The changing face of the subscription economy

The subscription economy has grown by nearly 435% over the past decade.¹

Consumers use subscriptions every day. In 2021, 50% of Europeans subscribed to an entertainment service.² While fashion, shopping, and beauty subscriptions were used by 19% of Europeans.²

The pandemic accelerated the subscription-model boom and diversified the types of subscriptions people paid for. One in three Europeans reported having more subscriptions than they did pre-2020 and one in five were subscribed to more than four services.²

Subscriptions are gaining ground over traditional e-commerce purchases for three main reasons: convenience, ease of payment, and cost savings.³ Many consumers also feel an emotional draw to certain subscription models, like curated monthly boxes. They report enjoying an element of surprise and delight each time their order is delivered.³

By 2025, the digital subscription economy will have a market value of $1.5T USD⁴, up from its current value of $650B USD.⁵ This growth isn’t just driven by entertainment-on-demand services or curated subscription boxes. Businesses big and small are reinventing the subscription wheel, disrupting how consumers today approach ownership and brand loyalty.

Here are the latest innovations redefining the subscriptions space.

Convenience as a subscription

Convenience has always been the leading motivation for consumers to sign up for a subscription service.³ They get the product or service they want regularly (or instantly), and the recurring payments are simply deducted from their preferred payment method.

Today, subscriptions are taken up a notch. Subscriptions don’t just make it more convenient to access your most-used products or services. Convenience itself has become a subscribable service.

In 2018, British online fashion retailer ASOS debuted their Premier Delivery service.⁶ ASOS shoppers can pay an annual €15 fee and receive free unlimited next-day delivery. Subscribers also get access to ASOS’ Nominated Day Delivery service, giving them the flexibility to choose a delivery day of their choice, up to 10 days in advance.⁶

Without Premier Delivery, ASOS shoppers have to spend a minimum of €40 for free standard delivery, which would take up to three working days to receive their order.⁶ Next-day delivery costs €10.⁶

Other retail platforms like Selfridges⁷, Woolworths⁸, Tesco⁹ and more offer free delivery as a subscription.

Free delivery subscriptions help ease the heavy costs of rapid last-mile fulfilment for merchants. Consumers get to enjoy unlimited free and flexible delivery, at a low, nominal cost.

Cost savings as a subscription

When Dollar Shave Club debuted in 2011, it revolutionised subscription-based services. Subscribers signed up to receive razors, shavers, and grooming products at their doorstep, at cheaper-than-market prices.¹⁰

Convenience, coupled with cost savings, became a key incentives to attract subscribers. But subscriptions like Dollar Shave Club entitled consumers to both products and cost savings. In today’s on-demand economy, cost savings alone have become the subscribable product.

Last year, Deliveroo UK debuted Plus, a subscription for free deliveries. For an extra £3.49 a month, Deliveroo subscribers can enjoy unlimited free deliveries on orders over £25.¹¹ Plus was designed to support larger households that rely on Deliveroo by helping them save on repeat delivery costs for food and groceries.¹¹

Dutch supermarket chain Albert Heijn is also launching a new subscription, Mijn Albert Heijn Premium (MAHP), which gives subscribers access to exclusive discounts year-round for an annual fee of €12.12 MAHP subscribers get 10% off organic produce, double loyalty points, and personalised deals. Customers can potentially save up to more than €100 a year on their grocery spend.¹²

Flexibility as a subscription

Consumer perceptions of ownership are changing along with the rise of subscriptions. 57% of consumers globally agree that they could own fewer products, preferring subscriptions instead.¹² This phenomenon is especially visible for high-cost products like cars and tech.

Apple recently teased a hardware subscription service allowing consumers to shorten their refresh cycles for their iPhones, iPads, and more.¹³

On-demand car rental company Kyte recently announced a Tesla subscription. Drivers rent a Tesla Model 3 at just $995 USD a month¹⁴, instead of paying its $44,990 USD price tag.

American company GO is also pushing to redefine traditional car ownership with their three-year car subscriptions. ¹⁵ A user can select a car model on their app, pick their mileage per month, get insured, and receive the car at their doorstep. ¹⁶ The cars are almost brand-new¹⁶ with full factory warranty, annual inspection costs, title and registration, and maintenance all included in the monthly fee.¹⁶ The subscription costs 25% less than monthly repayments on a traditionally owned car.¹⁶

Why do these subscriptions work?

Subscription models have always been a way for brands to establish longstanding, loyal customers. But the changing face of subscription-based services has added benefits for adaptable businesses.

• Access to better prices and cost savings are essential considerations for consumers when choosing a subscription.¹⁷
• Allowing subscribers to unlock cost savings with every purchase increases brand loyalty.
• Free delivery subscriptions can help ease high last-mile delivery costs.
• Consumers enjoy rapid fulfilment for a minimal fee and are incentivised to shop with your brand.
• Consumers today are less inclined to own big-ticket items. Businesses with subscriptions in these spaces can meet these changing perceptions around ownership.

Boost consumer loyalty with easy subscription experiences

The subscription model may be evolving, but one thing will remain the same: subscription experiences have to be easy, from payments to cancellations.

Businesses that offer recurring payments by PayPal help empower customers to enjoy an easy subscription experience while also reaping PayPal’s advantages.

Customers can seamlessly manage subscriptions on a single page within their PayPal account, allowing for easy payments and cancellations.