How the ballooning subscription economy reduces consumer choice
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Illustration: Sarah Grillo/Axios
The number of products and services we sign up for is ballooning as almost every industry latches onto the subscription business model.
Why it matters: The economy-wide transition to subscriptions takes away consumer choice — and it can exacerbate the existing inequities in the way we shop.
The big picture: We don’t just subscribe to streaming services anymore.
- Car washes are doling out memberships.
- Pet toys and treats coming in recurring bundles,
- More people are subscribing to meals, as the market for food delivery boxes grows.
- The personal care and grooming market has pivoted to subscriptions, with razors, makeup, and personalized hair care arriving monthly in the mail.
- Even Taco Bell offers a subscription service — $10 a month for a taco a day.
What’s happening: Businesses can make more money up front and over time by selling subscriptions and building loyalty.
- They can also mine subscribers for data and use it to tailor their services — making them even more appealing, says Liping Cai, a professor of marketing at Purdue.
- Consider how streaming services collect information on what you watch and use it to suggest new titles.
Between the lines: Despite the convenience of automated, subscription-based shopping, more than half of consumers would prefer to pay as they go, according to Deloitte. But many sign on for subscriptions because companies leave little choice.
- For example, a car wash might charge non-subscribers double or make them deal with longer wait times.
- Many hotels are offering subscriptions, and they could soon restrict services that once seemed like standard perks — such as room cleanings — to guests who are subscribers, The Washington Post notes.
Plus, we’re forgetful. The average consumer spends $219 on subscriptions every month, per C+R Research. But we’re only aware of about 40% of that spending.
- Customers’ forgetfulness when it comes to subscriptions can boost companies’ revenues by up to 200%, according to economists at Stanford and Texas A&M.
- The problem is so pervasive that it has given rise to a wholly new service — apps like Trim and Truebill that offer to clean up your subscriptions for you.
The stakes: The longer term impact of the subscription boom could be to reinforce economic inequities, Cai says.
- Companies are incentivized to designed products and services for and sell subscriptions to the most profitable customers.
- "Those who are deemed not profitable won’t be in their data," he says. "Certain groups will be marginalized, or even erased."
