Subscription Use Continued to Grow

Consumers’ use of subscriptions continued to grow in the fourth quarter of 2021, according to a report published by PYMNTS. [1] What does the report show regarding the latest trends in subscription use?  What is helping to drive this growth?

 

Increased Use of Subscriptions

Consumers, on average, subscribed to more services, spent more on subscriptions, and intend to keep them longer.  During the fourth quarter of 2021:

  • Nearly one-third of all consumers had at least one retail subscription
  • The average retail subscriber had five subscriptions, an increase of 1.3% over Q3:2021
  • Retail subscribers spent $15 billion per month on subscriptions, which was $9 billion or 67% more than in Q3, and a five-fold increase over Q1
  • The number of consumers intending to keep their subscriptions increased 76% from Q3

 

Why Are Consumers Using More Subscriptions?

Consumers cited access to high-quality products as the number one reason for using subscriptions, supplanting convenience. The PYMNTS report also found that retail subscription commerce products could lose as much as $2.2 billion by failing to offer better subscription experiences.

 

Pandemic-Related Increase

A lot of individuals signed up for free trials during the pandemic.  More than half of those people intend to keep those subscriptions.

 

The Free Trial

The report also highlighted that free trials were an effective marketing strategy–resulting in subscriber increases. Nearly 80% of retail subscribers have one subscription that began as a free trial.  Overall, 54% of individuals who received free trials ended up keeping it.

 

Going Straight to the Brand

Nearly two-thirds of all retail subscribers purchased products directly from the brand itself.  Why? Reasons driving this trend, according to the PYMNTS report, include:

  • Access to better products
  • Guarantee of authenticity (not a fake or knock-off)
  • Better pricing
  • Better customer service
  • Access to better coupons/discounts
  • Better rewards
  • Easier returns

 

Subscriptions: A Potentially Effective Marketing Strategy

The increased use of subscriptions during the fourth quarter of 2021, coupled with an increase in money spent on subscriptions, underscores the potential advantages of the subscription model.  Consumers appear to be drawn to the subscription model by its advantages and by the benefits provided that consumers might not be able to realize in a brick-and-mortar retail setting.

 

Companies that embrace the subscription model and offer consumers a favorable experience may prosper from these shifting preferences.

 

How may investors gain access to companies that may be poised to benefit from a shift to a subscription economy?

 

The Fount Subscription Economy ETF (SUBS)

The Fount Subscription Economy ETF (SUBS) seeks to provide investment results that, before fees

and expenses, generally correspond to the total return performance of the Fount Subscription

Economy Index.  The Index was designed to measure the performance of companies engaged in the business of providing subscription services, i.e., companies that sell products or services for recurring subscription revenue.

 

SUBS may offer investors an attractive vehicle to gain exposure to the subscription economy.

 

 1All data sourced from: Subscription Commerce Conversion Index, PYMNTS, November 2021

 

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Bong-Geun Choi Chief Economist

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