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Engage, Return and Repeat: The Subscription Economy

January 2017

The subscription economy is one of several alternative business models gaining traction across sectors. On the whole, a successful subscription service is just one aspect of a multi-channel offer. For business, the model signifies a new revenue stream, but often above that, a valuable source of data on consumers. For consumers, in its optimum guise, the subscription economy offers value and convenience, fitting with the shift in values and priorities we are seeing today in the New Consumerism.

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Changing balance of power amongst consumer goods manufacturers and retailers

The subscription model is important as it shifts the balance of power between retailer and manufacturer, enabling the manufacturer to reach out directly to consumers. The model guarantees revenue, builds consumer loyalty and allows companies to build data on their consumers.

Surprise subscription boxes becoming increasingly ubiquitous

Surprise boxes are becoming commonplace across a wide range of consumer sectors. Many boxes have fallen by the wayside and the plethora of boxes available has led to subscription-fatigue for some. Curation, exclusivity and experience are key.

Subscribing to regular supplies of goods works best for products which engender brand loyalty

Subscribing to regular supplies sits perfectly with goods that are constantly used, and also ones where the consumer does not feel the need to shop around. There are challenges with the model as it needs to be flexible, engender trust, provide value for money and be accurate – consumers do not want to pay for more than they need.

From ownership to access requires attitudinal change

Often about replacing goods with a service, changing consumer mindsets can be amongst the biggest challenges of short-term access models. Establishing trust, focusing on customer service and efficiency are important to overcome consumer reticence.

Leasing – a circular future for durable goods

Leasing is an integral part of a move towards a circular economy, one where nothing is wasted and everything is reused. The basic premise is that the manufacturer retains ownership of the item throughout, making it easy to remanufacture, recycle and get maximum value out of the product and its raw materials. Value, flexibility and convenience are key.

Introduction

Scope
Key findings
What do we mean by the subscription economy?
Subscription models: What’s changed?

The Surprise Subscription Box

Delving into the box
What’s in it for business?
Why do consumers like them?
Passing fad or sustainable business model?
Dos and Don’ts
Walmart Beauty Box: Value and discovery
Avenue A by Adidas: C uration and exclusivity
Graze: Online personalisation to bricks and mortar retail
MightyFix: Single discovery product
Birchbox : The frontrunner branches out to bricks and mortar
And for the contents that don’t measure up: The Aftermarket

Regular Supplies

Convenient and steady
What’s in it for business?
Why do consumers like them?
Are they viable in the long-term?
Dollar Shave Club: The right product at the right price
Amazon Dash Button: Convenience and technology
Peloton: Product and service bundle
Starbucks Reserve: Competes with niche players
Tide Wash Club: Convenience at a price
Target Subscriptions: I ncorporating special offers
ClassPass: Unsustainable pricing strategy
Jet.com abandons subscription model

Short-Term Access

The on-demand economy
Why selling access can be better for business
Why access can beat ownership for consumers
How to overcome resistance to change
An end to business as usual?
Book-n-Drive: A partnership with synergy
Baú verde: Consumer loyalty a prime concern
MUD Jeans: Emphasises ethical credentials
Wassup: Bypassing the washing machine

Long-Term Leasing

Leasing: A n old model revived for the modern age
Which products are most suited to leasing?
What’s in it for business?
Why do consumers lease?
Consumer and operational challenges to overcome
The death of ownership?
Solar City: Affordable and cost-effective
Currys and PC World Upgrade Anytime: Keeping up with latest tech
Bundles: Selling a service in a circular economy
Meublicity: Packs and end of life bargains
Flexirent: Pricing strategy open to criticism

Conclusion

The subscription model is not a one-size fits-all affair
Subscription models generate key benefits for business
The main subscription features valued by consumers include
Flash in the pan or here to stay?
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