What Will Drive The Next 'Subscription Economy’ Growth Phase?

• More than two thirds of subscription businesses plan to increase the number of sign-up products and services they offer before the end of the year
  
  
• Retailers from sectors with higher price points such as technology, furniture and home improvements are preparing to fuel the next wave of the subscription economy
  
  
• As the cost-of-living rises, over half of businesses plan price cuts to subscription packages to attract shoppers, and four in 10 will diversify into gifting options for the festive season
  
  
• While spending on subscriptions has dipped in recent months, long-term demand is being driven by younger consumers and those living in London 

New data on the ‘subscription economy’ shows that non-traditional sign-up products and services are likely to fuel the next wave of subscriptions. Barclaycard Payments – which processes £1 in every £3 spent on credit and debit cards in the UK – found that over two thirds (68 per cent) of businesses that currently offer subscriptions will expand their portfolios before the end of 2022. 

This growth is being driven by companies in groups often less associated with subscriptions. DIY & home improvement (76 per cent), homeware & furniture (73 per cent), department stores (73 per cent) and technology businesses (69 per cent) plan to launch new subscription offerings, all above the industry average of 61 per cent. 

Technology retailers, grocery brands and DIY & home improvement merchants plan to introduce the largest number of new sign-up products and services before the end of the year, with an average of four new offerings, compared to an average of three across all businesses. 

Of businesses which do not currently offer subscriptions, many report plans to invest in new offerings, with technology companies (50 per cent), department stores (49 per cent) and homeware & furniture retailers (41 per cent) all planning to launch at least one new sign-up product or service within the next 12 months. 

Business priorities: pricing, gifting and sustainability

As the cost-of-living continues to rise, over half (51 per cent) of businesses which offer subscriptions are planning price cuts to attract shoppers. This could prove a valuable sales tactic, with Barclaycard Payments’ data revealing that, on average, 30 per cent of consumers who try out a brand for the first-time by using a subscription, go on to become long-term customers. 

Businesses are also diversifying into new areas to increase sales, with three fifths (61 per cent) creating subscriptions designed to be purchased as presents in time for the festive season. This comes as 38 per cent of Brits also said they plan to gift a subscription product or service to their loved ones. The retailers most likely to launch new offerings to appeal to Christmas shoppers include festive food and drink providers (72 per cent), clothes & accessories retailers (70 per cent), and DIY & home improvement stores (66 per cent). 

In addition, as sustainability becomes more important, over a third (34 per cent) of businesses plan to introduce more environmentally friendly packaging, and 24 per cent are planning to sell more ethical and sustainable products through a subscription model. 

Younger consumers, and those in London driving long-term demand

Barclaycard’s proprietary figures show that while there was a 4.2 per cent fall in spending in June 2022 when compared to May 2022, businesses that offer subscriptions say they now account for over a third (36 per cent) of their overall revenue. 

Demand for subscriptions is strongest among younger shoppers, and those in London. Across the country, an average of 21 per cent say they are likely to sign-up to new subscriptions before the end of the year; with those aged between 18-34 reporting the highest intention (35 per cent), and regionally, those in London are most likely (33 per cent). The same two demographics are also more likely to buy subscriptions as gifts for others: 55 per cent and 56 per cent respectively, compared to a national average of 42 per cent. 

Harshna Cayley, Head of Online Payments, Barclaycard Payments, said: “While the growth of some subscriptions has tailed off following the pandemic, demand remains strong for services which make our lives easier and provide good value of money.   

“Our data indicates higher-value products such as furniture and technology are where new growth is coming from, rather than more traditional areas like entertainment and meal kits. Although phone subscriptions have been around for many years, more recently we’ve seen packages for wearable devices, coffee machines, bicycles and even robotic vacuums all start to take off. Businesses who diversify by tapping into how consumers want to pay for, and renew, more expensive items will be best placed to thrive as the subscription economy evolves.” 

Barclaycard Payments offers businesses a range of payment technologies to meet changing consumer demands, including solutions to seamlessly process subscription payments, along with offering exclusive subscriptions to customers that bank with Barclays. To find out more visit: https://www.barclaycard.co.uk/business/accepting-payments     

Source : Barclaycard

Image : Daria Nipot / shutterstock.com (1729973632)

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