The Kite Factory’s MD James Smith looks at how subscription services have fared during the Covid-19 pandemic

There are few things more appealing to a business than the promise of regular and reliable cash flow. The surety that every month income is guaranteed is a safety net to be cherished and the platform on which long term planning and strategy can be built.

This is why from video streaming services to beauty products, vegetable box deliveries to newspapers, businesses are either establishing themselves with a subscription model, or are doing all they can to migrate more customers to that method of purchase and payment.

And this year – into the mix – comes the impact of the coronavirus pandemic. Lockdown brought the subscription model to the fore for several reasons.

Whether a way of bypassing unreliable supply, gaining access to scarce products, or introducing surprise and a sense of self-gifting into people’s more limited and mundane lockdown lives, subscriptions met all sorts of emotional needs including security, reliability, entertainment and delight.

Our recent study with YouGov found that not only did lockdown spur interest in subscription services, but most people who signed up to one during lockdown intend to continue that membership as restrictions ease.

The research – conducted among 2,141 of the British public and covering all types of subscriptions to capture the whole market – found that almost two in five UK shoppers (37%) signed up to at least one new subscription service during lockdown (since 23 March 2020).

Furthermore, almost three quarters of new subscribers (72%) said they were likely to continue with that subscription post-lockdown.

According to the data, people who signed up to physical subscription boxes rose from 7.9m to 8.2m – a 3.3% increase – from February to October this year. The largest growth was among the over 55-year-olds.

These findings are beacons of light to many brands that have struggled through this tumultuous year. Not only is it encouraging to those already offering this form of membership, but also offers hope to brands considering this business model.

But for greater insight and nuance into these top-line figures, our research dived deeper into the preferred types of subscription and the specific demographics they appealed to.

Unsurprisingly, media memberships were the most favoured – taking the top four places. Video streaming services led the charge, proving most popular across all demographics, with three in five people saying they had signed up to a new video streaming service since lockdown.

We’ve seen Netflix subscribers exceed 195m, with it adding 15.77m subscribers in Q1 2020, followed by a further 10.09m between April and June – the biggest growth in its history.

Elsewhere the relatively new kid on the block, Disney+, hit 73.7m subscribers in October – one year since its launch.

After video entertainment, music/audio streaming was the next most popular subscription service, followed by magazines and then newspapers.

But who these services appeal to varies, with clear differences in purchasing behaviours depending on age. For instance, newspapers and magazines were most popular with the over-55s, while the 18- to 24-year-olds are the most likely to sign up to a music streaming service (41%) and 25- to 34-year-olds are twice as likely to sign up to fitness, health and wellbeing services.

Indeed, the type of service people signed up for also affects the membership longevity. People signing up to magazines and music streaming services were much more likely to continue subscribing than those that signed up to food & drink boxes or educational services such as online language schools.

In the current climate, where a tier structure means unpredictable, repeated, localised lockdowns are possible, business conditions remain extremely challenging for bricks and mortar stores.

The subscription model presents an option of regular custom and a more reliable customer base for retailers, and potential new DTC business strategies for other products.

News Source: Mediatel