By Nicole Stinson
Photo courtesy of Wikimedia Commons.
Why own when you can subscribe has become the new trend of consumers. From movie and television subscriptions on Netflix to a monthly delivery of condoms, the possibilities are almost endless.
Many are calling this the rise of the subscription economy, including Tien Tzuo, CEO of the subscription-billing conglomerate Zuora. He described the phenomenon as an economic-based shift where consumers are moving away from one-time purchases to subscription services.
“We now value the convenience and flexibility of subscribing to services rather than buying products outright,” said Tzuo in The Economist.
A study last year found that one in four companies in the US, UK, and Australia noticed a shift in their customers’ preferences in services. Now, over half of those companies are introducing subscription-based business models.
“Instead of buying something like a car, or even clothing it has become a lot more feasible to rent it instead,” Denis Pombriant, of Beagle Research, who authored The Subscription Economy: How Subscriptions Improve Business, told Small Biz Trends.
He continued to say that, “if you live in a city and need access to a car once in a while, you probably don’t want to pay the high tax rate, or find a place to park the thing, so you might use a service like Zipcar.”
Zipcar, a car sharing service available across the US, offers one-time rentals as well as monthly subscription services ranging from $6 to $250 a month. Since its launch in 2000, Zipcar has attracted over 750,000 members.
Like many other subscription services, Zipcar attracts mostly consumers from the Gen Y demographic, who make up over half their membership, despite only being 23 percent of the American population.
Kelly Mooney, CEO of the digital marketing agency Resource, also highlighted through her research that this generation is the most influential to retailers and businesses.
“They are more demanding and more savvy than they feel they’re given credit for,” Mooney told USA Today.
So while Tzuo may define the subscription economy as the current trend in business models, it could be argued that it represents Gen Y’s lifestyle and therefore the future economic model. This generation subscribes to what once considered the everyday necessities of their baby-boomer parents from owning a car or house, or even reading books and buying groceries. If you could once own it, we have found a way to subscribe to it.
Sheryl Connelly, Global Trends and Futuring Manager at Ford Motor Company, agreed that members of Generation Y “have an appetite for consuming but they are doing it differently.” taking advantage of rental opportunities and “access over ownership.”
Several reasons explain why the younger generation is choosing subscription over ownership.
For one, Gen Y “will be the first generation that is not going to be better off than their parents were,” according to Melanie Reuter, director of research for the Real Estate Investment Network. Their lack of material success affects their purchasing choices.
Further, coming into age during the recession has caused young people to be cautious, a factor that plays into the appeal of subscriptions, according to Jason Dorsey. Also known as the “Gen Y guy,” Dorsey is a millennials strategy expert who has given a number of talks on this topic.
In a report with First Clearing, a financial and operational services firm, Dorsey said that because of the constant changes in the world Gen Y are becoming increasingly interested in instant-gratiﬁcation services. Long-term investments like ownership could become outdated.
Another commonly acknowledged sociological aspect of Gen Y is that nothing is permanent.
Carrying out an existence not focused on permanence is reflective not only in the millennial consumer habits, but in greater life decisions. For instance, rather than strapping themselves down to save up for a mortgaged house like their parents, these transient young people are more likely to spend their time and money traveling to exotic places. Young people represent 20 percent of international travellers and contributed $217 billion to the tourism industry in 2012.
It’s not only leisurely travel, either; at home, young people graduate college to face a world of bleak career opportunities and high unemployment rates, causing them to seek jobs overseas.
In fact, working abroad has come to be expected: Move Guides published a survey on Gen Y which concluded that 93 percent of its members predict to do so at least some point in their lives.
One opportunity to work in another country is Australia’s Working Holiday program, offered to foreign nationals 18 to 30 years of age, which has seen significant increases in visa applications these past years. Teaching English in nations like South Korea or China is another option widely exercised by struggling college graduates.
So how does a subscription economy play into the lifestyles of a transient generation that also may not experience the same financial successes as their parents? Well, if someone signs up for Netflix subscriptions, they don’t have to bother purchasing a television or DVDs—or burden themselves with selling or transporting these items for when they pick up and relocate to a job overseas. Likewise, subscribing to Zipcar instead of buying a vehicle allows the driver more freedom, both to save money or move away, without bureaucratic insurance headaches or car-ownership burdens.
In light of the consumer trends and generational habits, subscriptions services are growing in many new sects. For instance, subscribing to software has also become popular and efficient enough that Tech Republic writer Susan Harkins advised people to subscribe rather than buy Microsoft Office 365. The former option offers perks that purchasing cannot, such as the 27GB of data on SkyDrive, plus being able to use it on more devices, which saves subscribers the costs on licensing.
Amazon also offers “Subscribe & Save” services to deliver everyday household goods like laundry detergent or cat litter to homes. The “Save” description of this subscription does offer truth: a study by The Simple Dollar crunched numbers and determined the program to be overall effective in domestic economizing.
In addition to cost, there’s accessibility. Scribd, which provides readers unlimited access to over 40 million titles for less than nine dollars a month and so far the service has attracted over 80 million monthly users.
While the future lies up in the air for many Gen Yers, subscriptions allow for the mobility and saving that sometimes ownership cannot always offer. They do not tie the user to a product and in most cases, the services are easy to cancel. When subscription users want to move or upgrade they do not have to sell, plus they have the flexibility to change their services to fit their needs even down to a monthly basis. It’s also beneficial that you can receive anything via subscription and try almost everything.
The subscription economy is really a product of Gen Y’s needs and aspirations. Our parents may have owned the American dream, but now we subscribe to it.