Subscription sales: an opportunity for entrepreneurs

Subscription sales: a fundamental trend

This is a trend that we have noticed for several years now and which affect us in our daily lives, in our way of consuming. The subscription economy is growing rapidly in almost every areas.

Having a peace of mind, avoiding late payments and penalties… These are the main benefits of the subscription! But the subscription does not onlyconsists in simple periodic payments (monthly or annual); there are also subscriptions “Pay-as-you-go” that is to say paying in the course of an actual consumption, where various individual costs are paid periodically.

In this article, we will ask ourselves two questions: (1) What are the means of payment used by consumers to subscribe and pay for their subscriptions? (2) Which are the sectors most affected by this new way of consuming, those who can see there a real growth opportunity ?

According to a study led by SlimPay and Innopay on Europeans and the subscription economy, the telecommunications, insurance, rent and utilities sectors such as gas, water and electricity appears as mature regarding the subscription with a penetration rate of 55% on average in Europe. Media spending, such as on-demand and streaming music, is also very well suited to this type of consumption, with 35% of respondents indicating that they have a subscription in place for this specific type of spending.

If we take a look at the willing to use a subscription payment in the future, so-called modern services and the sport in particular seems to be well suited to the subscription sales. The European average represents a potential growth of 16% in the use of subscriptions for the payment of daily purchases.

The advantages of the subscription compared to the one-time sales for merchants

ADVANTAGE 1: Allows the firms to smooth their cash flow.

ADVANTAGE 2: Enables firms to win customers’ loyalty more easily, thanks to the community aspect of the subscription and the recurrence of the brand’s visibility.

ADVANTAGE 3: It limits the risk of unpaid bills

ADVANTAGE 4: It creates a database of regular clients

ADVANTAGE 5: It enables the obtention of a very low working capital requirement, nay negatives.

ADVANTAGE 6: Ideal for short life products, easy to ship and inexpensive.

The benefits of subscription for consumers

ADVANTAGE 1: Peace of mind, no need to think about the payment date.

ADVANTAGE 2: The freedom to cancel when you want.

ADVANTAGE 3: Avoid late payment fees

ADVANTAGE 4: Enables consumers to predict and measure their expenses.

Subscribing requires a means of payment to be registered at the merchant so that the merchant can debit its customers automatically. Here is an overview of the most used means of payment:

The bank card remains the most used mean of payment, especially for small and medium spending. Depending on the country and the culture, the e-wallet takes a more or less important place. In Germany, for example, Paypal e-wallets are widely used. Money transfers (SEPA) are used mainly for large sums or for payments with institutions and large telecommunication companies.

The subscription takes a place more and more important in our habits of consumption. This practice has advantages for merchants especially in terms of cash but also for customers in terms of ease and “peace of mind”. All sectors are touched by this trend and new opportunities are opening up for entrepreneurs to take advantage of this new way of consuming. The education, sports and basic necessities sectors have high growth potential as more and more consumers say they are ready to consume them by subscription.

Now there is a difficulty to raise for the merchants: set up a powerful subscription management system to automate debits, the reminder process, the management of expiries of bank card, and give access to a personal portal to each subscriber. We had already discussed the best solutions to meet these needs in this article.

If you are looking to offer your products and / or services by subscription, I invite you to contact our team of experts who can advise you for free.