Subscriptions is now perhaps the default way we consume music and premium video content. Is it possible that will happen for retail as well? “It’s not just media and entertainment that seems to be surging,” Recurly CEO Dan Burkhart told me recently on the TechFirst podcast. “The highest growth was actually counterintuitive … curiously, the subscription commerce category really took off.”
That’s not what I expected to hear.In a crisis, many tend to get conservative. If a global pandemic is threatening our income, we shut down unnecessary expenses, trim luxuries, batten down the hatches, and prepare to ride out the storm in as strong a financial position as possible. And that’s in fact what happened — at least for richer people — near the beginning of Coronavirus.But not for subscription retail.
Growth in subscription retail actually outpaced multiple other categories. Recurly manages subscription programs for about 700 companies including Amazon-owned Twitch, Asana, CBS, Starz, AMC, Barkbox, and more, and released a report on the impact of Covid-19 on different verticals:
- Streaming: Growth up to 89.8%
- Education: Growth up to 60%
- SaaS/Cloud: Growth up to 51%
Consumer goods actually dipped early in the pandemic, only to rise in March through May, peaking at 145% growth. In contrast streaming media, with superstars like Netflix and the new Disney+, peaked at just under 90%. Also high, but not nearly as impressive.
What’s going on? Perhaps some good old-fashioned retail therapy, with a side-helping of surprise.
“I think there could be a little bit of a guilty pleasure in that it’s a bit of a decadent affordance to have something come to your home that you anticipate,” Burkhart told me. “That anticipation provides a little bit of a self-gifting twang, I think, that perhaps individuals were craving a bit.”
And, of course, there’s the convenience factor. Which Covid-19, of course, has dialed up to 11: masking up to go to a physical store isn’t super-fun for even the most pro-mask crowd.
“The cost and friction of actually going to a store even for simple groceries is something that I know in our family we’re talking about, and we might do a rock paper scissors to see who goes to the grocery store this time,” Burkhart says.
The education category was also up, with boosts of up to 73.2% in free trials, subsiding as schools closed. And, as we’ve seen, cloud and software-as-a-service tools are up as well.
Of course, subscriptions were up in general even before Covid-19. Burkhart says that’s in part due to risk-aversion: buying access to a service is relatively cheap and easy to cancel, whereas a one-time purchase of a commodity can be more irrevocable and seemingly wasteful. You bought the movie, it sucks, and you’re stuck with it, versus you subscribed to a streaming service, and you’ve got multiple options to try. If you don’t like any of them, you can always cancel.
One challenge: subscribing to many, and having multiple small holes in your bank account, draining money almost invisibly. Which, of course, forces subscription companies to continue to deliver value:
“Companies really need to shoulder the burden of making sure that they are continuing to deliver value in whatever it is they’re selling by way of a subscription model, in order to achieve that long term benefit,” Burkhart says.
There’s always going to be one-off purchases that we need to shop for intentionally But it’s possible, given the trend, that many of our recurring retail and grocery purchases could move to a subscription model.
Milk, toilet paper, shampoo, butter … once you have your favorite brand and you trust a provider to know the schedule at which you need replenishment, moving to subscription isn’t that big of a stretch, perhaps.
Even after Covid-19.