What: The FT argues that the subscription model might be more efficient for pricier items, due to the distribution and communication costs impacting FMCG goods in such a model

Why it is important:  Department Stores consider subscription through the lens of Subscription boxes only, which is an entirely different activity and which can be extremely consuming in terms of workforce and time. However, there are alternative models that could prove interesting to them while contributing at the same time to the financial bottomline and repeat traffic.

IADS already wrote about subscription models as at the Association we are convinced that this is part of the small actions that could bring additional value and traffic to department stores (see Business Case #3). ING Data estimates that the total market in Europe represent EUR 350bn, of which 39% is related to information technology services and 34% to media and content services (Microsoft is a good example with its Office 365 subscription).

Consumer goods only represent today 15% and one of the most famous model is Nespresso with its coffee pods.

However, the article argues that the model works best for higher priced-items, since, one distribution, communication and customer retention costs are factored in, FMCG goods are not worth the hassle from a corporate point of view. For instance, some brands already propose mattresses on subscription, including the replacement of the product on a regular basis.

Subscriptions recurring revenue model best suited to expensive items