What: Subscription models are facing an increasingly unfavorable context.

Why it is important: Some department stores have looked at this model to generate an additional revenue stream. However, the perks provided with subscription models need to be significant enough to make sure customers will not decided to cancel them out of necessity.

Subscription services boomed during the pandemic for obvious reasons: practicality of the format, curiosity, access to new products, and no-brainer approach. In addition, the government stimulus also helped this retail format to develop: prior to the pandemic, US customers had on average 1.5 subscription, and this number rose to 5 at the end of 2021, with an average USD 38 per subscription for an estimated total market size of USD 15bn.

However, analysts found out that 14% of customers are now intending to reduce their exposure to subscriptions, due to fears of the inflation, need to cut their budget, and concerns for the environment. This would affect the 3 existing models (replenishment, curation and access):

• Replenishment: customers might trade-down the premium products they receive at home to go back to stores buying the staple brands and save on overall costs,
• Curation: since the products sold with this approach as usually more discretionary, the pressure will also be  high to have them cancelled as non-essential products during a revenue crisis,
• Access: this might be the most resilient model as such retailers usually charge a lower fee.

Forbes believes that the reasons why subscription models were successful in the past few years (people had more disposable income, more free time and could not go to stores) have now disappeared and this calls for a reinvention of the model.

The Great Unsubscribe