Subscription economy growth stabilizes as consumers moderate spending

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The subscription economy, which has seen huge growth during the pandemic, has begun to slow, a victim of the impact on consumer habits of the cost of living crisis.

Search by Payments by Barclaycard finds that, on average, companies offering subscriptions estimate that almost two-fifths (36%) of their revenue was generated by these sales in the last 12 months, an increase of 11% year over year other.

However, with high street footfall returning to pre-pandemic levels as consumer life returns to “normal”, growth in the subscription economy has begun to decline, with proprietary data from Barclaycard showing a drop in 5.7% of subscription spend in May 2022. compared to May 2021.

Meanwhile, concerns about the rising cost of living have also prompted seven in 10 Britons to be more selective about the subscription services they use. More than a third (36%) of consumers say they have canceled at least one subscription because their disposable income has fallen as interest rates and inflation rise, with 31% citing higher prices as the reason.

On average, UK consumers canceled two deals each, with entertainment platforms (17%) and beauty and grooming kits (nine%) among the categories most likely to have been cut. The number of households subscribing to subscriptions fell by 14% points in one year, from 81% to 67%.

Research from Barclaycard Payments, however, shows that the appeal of enrollment products and services remains strong, despite economic uncertainty. Nearly four in 10 (38%) think subscriptions offer good value for money and 34% say it helps them manage their finances in a time of rising costs. Convenience (42%), assurance that key products will be delivered regularly (42%) and the ability to try new items, which they don’t normally buy (55%), were also cited as key benefits.

Companies remain optimistic about the future of subscriptions

Many companies have made significant investments during the pandemic to increase their subscription supply, and despite inflationary pressures, the majority remain confident in the returns they expect to see. Seven in 10 (69%) expect the subscription economy to continue to grow and nearly two-thirds (64%) will offer subscription products and services for the foreseeable future. Of those planning to launch a subscription offering, a quarter (25%) plan to do so within the next six months and 42% within the next year.

Subscriptions remain at the heart of the business agenda

While more than half (51%) of subscription providers plan to reduce the prices of their subscription products, almost as many (47%) plan to increase prices due to the surge in inflation and supplier costs. Three in five (61%) plan to launch lower-cost subscription products and services to give customers more choice, and two-thirds (65%) will do so in time for key retail moments, such as on Black Friday.

To encourage more customers to sign up for subscription services, more than half of businesses (54%) said they offered free shipping on products, while nearly seven in 10 (67%) offered discounts. Some merchants (18%) are also considering offering subscribed customers a bespoke loyalty program, with the aim of increasing value for money.

Subscribers appreciate convenience despite cost concerns

The Barclaycard Payments report also shows that many Britons continue to prioritize products and services they get digitally or directly to their front door. Three-fifths (59%) say they use subscriptions because they provide exclusive access to content and more than half (54%) believe they save time. Meanwhile, two in five (45%) think subscriptions provide a personalized experience and almost two-fifths (37%) public subscriptions help organize their lives.

When asked what would make them more likely to take up subscriptions in the future, Brits picked good value for money (38% – up from 33% in 2021), free trial (32% – vs. 29%), free shipping (27% – in line with 2021) and flexible contracts (21% – vs. 18%) as the most attractive features retailers can offer. More than four in 10 (42%) also think subscriptions are great gifts, with 38% expressing an intention to buy a subscription for friends or family.

Changing consumer preferences

While many consumers report seeing value in their subscriptions, others are reducing the number they subscribe to. This is mainly due to the rising cost of living, but also reflects the fact that Britons are spending less time at home, streaming their favorite box sets and films on demand, as the country has reopened.

Kirsty Morris, chief executive of Barclaycard Payments, said: “Subscriptions have seen huge growth during the pandemic as Britons have been spending most of their time at home so it was inevitable that this would level off as the economy would reopen. Yet, as the rising cost of living continues to strain their finances, many consumers are reassessing their discretionary spending and cutting back on certain products and services they no longer deem essential.

“It remains clear though that consumers still appreciate the ease, convenience and often the additional extras they can access through subscriptions; whether through digital services or products delivered regularly to their doorsteps. Many retailers have adapted quickly during the pandemic to meet changing demand, and those who continue to evolve their subscription offering to meet this new set of challenges will be in the best position to benefit from loyalty. and increased consumer satisfaction.

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