Fears of a subscription commerce bubble are evaporating as new data find consumers amassing and retaining more subscriptions rather than paring down — and as merchants and brands redouble their efforts to make retail subscriptions more appealing and engaging than ever before.
According to The 2021 Subscription Commerce Conversion Index, a PYMNTS and sticky.io collaboration, retail box subscribers are averaging five subscriptions in the fourth quarter of 2021 — 1.3 more subscriptions than they did in Q3 — representing a cumulative spend of $15 billion monthly, exceeding Q3 by more than $9 billion.
Asked what’s causing an uptick at a point when some prognosticators saw subscriptions dropping off, Brian Bogosian, president and CEO at sticky.io, told PYMNTS’ Karen Webster that the reasons behind subscription strength are foundational: more value in creating better experiences.
Bogosian said many established brands and retailers are demonstrating the value of retail subscriptions. But at the same time, he pointed to “new players coming into the market with unique products and services that allow consumers to recognize, having seen the advantages of easy subscription delivery of goods and services.” And those offerings fit just as well into consumers’ lifestyles.
Despite all of the stalwarts and upstarts moving into the space, though, subscription commerce is in a “nascent stage,” Bogosian said — not near a saturation point. But subscription brands that don’t innovate won’t survive.
“You will see those that don’t continue to evolve and improve their overall product delivery or have the tools necessary to be able to assess [performance] … continue to pull back and lose customers over time,” he told Webster. “It’s really important that people are on their game and looking for ways to continue to bring value to consumers.”
Get the study: The 2021 Subscription Commerce Conversion Index
Customer Satisfaction Is Key
While the overall sector outlook is sunny, data from the latest Subscription Commerce Conversion Index found that nearly 15% of all subscribers — 12 million people spending $2.2 billion monthly on subscription services — have plans to cancel. Reasons run the gamut from saving money to dissatisfaction with a subscription service.
Bogosian attributes this to subscription players not building sufficient consumer value and not investing in software platforms — on the front- and back-ends — sophisticated enough to deliver the robust user experiences customers have come to demand.
“A lot of platforms don’t allow the tools necessary for some of these business models to even exist,” he said. Pointing to “overly aggressive” merchants, he noted that fine control of billing practices alone makes a major difference in how consumers perceive providers.
In fact, it can be downright confusing. Mentioning Mastercard and Visa rules governing free trials, consumer consent and subsequent billing, Bogosian said, “The terms and conditions on a lot of these things need to be clear to consumers. This is a bifurcated, complex [situation] where certain things are merchant-focused, [some are] consumer-focused, and having the capabilities, the tools, the analytics, to be able to see which offers are working [and] which aren’t working requires a lot of complexity and software that helps you manage that business.
“Customer satisfaction is key to growing an industry,” Bogosian said, adding that “having an ecosystem of partners to be able to provide added value to … merchants that we don’t provide on our own” is a critical aspect of his company’s platform, as with all subscription platforms.
Subscription merchants have a competitive advantage because they’re often able to differentiate their products and experiences. Matching that with a well-managed backend, Bogosian said, can prove to be a potent formula for success.
“People are looking at other channels to market today to get to the billions of people who are out there reading [about subscription offers] online,” he said. “You see these things that are high quality, they have a competitive advantage over other similar products, and they have a channel now that’s new and unusual, and allows them [to have] direct to consumer [access] and to set business models that make it compelling for the consumer.”
The longer the relationship, the more merchants get to know their subscribers, which leads to deeper personalization of products, offers and payments — all lessening the chance of churn.
“Before they’ve even purchased, you’ve learned a lot about the consumer from that experience online and developed a connection,” Bogosian noted. Knowing what items subscribers browsed, “what their preference is, creating personalization experiences for consumers who come back, continuing to refine the types of things that resonate with that individual” is what makes subscriptions uniquely compelling.
Seeing the strength in subscriptions is making Bogosian bullish about 2022. “We expect we’ll double our business next year,” he predicted. Going forward, he expects that subscription platforms will continue to introduce new functionality. “I think we’ll continue to see the lifetime value on some of these things continue to extend.”