Why the Subscription Commerce Model is Rising

Subscription commerce model

Subscription commerce modelCheck out your most recent credit card statement and you’ll notice more recurring charges than ever. That’s because everyone is signing up for subscription services rather than making one-time payments like back in the day.

The subscription commerce model isn’t just for software and digital entertainment services in 2022, although that’s where the idea took root. Everything from food and health supplies to clothing and gear can be configured into a subscription, and companies on the cutting edge of the trend are making some serious profits.

Here are all the reasons why the subscription commerce model continues to rise in prominence across industries, and why we shouldn’t expect the trend to slow down anytime soon.

 

Software Made Easy (for Individuals and Companies)

Software-as-a-service (SaaS) is the quintessential subscription commerce model of the 21st century. We’re all a part of the monumental SaaS movement, whether we realize it or not.

“Usage-based subscription pricing models are becoming more common for some companies,” said Stephanie Lemmerman, CFO of Recharge. “The merchants we work with have long incentivized consumers to subscribe to buy razors or other products they once bought periodically in stores by offering discounts in what she calls the ‘subscribe and save’ business model. Last year, you saw a lot of merchants who needed to be online in order to survive and a lot of consumers who were concerned about the predictability of getting what they needed.”

SaaS is just the tip of the iceberg in the world of subscription-based software. Nowadays, companies can create entire IT ecosystems from nothing, thanks to cloud services that require absolutely zero on-site hardware to buy or maintain.

“Infrastructure and platforms are the next layer of IT outsourcing that takes the form of a monthly or annual subscription,” said Karim Hachem, VP of eCommerce at Maxine of Hollywood. “This gives us a partial explanation for why so many businesses are being founded in the 2020s out of thin air with seemingly little capital. Just a few years ago, the services just weren’t available for them to start. Now, you can start a million-dollar business in just a few days with the right cloud services to support your operations.”

The advantages of SaaS and IaaS are clear for small businesses, but what about the software companies that offer these subscriptions? Turns out – biz is booming on the tech front.

“Everyone wins when it comes to SaaS and its cloud service counterparts,” said Natália Sadowski, Director of Aesthetics at Nourishing Biologicals. “Brand-new companies finally get the chance to thrive and remain agile. Software developers and cloud operators get recurring monthly revenue with customer retention at all-time highs. It’s hard to imagine why anyone – on either side – would want to go back to a one-time license model at this point, considering all the advantages across the board.”

 

The Digital Media Revolution

Perhaps the most familiar type of subscription commerce model is in the field of media and entertainment. For the vast majority of Americans, the cable cord has been cut in favor of selected services based on personalized tastes and priorities.

“From TV shows and video games to every movie ever made, the state of the entertainment industry is all about subscriptions,” said Hector Gutierrez, CEO of JOI. “On top of that, they’re raking in more revenue than ever thanks to minimal overhead, and putting more resources into creating original IP’s and strong user interfaces on desktop, mobile, and beyond.”

In addition to subscription classics like Netflix and Disney, news media and sports entertainment are also building bigger audiences worldwide.

“At this point, nobody needs access to 1000 different news sources or channels for sports,” said Adam Nadelson, CEO of The IV Doc. “They know what they like, and can forget about all the rest if it saves them some time. Meanwhile, smaller media outlets are doing better than ever and legacy brands are declining in viewership. Subscriptions are ushering in a new era of how people get news, enjoy sports, and generally view the world.”

At the surface, subscription services are all about clicks, views, and cash flow. Dig deeper, and we discover that people are attracted to something more important.

“A commonly overlooked aspect of the subscription model is the sense of community, identity, and personal empowerment it provides to people,” said Jim Marggraff, CEO of Kinoo. “No longer are consumers waiting passively and flipping through channels, or browsing news sources to find something that resonates with them personally. They have the power of choice now, and they’re willing to pay for that. Even if the bills end up being more than a cable box, it’s worth it to them, and that’s not going to change.”

 

Food and Necessities On Demand

Subscription services aren’t necessarily new in the world of food – remember the milk man or meat delivery companies from back in the day?

Of course, the 21st-century version of food subscriptions look different, with everything moving more quickly and customized.

“While humans once had to fetch water from a well, we have long since developed systems to deliver this essential resource straight to taps in our homes,” said Slava Bocharov, Co-Founder of Buyk. “We believe that, as ultrafast grocery delivery becomes more widely available, it will come to be seen as a crucial piece of infrastructure for daily life in much the same way. Subscription services and memberships will be the next logical business move from there, offering more perks and incentives to customers for repeat purchases.”

Food is just one example of subscriptions helping people navigate the needs of domestic living. Companies are now delivering goods and necessities that help people stay healthy, happy, and clean without ever running out of what they need.

“With the press of a button, you can now have all your office supplies, cleaning supplies, and other consumer staples delivered without needing to think about it twice,” said Theresia Le Battistini, CEO and Founder of Fashion League. “This frees up tons of mental energy and time for busy professionals and growing families. Subscriptions are benefiting people in real ways, so it’s more than just a business model. It’s actually a big step forward in progress and the standard of living for people everywhere.”

 

Ecommerce Embraces the Subscription Model

Even though you’d see the day that businesses make money from sending “mystery boxes” and grab-bags to people every month? In 2022, anything is possible.

“The popularity of subscription collectibles and random gift boxes is amazing to watch, and not even the best business analysts could have predicted the weight of this trend,” said Christy Pyrz, Chief Marketing Officer of Paradigm Peptides. “People are buying monthly boxes filled with gear and goodies for whatever hobbies and interests they have. It could be comic books, it could be streetwear – if the niche exists, there’s an opportunity for someone to capitalize on it with a subscription model, if they haven’t already.”

When it comes to clothing, subscriptions get more complicated, but pioneering businesses are figuring out ways to pull it off with flying colors.

“Clothing brands are making the subscription model work for them by emphasizing the personalized shopping experience aspect,” said Mark Sider, CEO and Co-Founder of Greater Than. “They create in-depth question-and-answer forms that people fill out with their sizes, preferences, goals, etc. Then the company sends out a shipment of clothing or gear that matches those standards. It’s a way for people to go shopping from the comfort of home and always have something fresh to wear. With flexible returns and great customer support, the result is an amazing service worth the money.”

 

What’s Next for the Subscription Commerce Model?

It might look like the subscription craze has reached its peak in 2022, but there is a lot more on the horizon. Like any area of business, innovation is always around the corner.

“Look at what has been accomplished with ride-sharing services so far in this century, then consider the wealth of opportunities that exist in that market for subscriptions,” said Dan Gray, General Manager of Kotn Supply. “It’s clear that customers are willing to pay more to get a better experience, and that’s apparent even more in transportation. Something like a “first-class” pass for airlines or ride-shares is possible and will likely happen. There will always be a market for people who want the VIP treatment, especially transport and travel markets.”

Can subscription plans be applied to sectors like healthcare and education that are in desperate need of something new? At this rate, the shift to subscriptions is more than likely.

“In a sense, we’re already accustomed to paying monthly or yearly for health services and education for our kids,” said Amy Keller, Co-Founder and CEO of FAVES. “The difference is that we don’t have much choice in the actual product. Now, companies see that things can be done differently, and consumers are ready for something new. They want more control over what they pay and what they receive. Subscription models are paving the way for more free-market solutions to things like healthcare and education, and this has the power to change the world for the better on a big scale.”

Not only has the subscription commerce model swept the economy so quickly, but the transition has been smooth, with few roadblocks along the way. Stay tuned to the future of subscription services in all industries and be sure to keep an eye on those recurring charges. 

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