6 Traditional Industries Revolutionised by Subscription-based Business Models
From airlines, consumables to fashion – Will one-off transactions be soon has-been?
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In recent years, we have a seen a significant shift in the way business operate. Subscription-based business models have taken the world by storm and revolutionised traditional industries, offering convenience, customisation, and hassle-free accessibility to consumers.
When we think about subscription model, we often only think about Software As A Service (SaaS), streaming or fitness subscriptions. However, subscription is more and more viewed as the preferred model for consumers.
In this article, we will explore 6 traditional industries that have been transformed by subscription-based models.
What is a subscription business model?
A subscription business model is a revenue model based on customers paying a pre-agreed amount a regular basis (often on a monthly or yearly basis) for the use of a product or service.
From Spotify, Netflix to HelloFresh, companies are moving from a traditional transactional model to subscription as it strengthens long-term relationships and allow strong revenue predictability thanks to the recurring nature of the business model.
According to statistics published in Forbes, the global market for e-commerce subscriptions was worth $72.91 billion in 2021 but increased to $120.04 billion in 2022 and is tipped to reach $904.2 billion by 2026.
Subscription is EVERYWHERE.
This is fascinating, many players in traditional industries are increasingly implementing subscription-based offer to acquire new customers which demand this type of model as more convenient for them.
You can now purchase a monthly subscription to get your coffee or to get an education for any subjects. Overall, the customer experience has been significantly improved for two main reasons:
First, businesses have to focus more on retention and referral rather than just focusing on customer acquisitions. Secondly, most of the time, if you are not satisfied with the company’s service or product, you can just cancel your subscription and try something else that better matches your expectations.
Let’s now deep dive in the 6 industries transformed by subscription-based models.
Airlines
Subscription models provide two benefits to customers:
Firstly, they offer affordable travel options for those who travel frequently. Secondly, they promise to minimise the time spent in airports.
There are two variations of subscription models available: one that includes flights and another that excludes flights but offers premium services and allowances.
easyJet Plus – Offers a bundle of travel benefits at a yearly cost of £125. The benefits include allocated seating, dedicated bag drop desks, fast track security, speedy boarding, additional cabin bag, food & drink vouchers, and a guarantee of overhead bin space.
Surf Air – US-based company that has implemented a subscription membership offering unlimited flights to its members.
Cars
The rise of subscription business models for cars is changing the way people access and use vehicles. Instead of owning a car, people can now subscribe to services that offer access to different vehicles, without the cost, responsibility, and clutter of owning them.
This trend is part of a wider shift away from privately owned vehicles towards services owned and run by public or private ventures.
Companies like Audi, Volvo, and Porsche have all launched subscription models, offering different tiers and vehicle choices at varying price points. While the future of driverless technology remains uncertain, the move towards subscription models is paving the way for more efficient and cost-effective solutions.
Consumables
Over the past decade, a few companies have launched subscription offerings that enabled them to grow at an impressive pace. Here are a few examples:
Dollar Shave Club – Launched in 2012, it’s an American subscription-based service that provides customers with high-quality razors and other grooming products at affordable prices. With over 330,000 customers in its first year and annual revenues of over $260 million, Dollar Shave Club has revolutionised the way people purchase grooming products.
HelloFresh – Launched in 2011, it’s a Berlin-based startup that offers a subscription service for meal kit delivery. Customers choose from a range of weekly recipes and receive pre-measured ingredients and recipe cards delivered to their door. With a focus on convenience, freshness, and sustainability, HelloFresh has become the largest subscription e-commerce company in the world, with sales over €7.6 billion in 2022.
Pret a Manger – Launched in 1983, it’s a British sandwich shop chain that offers a subscription service called "YourPret coffee." This service allows customers to purchase a monthly subscription and receive up to five coffee-prepared drinks per day, including coffee, tea, and iced drinks.
Education
Traditional education models can be expensive and inflexible, but subscription-based services are providing a more accessible and affordable alternative. With subscription-based learning, students can access a wide range of courses and resources for a monthly fee, giving them more control over their education and allowing them to learn at their own pace.
Here are a few examples of companies that are disrupting education through subscription models:
MasterClass – Offers online classes taught by experts in their field, such as cooking with Gordon Ramsay, writing with Margaret Atwood, and basketball with Steph Curry. Users pay a yearly subscription fee to access all classes.
Coursera – Provides online courses from top universities and companies in various fields, such as computer science, business, and arts. Users can either audit the courses for free or pay a monthly subscription fee to access additional features, such as graded assignments and certificates.
Udemy – Offers online courses on a wide range of topics, from personal development to professional skills. Instructors can create and sell their courses on the platform, and users can pay for individual courses or a monthly subscription to access unlimited courses.
Chegg – Provides online tutoring, study help, and textbook rental services to college students. Users pay a monthly subscription fee to access these services, which can be especially helpful for those taking online classes or studying remotely.
Duolingo – Offers free language learning courses, but users can also pay for a premium subscription to access additional features, such as offline learning, ad-free experience, and progress tracking.
Health & Wellness
Subscription-models have revolutionised the way people access health and wellness services. By offering personalised and convenient solutions, these companies have made it easier for individuals to take control of their health.
Here are some examples of companies in the health and wellness subscription space:
Peloton – Offers a subscription-based model for their at-home fitness equipment, which includes live and on-demand workout classes.
Fitbit – Offers personalised fitness coaching, health insights, and mindfulness resources to users for a monthly fee.
Mirror – Offers a smart mirror as part of a subscription service, which provides personalised workouts and coaching based on individual preferences and goals.
Headspace – Offers a subscription service for its guided meditations, mindfulness exercises, and sleep sounds.
Noom – Weight loss app that provides personalised meal plans, coaching, and support through a subscription-based model.
Fashion
Rent the Runway – Allows women to rent designer dresses and accessories for special events or everyday wear. Customers can choose from a variety of plans that offer different rental options and prices.
Le Tote – Delivers personalised fashion items to customers' doors every month. Customers can choose from a variety of clothing and accessory items, wear them as long as they like, and return them when they're done.
Fabletics – Activewear brand that offers personalised outfits for women based on their fitness goals and preferences. Customers can choose from a variety of plans and receive new outfits each month.
This is just the start
I truly believe subscription is probably the best business model for most industries for two main reasons:
Firstly, consumers focus more and more on usage than ownership. Secondly, business owners and investors love revenue predictability because it allows them to have more cash on hand and make more informed decisions.
And you? What is your opinion on subscription-based models? Let me know in the comments.
I hope you found this article interesting!
Have a nice week!
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