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Consumers are shifting towards subscriptions from niche industries

A new publication from Hamburg-based market intelligence firm yStats.com, “Global Subscriptions and Recurring Payment Market 2023”, gives a comprehensive overview of the subscription market and the emerging trends within the market. The report also highlights the estimated market value of the subscription market as well as the growth trajectory of the market across regions.

Despite the anticipated growth of the subscription economy, the current economic slowdown is hampering its pace.

The demand for subscription products increased during the pandemic, with social distancing and lockdown measures in place. For consumers, the subscription-based business model offers convenience, while merchants enjoy recurring profits and revenue even during tough times such as the downturn accompanying the COVID-19 pandemic. Thus, the market value of the subscription economy is estimated to witness double-digit growth between 2021 and 2022, reaching a value in the billions of Euros, as stated in the new yStats.com report. Compared to other age groups, millennials and bridge millennials held the highest number of average retail subscriptions as of May 2022. Although the subscription revenue growth fell slightly in 2020, the market showed signs of recovery as of 2021, and the subscription economy revenue growth reached a double-digit figure in 2021, higher than the S&P 500 revenue growth during the same period. Furthermore, consumer spending on the top 100 subscription apps from both app stores and Google Play showed a significant increase from 2020, with the total figure amounting to a certain billion Euros in 2021. With the rising popularity of subscription products and services, a high percentage of direct-to-consumer companies are forecasted to offer subscription services by 2023, as spelled out by the new yStats.com report. The growth trajectory of Subscription Video on Demand revenue and the number of subscriptions differs across regions, with MENA forecasted to witness the highest growth between 2021 and 2027 compared to other regions. Furthermore, mobile subscriber penetration in Iran and Israel is also set to increase by several percentage points between 2021 and 2025. Despite the projected growth of the subscription economy, consumers in some regions have indicated plans to cut back on their subscription services in the face of rising inflation. For instance, as of May 2022, consumers globally indicated intentions to decrease expenditure on various categories such as eating out, travel, and clothing, with media and streaming service subscriptions also making the list. Moreover, a comparison with other countries globally shows that Mexico had the highest share of consumers canceling at least one of their current subscriptions as of May 2022, as stated in the yStats.com report. Mexico, followed by Spain and Italy, were among the countries where the share of adults cutting back on media and streaming subscriptions was the highest during the same time period. In the UK, the share of households subscribing to at least one subscription service decreased slightly as of June 2022 compared to 2021. Nevertheless, the entertainment category still remained a preferred subscription category for consumers in the UK as of 2021.

Trends such as hyper-customization, advanced technology, and the rise of subscriptions of niche industrial sectors are set to shape the subscription market.

The booming subscription and recurring payments market is estimated to be soon dominated by emerging consumer trends such as hyper-customization, the use of AI, machine learning, and the rise of subscriptions of physical goods. One source cited in the yStats.com report forecasts that nearly half of the subscription revenue will come from physical goods as of 2022. Over the last few years, consumers have been demanding subscriptions to physical goods such as food & beverages, beauty products, fashion & apparel, along with other luxury items. The subscription economy is also more data-driven today. Companies and brands have access to large-scale customer data, which they use for improving service and customer experience. Predictive marketing tools, AI, and machine learning are also being used for forecasting growth trends. Customers are demanding that their products be more customized and personalized than before. Therefore, it is necessary for companies to track the customer journey to offer customized subscription packages to the consumer. Furthermore, digital wallets, BNPL, one-click payments, and auto-renewal of subscription packages are some other trends that will dominate the subscription and recurring payments market.