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Uk home improvement

Generation subscription: The increasing trend for monthly payment models

Subscription-based payment models appear to be changing the way people shop and how businesses operate today. But what does our love of rolling subscriptions tell us – and how can you use this information to benefit your customers?

Online shopping has been a part of our lives for many years now, but the pandemic saw a surge in demand for delivery, click & collect and subscription-based services. A good example of this, as more people took to their kitchens, is that almost a fifth of UK consumers are signed up to a food or restaurant meal subscription service 1. Research shows2 it’s clear this shift in shopping habits is here to stay, as 82% of subscription vendors say their customer acquisition continued to rise despite the easing of restrictions. This change in consumer attitudes is encouraging businesses to consider the value of subscription services too, with two thirds (67%) of retail businesses planning to launch more in the future.

Similarly, demand for certain online streaming services surged in popularity during lockdown. While the circumstances surrounding an increase for these particular kinds of subscription are unique, one thing is clear; a need for the simplicity, convenience and safety of subscription-based services, particularly for essential items, is likely to increase as we adjust to the ‘new normal’.

It might seem like a lifetime ago, but there was a time when we visited a physical store to buy our music, our films, computer software, and so on. Then subscriptions came along and things began to change. Formerly the domain of magazines and gym memberships, the past few years have seen subscription-based sales models disrupting all kinds of consumer markets, from streaming services to socks. Recent research3 indicates that the average Brit spends £620 a year on sign-up services, while 81% of UK households are signed up to at least one subscription, rising from 65% in 2020.

Thinking inside the box

The popularity of subscription-based services has grown with brands like Amazon Prime, Netflix and Spotify. Today you can get anything from audiobooks, active wear, monthly ride-share passes, makeup, contact lenses, cinema passes, flowers, footwear, video games, make-up, and alcohol on a monthly subscription basis.

Subscription services tend to fall into one of three categories; replenishment for essentials like food, toiletries and household items, curation for treats like beauty boxes and collectables, or access for things like newspapers, apps and streaming services. And we’re seeing the services becoming the norm, but what makes them so popular?

Making it personal

Signing up to a subscription-based service, allows customers to get the items they want while paying for them on a monthly basis. They can try new products and feel excited as each month could bring a new selection of treats and the items can be tailored and personalised to each customer.

Whether it’s choosing meals to feed your family or receiving a box of toiletries created to meet the needs of particular skin and hair types, personalised products represent a significant area of the subscription market. From personalised digital journeys to personalised beauty treats, there is always something you can do to make the experience feel more special and one-on-one for customers. So, could subscription models be the ideal way to reach them?

Smooth, seamless convenience

The popularity of subscription-based services seems to tell us that customers are looking for convenient ways to purchase items. Smooth and seamless, rolling subscriptions for products and services could help make the buying experience more enjoyable. Instead of queuing with other social-distancers in the supermarket, consumers could have a box of fresh ingredients delivered to their doorstep. Even paying for goods has been made safer and more convenient; customers don’t even have to risk touching payment terminals or even enter their payment details, as most subscription services are based on rolling contracts that auto-renew each period via direct debit until the customer chooses to cancel.

To replicate a similar experience for your customers, consider ways to incorporate seamless purchasing into every stage of the customer journey.

The price is right?

Price is another reason why subscription services may be compelling to many. Charging customers per month may seem a more attractive proposition to them than having to pay for, example, a year’s-worth of music all at once.

Some subscription-based services also provide customers with heavily discounted prices. This can be seen with some beauty box subscriptions, where consumers have access to a certain number of premium, personalised products at a lower price than if they have bought directly from the retailer. Nearly half (48 per cent) of those signed-up to subscriptions say they save money as a result, averaging £290 per year, by taking advantage of introductory discounts on offer4.

As these kinds of services become more popular, it would seem that consumers are becoming more comfortable for paying for services using a ‘monthly’ payment model. This new way of thinking about paying for items could open up some great opportunities for you.

It pays to be flexible

In today’s market it seems that consumers need more than just convenience from their shopping experience. It’s not just about the perfect product, at the right price, it’s also about how they can pay for the items as the subscription model illustrates.

Point of sale finance could be an attractive proposition for many shoppers, allowing customers to spread the cost with set monthly payments in a convenient way. In fact, our research5 has shown that 42% of consumers choose retail finance because it’s more convenient than other forms of credit.  31% said it was easier to manage and 27% felt the application journey was simpler compared to other credit options.

By offering consumers a convenient, flexible and cost-effective way of purchasing a product, you could be helping to turn one off shoppers into long-term loyal customers.

What does all this tell us?

As the subscription market continues to grow, it’s clear that there’s opportunity for businesses to use subscription services to differentiate their offering and retain customers. For consumers, subscription products or boxes offer on-demand services that offers choice, convenience, personalisation, and often a lower-cost way to buy what they want and need. As customers are now embracing new ways to pay for their items, you should consider providing your customers with a variety of payment options, including retail finance.

Get in touch

To discuss your business requirements and how Barclays can support you, contact us today.

References

1 & 2 Consumer figures are taken from a survey conducted from 13 – 16 July 2021 by One Poll on behalf of Barclaycard Payments, of over 2,000 UK nationally representative adults in the UK. Yearly comparison calculated by comparing findings from Barclaycard Payments conducted 12 months ago with those obtained in July 2021.

Retailer figures are taken from a survey conducted in 5 – 13 July 2021 by Opinium on behalf of Barclaycard Payments, of 400 senior decision-makers (director level and above) in retail businesses. Of these, 87 were grocery food and drink retailers.

https://home.barclaycard/press-releases/2021/09/Deliver-to-door-food-subscriptions-remain-popular-post-lockdown/

3 & 4 Consumer figures are taken from a survey conducted from 13 – 16July 2021 by One Poll on behalf of Barclaycard Payments, of over 2,000 UK nationally representative adults in the UK-  https://home.barclaycard/press-releases/2021/08/Subscription-Society-surges/

5 Barclays Partner Finance commissioned independent research using 1,000 UK consumers in September 2021