The subscription business model is currently sweeping across the United States, enticing many people with its value propositions of convenience and affordability. There are already a staggering 225 million subscriptions offered across the nation. 61 million Americans are a subscriber to at least one of these, contributing to an average of 3.7 subscriptions per person. These numbers are only projected to rise, as subscription based businesses are growing 3.7 times faster than the traditional businesses in S&P 500.
One of the main growth factors for subscription based businesses is the high usage rate among Millennials and Gen Z. Millennials are leading the charge, with 39.3% of their population having at least one subscription. Gen Z is lower, at 21.9%, but this number is projected to grow as they mature into higher financial means. These two younger generations might be especially drawn to these digital and physical subscription models because of their prolonged exposure to these subscription model businesses and increasing reliance on digital payments and services.
COVID-19 was also a major reason for the growth of subscription services not just in the United States, but worldwide. The pandemic forced many of the traditional modes of business to temporarily shut down, especially brick and mortar businesses that require physical interactions to complete a transaction. Many people found themselves instead relying upon Amazon Prime, Instacart, and other online subscription services to have access to their basic necessities, like groceries and toiletries. In fact, during the pandemic and the subsequent lockdowns, subscription based businesses grew by 11.6%, while other businesses shrank by 1.6%.
There are two main types of subscription models that are available: direct to consumer (DTC) and business to business (B2B). Within these two overarching categories, there are three primary types of services that are offered. 55% of the market is dominated by curated subscriptions, which are selected for a specific customer across a wide range of product offerings. Another type of subscription model is replenishment subscriptions, which make up 32% of the market. These subscriptions are designed to renew once the goods or services have run out, and can cover a wide range of necessities from groceries to office supplies. The third type of subscription is membership/access services, found in the likes of Sam’s Club and Amazon Prime. These subscriptions make up 13% of the market, and are designed to give subscribers membership perks and discounts.
The possibilities are endless with subscription structured business models. There is a huge variety of goods and services that are offered with these types of models, ranging from video games to dog walking. Each state has their own individual preferences for what is their most preferred subscription. Media streaming services reign supreme, with six states claiming it as their most used subscription. Security services land in second place, with five states saying it is their favorite. Regional differences and prominent industries within the state can skew their preferences in a certain direction.
There are so many more subscription offerings on the horizon as well. Companies such as The Sill and MyGardenBox are sending subscribers new houseplants every month, tailoring them to each customer’s specific indoor conditions. Print subscriptions are a recent innovation that a lot of businesses have found useful, as they can help save up to 50% on toner costs. Toner amounts can be sent directly to the office based on their usage rates, rather than creating the inconvenience for companies to buy in bulk. Even science has been turned into a subscription, where science enthusiasts can receive new accessories and brand specific merchandise every month.