You don’t need a subscription for this brief trip down memory lane — but the way things are going, you might one day.
Think back to 2009, just as Recurly CEO Dan Burkhart and Karen Webster of PYMNTS did during a recent discussion about all that has changed in the past decade when it comes to subscription commerce. Sure, subscriptions were a hot thing back then, Burkhart recalled — but those subscriptions were along the lines of Zipcars, cable TV packages and Netflix DVDs.
But something was changing, and changing big — a shift that led to today’s fiercely competitive field of subscription commerce and the payment services that power it. “The software model was changing,” Burkhart told Webster, “and we were seeing the SaaS model emerging.” Indeed, the exploding popularity of software-as-a-service (SaaS) prepared the ground for today’s anything-goes subscription commerce industry.
You can’t know where you are going unless you know where you’ve been — your history teacher was right — and that wisdom applies to subscription commerce. The business model increasingly presses its advantage with consumers, and now includes a wide, almost dizzying array of products and services, from streamed content to cars to food to apparel.
Proof of the growth and maturation of the subscription market comes from the clients Burkhart and his colleagues at Recurly speak with. Whereas a decade ago the businesses tended to ask questions about the basics such as payment gateways, today the sales talk is much more high-level. “The conversation is much more advanced than in the early days,” Burkhart said, spanning the best practices absorbed over the last decade, among other inquiries. “The market has become much more sophisticated.”
But that doesn’t mean the road to future growth is smooth. After all, not every subscription business has succeeded or survived with major revision — a look at the meal-kit industry gives plenty of examples of that. Even so, subscription commerce operations are learning that they must meet the promise of their marketing, and must provide the “steak and the sizzle” instead of boring consumers with banal experiences.
“In the past, there was perhaps over-selling and not always truth in advertising,” Burkhart said. “If you are putting something in a box and shipping that same box over and over, you are likely to churn out customers more quickly.”
In short, subscription commerce operators need to figure out more ways to dazzle and excite customers in order to stand apart from the crowd. Burkhart used all those “unboxing” videos on YouTube as an example of the desired impact. Those videos show consumers opening boxes and displaying excitement at the contents within — the ideal outcome of any subscription delivery.
The stakes and potential rewards of subscription commerce keep getting better, after all. According to PYMNTS research, subscription commerce is increasingly global in nature. A recent study found that 71 percent of consumers across 12 countries have subscription services, up from roughly half who had them five years ago. Nearly three-fourths (72 percent) of consumers have completed a cross-border purchase; those purchases are dominated by digital goods and services, with 75 percent of shoppers who purchased digital products also buying internationally. As the search continues for the new Netflix, new and upstart subscription operators are upping their own games and trying to gain more market share.
Those operators have significant advantages over the subscription businesses of a decade or more ago, Burkhart said. That’s because the rise of cloud computing, among other factors, has enabled startups to open their doors with less capital than was previous required for big, fixed-cost investments. That, in turn, makes it easier to operate within the margins offered by subscription businesses, he noted.
As well, consumers are becoming more used to buying on subscription and rejecting traditional notions of ownership. That is seen in the automotive sector, where car subscriptions are giving traditional vehicle leasing a run for its money. After all, those subscriptions tend to have less friction and simpler contracts than does the leasing process.
As Webster pointed out, inertia plays a big role in the success of subscription commerce. A person who likes a particular car or clothing provider is less likely to go through the trouble of leaving and finding another subscription merchant. That trend will continue, Burkhart believes.
As will the ability of subscription commerce providers to offer ever more granular and personalized experiences for consumers — experiences that also feature robust payments, he said. It’s been an eventful 10 years for subscription commerce, but the best may be yet to come.