The growth of the “subscription economy” has steadied as living costs squeeze household budgets and people return to pre-coronavirus pandemic routines, figures from a major payments provider have suggested. More than a third (36%) of people say they have cancelled at least one subscription because their disposable income has fallen as interest rates and inflation climb, with 31% citing higher prices as a reason why, according to Barclaycard Payments.
Entertainment platforms and beauty and grooming kits are among the categories most likely to have been cut back on.
The proportion of households signed up to subscriptions has dipped from around four in five (81%) a year ago to two-thirds (67%), according to Barclaycard Payments. It released the findings after commissioning Opinium Research to survey 2,000 people across the UK in June. Some 400 UK senior decision-makers at director level and above from a range of retail sectors were also surveyed.
Barclaycard Payments – which processes £1 in every £3 spent on credit and debit cards in the UK – found that, on average, businesses which offer subscriptions estimate nearly two-fifths (36%) of their revenue has been generated from these sales over the past 12 months. However, with people going back to some pre-pandemic routines, Barclaycard data showed a 5.7% fall in subscription spending in May 2022 when compared to May 2021.
The research also indicated the appeal of sign-up products and services remains strong, despite economic uncertainty. Nearly four in 10 (38%) people believe subscriptions offer good value for money and 34% said they help them manage their finances at a time of rising costs.
Convenience (42%), reassurance that key products will be regularly delivered (42%) and the ability to try new items which they may not normally purchase (55%) were also cited as key benefits.
The research also found that about seven in 10 (69%) businesses forecast the subscription economy will continue to grow and nearly two-thirds (64%) will offer sign-up products and services for the foreseeable future. Of those planning to launch a subscription offering, a quarter expect to do so in the next six months and 42% are planning to do it in the next year.
While over half (51%) of subscription providers are planning to cut prices on their subscription products, nearly as many (47%) intend to increase prices due to soaring inflation and supplier costs. Many of those surveyed also said they plan to launch lower-cost subscription products and services to give customers more choice. Some are planning this around key shopping periods, such as Black Friday.
Free delivery, discounts and bespoke loyalty programmes are among the ways in which businesses plan to encourage customers to sign up with them.
When asked what would make them more likely to sign up to subscriptions in the future, 38% of people said good value, 32% would be encouraged by a free trial, 27% would look out for free delivery and 21% said flexible contracts would be appealing.
Kirsty Morris, managing director at Barclaycard Payments, said: “Subscriptions saw huge growth during the pandemic as Brits spent most of their time at home, so it was inevitable this would steady as the economy opened back up.”
She added: “It remains clear however, that consumers still value the ease, convenience and often additional extras they can access through subscriptions; whether that be through digital services, or products delivered regularly to their door. Many retailers adapted quickly during the pandemic to meet changing demands, and those which continue to evolve their subscription offering to respond to this new set of challenges will be best placed to benefit from increased consumer loyalty and satisfaction.”
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