 4 for Walmart. This pullback by the two youngest generations in our study has driven the overall sample down, with Prime and Walmart+ memberships among all consumers declining roughly 1 percentage point between April and May.
These declines illustrate a trend reversal from previous PYMNTS findings on consumers’ Amazon Prime and Walmart+ subscriptions.
If we hop back years, Walmart+ subscriber rates saw steep gains between October 2021 and October 2022, especially among Gen Z, millennials and bridge millennials. Amazon saw their Prime subscriptions across these age cohorts either stay steady or tick up, presumably because of their subscription program’s already high saturation rate.
As with other subscription plans, it may be safe to presume that cost is a primary driver for these cancellations. Previous PYMNTS research found that Gen Z and millennials have difficulty making ends meet. It makes sense that these budget-constrained demographics would drop these subscriptions if they live paycheck to paycheck. This is especially true if consumers feel the required annual fees of these subscriptions are more significant than the savings they bring. With Walmart+ currently costing $98 per year and Amazon Prime at $139, the promise of reduced prices and fees during the purchasing process may not be enough for cash-strapped consumers who cannot afford this “extra” upfront cost.
Consumers, particularly millennials and Gen Z, feel the strain like never before. While convenience certainly has value, monetary value is king, meaning Amazon and Walmart may need to emphasize their cost propositions better to win back their youngest subscribers and return to the positive growth of yesteryear.
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