Once upon a time, subscriptions were associated with media only. Then streaming poured into our lives – it turned out that you can get access to bottomless catalogs of music, films, and TV series for a small monthly fee. Now we are buying things less and less. And this is logical when even houses and premium cars are available by subscription.
With the help of Knife, let’s check how such a consumption model is gaining popularity, why it is more profitable than buying, and how the subscription services are arranged.
A bit of history: how subscriptions came into our lives
The subscription-based business model originated in England in the 17th century. Publishers of books and periodicals were the first to use it. In the 19th and 20th centuries, milkmen used to go home in English-speaking countries – the daily delivery of milk to the door can also be considered a subscription form. In the second half of the 20th century, the idea was taken up by theaters, sports clubs, and cable TV channels.
The real boom in subscription services happened in the XXI century, when they transformed entire industries, primarily the sphere of content consumption. Subscriptions have extended to things: you can subscribe to food and drinks, cosmetics, clothing, pet products. The promising market has attracted significant players: P&G, Sephora, Walmart, and others are developing their subscription services.
Exotic forms of subscriptions began to appear. For example, Metallica offered fans a season ticket called Wherever I May Roam Black Ticket three years ago. For $598, the lucky ticket holder could attend any concert as part of the band’s American tour.
Before recent times, this did not apply to major purchases such as real estate and cars. But today, this bastion is surrendered too. Subscription services break the idea firmly embedded by the capitalist model in our collective unconscious: to use something, you have to own it.
Unusual services: what you can get by subscription today
In 2019, one of the largest Russian resellers launched the iPhone Subscription service. The client pays a fixed amount every month and receives a new iPhone with free service during the year. After a year, you can redeem your smartphone or replace it with a new one for free. And if the next model came out, a replacement can be issued earlier but with a surcharge.
A subscription to household appliances, such as a refrigerator or washing machine, works roughly the same way. The price includes not only the product itself but also its delivery, installation, and repair during the subscription period. When the term has expired, you can either keep the equipment for yourself, pay the rest, renew your subscription, and get a new kit for free.
Many airlines are introducing a customer subscription for those who fly frequently and do not want to waste time buying and exchanging tickets. United Airlines was one of the pioneers in this. The company offers several types of subscription: the cheapest one allows you to fly in economy class on any flights within the country, the most expensive – worldwide. For additional money, you can extend the subscription to one travel companion.
You can buy an “air pass” not only for regular flights. For example, the American startup Surf Air allows season ticket holders to fly unlimited private jets.
Subscription services have also reached the real estate market: today, several startups offer subscriptions to houses and apartments at once. Unlike ownership or lease, they do not tie a person to a place. Thus, by paying for a subscription to the roam.co service (about $1600 per month), the user gets access to a network of coliving houses in different parts of the world, which he can change as often as they like. For fixed payments, the client receives comfortable housing in the selected location and access to infrastructure: from coworking to a fitness center.
A subscription car is essentially an all-inclusive long-term rental. For a fixed monthly fee, the client receives a vehicle of a particular class for a month or a year, and the company takes care of all the worries about its maintenance and service (including even washing). As in the case of a real estate subscription, a subscription does not bind a person to one car (and this is the difference, for example, from leasing).
At the same time, a subscription to a car is fundamentally different from other sharing models (for example, car-sharing). The vehicle is fullly yours during the duration of the subscription, no other people drive it, and you can use it at your discretion.
Five reasons why subscription is better than shopping
Subscribing is often more profitable than buying a property. This is on the surface in the case of content: than buying one film, book, or album, it is cheaper to gain access to an entire catalog temporarily. This is why streaming subscriptions have taken over the world quickly, displacing individual media (DVD or CD) and industries (rental).
When it comes to signing up for expensive things, it’s not so obvious like a car. Most would say that owning a private car is more profitable than paying for a subscription. But when calculating, many do not consider that buying a vehicle implies many regular payments: insurance, taxes, maintenance, tire fitting, car wash. If you add it all up, the subscription might be more profitable than the purchase.
In addition, in buying expensive gadgets or a car, do not forget about the losses when replacing things with a new one. The purchased car loses in price by about 20% immediately after leaving the salon, and every year its cost decreases. A subscription allows you to regularly update the model without any losses inevitable when buying and selling.
Freedom and flexibility
Unlike a purchase, a subscription does not bind a person to a particular thing: you can use it for as long as you need, refuse at any time, or quickly change it if your needs have changed. For modern people with their constantly changing rhythm of life, this opportunity is priceless.
