Why start a subscription service in 2022?

Why start a subscription service in 2022
In recent years, there has been an increase in consumers who want to rent rather than own. According to a McKinsey research study, the e-commerce subscription market has grown by more than 100 percent a year for the past five years. In fact, the subscription e-commerce market is projected to reach €477 billion by 2025, up from €15.1 billion in 2019 – making it an extremely interesting opportunity for existing and aspiring business owners as well.

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By Christian Wilkens

What is new is the speed it takes for ordinary businesses to move from a traditional business to a subscription-based one

Subscription is not a new concept. The idea of recurring income has existed for over a decade, but mostly in the media and software industry with Spotify and Netflix as two good examples. We at Sharefox have started to see an enormous need for subscriptions also in tangible products, such as in the children's segment. Clothes and prams are only used for a shorter period of time and are therefore perfect for this type of business model. Another important example is in the mobility industry where cars and electric scooters can be rented on a monthly basis.

What is new is the speed with which ordinary businesses can transition from a traditional business to being subscription-based. This is clearly possible to do with smarter digital solutions for rental e-commerce.

To further understand the market for the subscription economy versus the more traditional S&P 500 index, look at the graph below. We observe the history of two types of economies. The SEI (Subscription Economic Index) has experienced a 17.5% 10-year CAGR versus 3.8% for the S&P 500, and the gap between these two numbers is widening. In other words, the subscription economy is here to stay.

The Subscription economy index

Source: Linkedin

Subscriptions build loyalty and loyalty creates revenue

The subscription economy is an excellent way for companies to build stronger and long-lasting relationships with their customers. Instead of traditional sales where you as a business owner have to spend a ton of money on acquisition costs, just to hope to maybe see the customer come back for another purchase, the recurring revenue subscription sales model offers much more predictability in the business transactions, because there is a much deeper level of customer engagement.

Regular purchases provide more and deeper insight into customer behavior, allowing you to continuously improve the personalized experience you offer, which in turn keeps customers coming back. If done well, subscription businesses create extremely loyal, repeat customers—and, according to Shopify, repeat customers spend 67% more than new customers.

Technology drives changes for the needs of new generations

If you're thinking about starting your own subscription service, you may already know the huge benefits of subscriptions. The list below shows you six reasons to consider switching to this sales model:

  1. Predictable income
  2. More money on hand
  1. Spend less to acquire customers
  1. Loyalty to the user lasts longer
  1. Collect data about users to improve the customer experience
  1. Make upselling and cross-selling easier
''New technology now makes it possible for businesses from virtually every economic sector to offer membership services to their customers.''
- Robeco

According to the globally recognized investment company Robeco, they expect this trend to continue in the coming decades, mainly driven by the ongoing digitization of the economy. New technology now makes it possible for businesses from virtually every economic sector to offer membership services to their customers.

A big part of the rapid rise and development of this model is the generational transition, as millennials and Generation Z tend to be more interested in subscriptions and rentals rather than ownership. The newer generations do not see it as necessary to own everything, such as tools, small machinery, cars, musical instruments or even clothes and wigs.

Green transition to a circular economy

We have been able to conclude at this point that it is profitable for small, medium and even large retailers to start a rental subscription service, but another more important thing is that it is very beneficial for the planet and the limited resources we have. Instead of producing new materials, transporting goods across the planet, polluting and stretching the capacity of the earth's resources, you as a business owner will now be able to take an active role in becoming an important part of the circular economy.

We see new companies popping up all the time with their new subscription service. Companies such as Bergans , a Norwegian outdoor clothing company, have just launched their new subscription service, where parents can subscribe to park suits according to their children's needs. When the children outgrow the clothes, the parents can simply change the size without having to buy bigger clothes and sell or throw away the old ones.

Playgear is another good example of a company that has also launched their subscription service. They provide a platform where their customers can rent musical instruments for as long as needed. They understood the need to make the customer journey much shorter and easier than it previously was. With the advancements in new rental technology, they made renting as easy as shopping.

Personal mobility business is also a product area that you will find has become even more accessible and subject to subscription. With e-bikes and e-scooters available for hire in all major cities, the need to own one's own bike has diminished.

Breaking down an old myth

With all the positive benefits of starting a subscription service, such as better customer loyalty, greater and more predictable cash flow, you would think that everyone would start developing their subscription solution. So why don't they? The main concerns our customers mention are the costs, time and consequences of starting a new sales funnel . At first glance, it may not appeal to all investors or business owners, as they appear to incur new costs in acquiring customers – for example for sales and marketing, or software development, which means that for smaller and medium-sized companies, the cost of making this transition too expensive to implement.

At Sharefox , we break down old myths almost every day. We show how easy it can be to start a subscription service at a very low cost without the companies having to do a lot of work themselves.

If you want to know how to start a subscription service, you can read our blog “ How to launch a subscription service for your business in 2022 “.

What are you going to do now?

When you are ready… here are 4 ways we can help you expand your rental business! 
  1. Do you want to grow your business today? Try Sharefox rental system for free - or book a demo and get a personal expert to analyze your company's situation, come up with solutions on how you can streamline your methods and create a more profitable company.
  2. To learn more about the Sharefox rental system , read about trends and news for free, visit our blog or visit our resources section in the main menu. Here you can download guides and e-books that we also share with our customers.
  3. If you want to work with circular economy , Saas and want to be part of the Sharefox team or find out why we are one of the fastest growing rental platforms in the rental industry, see our job postings here .
  4. If you have a good friend or know someone who would have found this article interesting, then feel free to share it with them via email, Linkedin or Facebook .

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