The Benefits of Subscription Based Models

Subscription based models are currently one of the most popular business models and are showing no signs of losing this supremacy any time soon. Within the United States alone, there are 61 million subscribers paying for the services of 225 million subscriptions. These numbers translate to an average of 3.7 subscriptions per person, meaning that there are many uses for subscription services that the average person finds in their daily life. These numbers will likely only continue to grow in the next few years, as subscription models are growing 3.7x faster than companies in the S&P 500. 

There are two main types of subscription based services: direct to consumer (DTC) and business to business (B2B). DTC is an extremely popular type of subscription model, as there are 27,000 DTC subscription services that completely cut out the use of a middle man. Among these are three main types of subscription services that are offered, including membership/access, curated, and replenishment services. 

Curated is the most popular type of subscription service, accounting for 55% of services. This includes media, boxes, and physical products. Birchbox and Fabfitfun are two companies that fall into the curated subscription model. Replenishment services cover office supplies, toiletries, groceries, and any other continuous use services. 32% of subscription models are replenishment, including Dollar Shave Club and Lexmark. Finally, membership/access accounts for 13% of subscriptions, and includes very recognizable services such as Amazon Prime, Sam’s Club, and Best Buy. 

Preferences for different types of subscription services vary by state. TV streaming services are by far the most popular, with 6 states using it as their most frequent subscription service. Security services come in second place, with five states using it most frequently. However, there is such a wide range of available services using this type of business model, from makeup to music streaming to media. Florida even favors dog walking subscription models more than any other kind! The opportunities are endless for subscription based businesses. 

There are several reasons why subscription based models are growing in popularity. It’s convenient, simple to use, easy to understand, and engaging for the consumers, small business owners, and operators who are coming into contact with the service. It is very predictable for a user’s time and budget as well. Some replenishment style subscriptions offer usage based pricing, which allows users to get items when they need them, not just at the end of every month. This type of setup is especially helpful for grocery-related items. 

There has also been more subscription based usage due to changing demographics. Younger generations have much more exposure to these types of business models and are therefore more likely to use them on a consistent basis. Millennials are the largest users, making up 39.3%, but Gen X is projected to overtake them as they grow older. COVID-19 was definitely also a boosting factor to the use of subscription services. Lockdowns made it difficult for consumers to receive their desired goods and services through normal channels, so many people turned to subscription services. In fact, these services grew by 11.6% during the pandemic. 

As subscription based models are growing more mainstream, there have been some unique takes on what products and services can be made into a subscription. Plants are a new addition- subscriptions can receive new houseplants every month that are tailored to their specific indoor conditions. Print is offered as well, where toner can be delivered to a business based on their usage rates. This can help cut down toner costs by up to 50%. Even science has been turned into a subscription service, where users can purchase brand-specific merchandise and have access to new accessories. 

In conclusion, subscriptions are clearly taking over the business world with its innovative design, convenience for users, and affordability. There has already been a drastic amount of growth within the last several years, due to the impact of the pandemic and growing adoption rates of this technology with younger generations. It is likely that soon we can expect to see products take on a subscription model that have never before been possible. There is an exciting future ahead for subscription structures, and it is sure that the business world will never be the same afterward.

Data shows subscriptions are here to stay

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