AFTER THE ENTERTAINMENT INDUSTRY'S SUBSCRIPTION ATTACK, IT SEEMS LIKE THE TREND IS SET TO CONTINUE ON ACTUAL PHYSICAL PRODUCTS. HERE'S HOW.
Imagine buying an iPhone on an annual subscription! You pay 1000 bucks every year and then you get your hands on the latest & greatest iPhone! Seems ludicrous? Let me explain!
WHY COMPANIES WOULD LOVE SUCH A MODEL
First, there is a recurring stream of revenue for the company. Every year, the company would receive a steady & solid source of revenue by selling products on a subscription basis.
The company does not have to focus on making product ultra durable. Although this may sound counterproductive, it makes sense as it brings down costs.
The company can get users hooked into the product ecosystem and nudge them to buy more products. For example, if you are already subscribed to a OnePlus Flagship Phone plan, the chances are you'll look at buying the OnePlus Bullet Wireless earphones subscription plan too.
The company can easily re-use components of the older version in newer ones after a few sly adjustments. This can especially be true in technologically plateaued products like a keyboard or even furniture.
The company can have more comprehensive data about consumer preferences as they analyse the choice of product type, colour, price & specification through their subscription choices. This way, the company can offer personalized product choices to each user & can also have a closer look at more broad general trends. Imagine Samsonite having information regarding your favourite bag colour, style & type. Amazon & Netflix have added this strategy of big data analytics leaving to impactful personalization.
Established brand names can easily go the D2C route & cut the middlemen like Amazon. It would bring the price down to a great extent which can enable companies to either inflate their profit or make their prices more competitive by passing on the benefit to the end-user. For example, famed publishers like Harper Collins can launch thier own book subscription plan delivered directly to your home.
IS THIS GOOD FOR THE CONSUMER?
This is like asking is pollution good for the planet! Consumers are simply tempted to shell out more money by creating a facade of value. On the surface, paying 200 dollars a month for the latest iPhone sounds really enticing but the fact is, you don't need a new premium phone every year! (except if you're super rich & live like royalty :)
SOME PREVIOUS SUBSCRIPTION BUSINESS MODELS
OTT fervour has gripped the entertainment industry across the world. However, this is not the first successful subscription model:
Subscription Box: Recurring home delivery of certain items like meal kits, medical box, shaving gear, beauty set & oral hygiene kit has worked well in North American & European markets. Brands like Dollar Shave Club and BeautyFix have thrived in this model.
Software Subscription: Perhaps the most omnipresent model, companies like Zoom & Salesforce are some recent successes from this category.
Accessibility Subscription: These subscriptions provide complete access to all the content/service on offer. Apart from OTT, the gaming industry (Eg: EA Access) has also monetized this model very well.
PARTING THOUGHTS
This seems like the next big thing in retail after the credit card & e-commerce revolution! The Buy Now Pay Later fad seems to have died down a bit but this Subscription Plan seems to be catching fire under the radar. Just have a look at the companies which have already started offering it:
Microsoft (Xbox Gold)
Audi Select (choice out of 5 cars, monthly subscription)
Peloton (home fitness gear with app)
The opportunities are endless in this space! Imagine buying stuff like furniture, books & phones on subscription, delivered & taken from your home with a choice of customisation.
All I can say is get ready to buy some more subscriptions :}