The subscription business models are taking the United States by storm in recent years. Subscribers can order groceries, watch their favorite TV shows, and find the latest fashion, all by paying a recurring fee every month. 61 million customers in the United States alone are paying for 225 million subscriptions, which clocks in at 3.7 subscriptions per person. It is likely not slowing down anytime soon either- subscription models are expanding at a rate that is 3.7 times faster than businesses in the S&P 500.
There are two main categories of subscription-based services: business-to-business (B2B) and direct-to-consumer (DTC). Within this field, membership/access, curated, and replenishment services have become the three main subscription models. Curated subscriptions make up 55% of the market, and cover a range of products, including physical goods, media boxes, and product boxes. Replenishment services, which account for 32% of the industry, cover everyday basics like food, toiletries, and office supplies. 13% of the market is made up by membership/access subscriptions, which provide special access and discounts to services such as Amazon Prime and Sam’s Club.
There are a wide variety of state-specific preferences for particular subscription kinds. TV streaming services are the most popular, reigning supreme in six states. This is followed by security services in five other states. However, the variety of accessible subscription services is quite broad and includes everything from media to music streaming, to makeup. Dog-walking is even the most popular subscription service in Florida.
Subscription models are becoming more and more popular due to a number of reasons. For all stakeholders, including customers, small business owners, and operators, subscriptions are practical, simple, engaging, and affordable. They provide users with enough predictability to know when they will be charged and what they are being charged for. Usage-based pricing is used by some replenishment-style subscriptions, allowing consumers to get goods as needed rather than only on a monthly basis. This is especially advantageous for non-renewable goods that are consumed consistently, such as groceries.
Subscription services are becoming more popular, due to the rising number of Gen Z and millennial consumers. Younger generations are more inclined to adopt these business models since they have been exposed to them from an early age. With a share of 39.3%, millennials are the largest user generation, but Gen Z is sure to overtake them as they grow older. COVID-19 also positively impacted the subscription service model, as lockdowns made it impossible to rely upon traditional stores. During the pandemic, these services grew by a significant 11.6%.
There is so much to look forward to in the world of subscription models. New approaches to this type of business model are emerging all the time- even plants are now being offered as a product to subscribe to on a monthly basis. As the new generation becomes even more acclimated to having a monthly subscription fee for their everyday products, some services will emerge that focus purely on keeping track of people’s subscriptions. Pioneers of this type of service include TrackMySubs and RocketMoney.