As a nation, we spend a combined £2 billion on subscriptions every year with the average person spending £60 a year.
As a nation, we spend a combined £2 billion on subscriptions every year with the average person spending
a year. Nowadays it’s possible to subscribe to everything from groceries and entertainment packages to cars and technology. Large international companies like Netflix and Amazon are among the most popular services to be subscribed to. However, the first subscription services can be traced back more than a century. So, as subscription services continue to take a wide range of forms and entice an expanding customer base, what are the origins of this trend and how can the modern-day subscription service be beneficial for businesses?
The origins of subscription services
In the UK, individuals were able to subscribe to deliveries from milkmen as long ago as the 1860s, while magazine subscriptions began in the late 1800s. These subscriptions were largely about convenience, allowing individuals to regularly receive goods delivered straight to their doorstep. Delivery services from milkmen remained popular for more than 100 years with consumers also being able to receive other items such as bread and eggs. Despite 90% of the milk consumed by Britons in the 1980s being delivered to their doorstep, this dropped to just 3% in 2016 as convenient stores and supermarkets made buying milk both easier and cheaper. Although these types of subscriptions began to wane in popularity, they were arguably the catalysts of the booming subscription as a service model of today.
The modern subscription service
In the 160 years since subscriptions were first introduced, the landscape has changed significantly. Over time, these have evolved and consumers can now subscribe to services which regularly deliver everything, including snacks, books, clothes and makeup to their front door. Meanwhile almost half of UK homes have a subscription to a streaming service. However, as the range on offer has increased, their appeal is no longer limited purely to individuals. In fact, as subscription models become available for everything from fruit and milk deliveries to office furniture, printers and laptops, signing up to subscription services can be hugely beneficial for businesses.
How can businesses benefit from subscription services?
In the past, most large organisations would purchase any required technology ‘outright’ and then depreciate it over time on their balance sheet. Today, many businesses don’t have the cash flow to fund large scale technology transformation projects up front or they may not want to have such visibility on the balance sheet. However, as subscriptions have evolved, they have offered a solution to this problem, allowing organisations to obtain the resources they require without the burden of large upfront investment.
Technology can provide a competitive edge to all manner of industries and businesses when deployed effectively. However, for large operations, getting sign off in terms of the budget can be a long and laborious process. With subscription solutions, there is no waiting time and even existing legacy technology can be added to the solution. In addition, in times of uncertainty organisations can feel insecure about funding their technology transformation projects without damaging cash flows. This is something we have seen with Brexit as analysis of data from the Office of National Statistics shows that businesses have invested £22bn less in the last two and a half years because of the uncertainty it has caused. While this might be financially prudent, businesses still need to operate as usual and maintain their competitive edge in a global market. Technology is a critical component of this — not only is it crucial in supporting staff, operations and customer interactions, it can also improve business agility and responsiveness to changing market conditions.
Therefore, using a subscription model can ease the burden of any upfront technology investment, whether it is needed for business-critical reasons or not. It can balance the investment by relieving the burden on capex while delivering on the business’s objectives. This then frees up the company from the burden of diverting funds from other services over technology to remain operational and agile. Additionally, many organisations will be used to this type of model as they use them to provide the funding for large purchases such as cars and furniture.
The future of subscriptions
Over the last 10 years, we have seen a resurgence of the subscription model and the popularity of these services is likely to continue. While this new iteration of the subscription service is a far cry from the initial conception introduced back in the 1800s, the basic principle remains the same – convenience. Whether for individuals or businesses, subscription models enable them to obtain the goods or services they require in an ongoing and easy fashion. In an unpredictable economic climate, subscription models help businesses continue to access much-needed resources, allowing them to remain agile and competitive. Further to this, subscription models provide an excellent way to respond to challenges, changes in market conditions and the needs of both employees and customers in a risk-free manner. As more companies begin to offer subscription models, the range of items and services businesses will eventually be able to access through this method will be endless.