RSMUS.com2020 will always be remembered as the year we, as a society, changed many of our normal behaviors because of COVID-19. With mandatory lockdowns and social distancing becoming the norm, retailers have had to adapt to the changes in consumer behavior across all industries. One trend that has seen one of the biggest booms since the start of 2020 is subscription services.
Even before COVID-19, retailers were seeing growth and profitability in subscription like services. Typically, when we think of subscription services, we think of streaming platforms for music and entertainment like Netflix or Spotify. However, there has been positive growth across many industries and verticals since the beginning of 2020 in the subscription sector. Since the COVID-19 crisis began, the consumer products industry has seen a 145% increase in subscription growth as compared to a 90% increase for an already established entertainment streaming industry which is where most people think the biggest increase has been (COVID boosted retail subscriptions – Forbes). One of the main reasons for this uptick, is the convenience a subscription service provides when there are public health concerns and stay at home orders across the country. Subscription services already offered ways to save on products, but now offer a safer way to consume those products by having them delivered on a predictable (and easily canceled) schedule.
So how have retailers responded to this major shift in buying trend? Many retailers either have expanded upon existing offerings, or have recently gone head first into this new category of sales. One study, done before COVID-19, estimated that by 2023 75% of direct to consumer brands will offer some subscription based service (MultiChannel Merchant), and the pandemic has only accelerated retailer and consumer adoption. One company in particular and client of RSM, Ste Michelle Wine Estates, plans to launch a brand new subscription model this August as response to this growing industry trend. This new subscription offering will allow customers to build their own subscription box on the new Elicit branded website, and consumers will have direct access online to manage their subscriptions by setting their own custom frequency. This is one example of the innovative ideas that companies are implementing to insert themselves into this booming revenue stream.
With the accelerated changing landscape of how consumers shop, subscriptions are likely to continue to grow beyond the current pandemic. It will be exciting to see the innovation that follows this trend as just offering a subscription service no longer distinguishes a retailer from its competitors.