Let’s say there are already startups in the US that provide furniture sets by subscription. Considering that millions of people live in rented apartments and change them regularly, this option is convenient. You can quickly furnish a new apartment, taking into account its size and layout, without spending money on new furniture and without puzzling over how to get rid of the old one.
Likewise, a subscription eliminates the need to maintain two cars: one for city trips, the other, with greater capacity and cross-country ability, for travel and suburban trips.
Sometimes it can be challenging to make the right choice before buying. In this case, the subscription becomes a tasting or testing of different products. For example, if you are not into coffee or wine, you can subscribe and entrust the choice to experts who will select the best sets for you every month. For the same reason, subscriptions to “beauty boxes” are popular: it is convenient to receive monthly samples of care and decorative cosmetics and compare them in practice to find a suitable product.
This is even more relevant for big things (after all, the price of an error is higher there). As part of a car subscription, you can sit behind the wheel of various cars (and, what is essential, on the routes you are used to), understand which one suits you best, and then take the one you like for a long time. This way, you will not end up in a situation when you bought the car, and after a few weeks, it turned out that it did not meet your expectations. The same is, for example, with a subscription to gadgets: having bought a phone on credit, you will have to pay the entire cost without a remainder, regardless of whether you like it or not, and the subscription can be canceled at any time without paying the residual value.
Convenience and comfort
When a person buys a thing, all the responsibilities for its maintenance and repair fall on him. Subscription services take care of these concerns. The subscription includes 24/7 roadside assistance – from wheel changes to legal support. A subscription fee is a payment not only for the possession of a thing but also for comfort.
Moreover, the subscription saves you the hassle of buying and selling things: you can subscribe through the app in a few clicks, and you can just as quickly terminate it.
The ability to afford more
This primarily applies to subscriptions in the premium segment. Few can afford a private jet, but airline subscriptions seem affordable. Not everyone can afford to buy new designer clothes all the time, but you can subscribe and access an entire wardrobe from fashion boutiques.
What’s in store for subscription services?
According to research, the subscription services market is growing by more than 100% every year. UK residents alone spend £2 bn a year on subscriptions, roughly £60 per person. At this moment, the very model of consumer behavior is changing: the desire to own something (from apartments and cars to music) is steadily decreasing. The priority among buyers is convenience and mobility, the ability to change things as often as they want without risking going broke.
Analysts predict that by 2025, auto subscription programs in the US and Europe will have about 10% of all new car sales. This means that the subscription trend can change the global car market.
Ecolife editorial comment
The idea that the future belongs to the different subscriptions and sharing, joint ownership, and uses emerged after 2016. E.g., it has been calculated that even for most of those who use their personal car every day, it still stands idle for more than 80% of the time. And let’s keep in mind that owning a private vehicle is not only a purchase (often all the same on credit or lease) but also a bunch of associated costs like parking, refueling, preventive maintenance, insurance, repairs. It turns out you buy a car only so that it stands 80-90% of the time, and at that time, you pay for the garage, parking, insurance, and repair.
Of course, users and corporations began to think about the sharing model when the car is not yours, and you pay only on demand – for those days or hours when you really need it. And the actual owner pays for parking and repairs. And the most important thing is the breadth of choice.
Let’s remind you of more distant (and more fantastic) implications. There’s a theory that in the future, there will be an era of “hypernomads.” I mean, all people will become futuristic nomads who have nothing of their own. You rent a house, a car, gadgets, clothes, eat in cafes and restaurants, watch news and movies in streams, rest on an exchange like AirBnB or at resorts-services.
But it gives you mobility! Because there is no permanent job either, today you are needed to work in Africa, tomorrow you go by hyperloop to Brazil, the day after tomorrow to Japan, etc. – where there is a burning need for your skills and interests.
But let’s keep in mind another significant thing. Sharing is not so “green” as it seems. It’s connected with overproduction, planned obsolescence, and mountains of garbage.
Because the corporations, which in fact will own things, will not care to repair them well enough. So the users will give back the items to the manufacturer or will buy a new one. Clients will simply purchase the latest version of the iPhone just because they don’t want to use some kind of iPhone 5.
This means that manufacturers will make goods of even more inferior quality. They break down more often and change even more often because now they rely not on the average user with his money but the budgets of corporations. And this is in addition to the fact that tenants will only want the newest, and such constant updates will be in demand.
In short, even if such a sharing model “takes off” globally, it will be bad for the environment, so for sure.You may read about the features of the Fourth industrial revolution, a new social challenges associated primarily with the transformation of the labor market here.