The Subscription Economy: What It Is and Why It’s Advantageous

The sharing economy, the gig economy, the engagement economy, the entrepreneur economy – over the last decade, business analysts have rolled out the term “economy” for pretty much every notable phenomenon driving the way people do business. But none was more widely used, nor had a greater impact, than the subscription economy, which has given rise to a whole new industry of subscription box fulfillment services.

So disruptive has this business model proved that now virtually every industry is seeing its conventional sales model shaken up. Just look at Blockbuster – or, rather, look at the empty parking lot where the Blockbuster used to be, which now houses a tall billboard for a new Netflix show.

What Is a Subscription Model?

A subscription model shifts the notion of consumerism away from ownership and toward access. Why own something you only want to use occasionally? Wouldn’t it be better to have access to that good or service, and goods or services like it, for a flat monthly rate? Not only will you get a greater variety than you otherwise might, but you can also opt in and out at your convenience.

Subscription models do vary a little, though. For the purposes of this article, let’s discuss three case studies of industries that have embraced subscription services: automobiles, groceries and entertainment. You will see that there are small but appreciable differences in the way these services operate.

Case Study #1: Car Subscriptions

Car subscription services, which are relatively new, allow motorists to pay a flat monthly rate for access to a fleet of vehicles, which they can swap, renew or cancel on a monthly basis. It differs from a lease in that it is flexible and requires no long-term commitment. While you may be able to get a great price on a lease you pay that price consistently over a period of two to four years; with a car subscription, you can opt in and out, even swapping cars as you go. This is, therefore, a model that optimizes for flexibility.

Case Study #2: Grocery Subscriptions:

Grocery subscriptions, by contrast, aren’t any more or less flexible than going out and buying groceries. But grocery boxes find their value proposition another way: they are curated, convenient and save time. By subscribing to a grocery box service, working professionals or caregivers save having to go to the store, eating up time better spent on other tasks. The company, meanwhile, enjoys a consistent revenue stream. This is what you might call a model that optimizes for convenience.

Case Study #3: Entertainment Subscriptions

Finally, you have entertainment subscriptions, perhaps most iconic among the subscription services. These are your Netflix’s, your Hulu’s and your HBO On Demand’s. Here, you pay a flat rate for access to a library of movies and television shows (or, in the case of Spotify, music). Rather than car subscription services, whose value prop is more about flexibility, entertainment subscriptions are more about volume, about having access to an array of choices at all times. After all, everyone’s finicky about their own taste in entertainment.

Whatever the value a given model has to its customers, it’s clear that the broad concept of subscription services isn’t going anyway. They mark a bold new way of defining what it means to be a consumer, and a business.

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