Netflix is the tip of the iceberg.
And Spotify and Amazon Prime Video and Apple Music.
They are all an ice peak peeking out.
Beneath the surface, still asleep, is the monstrosity of subscriptions, a model applicable to almost everything and which is already settling in the most unsuspected sectors.
And in companies that are far from the size of the tech giants.
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Pascual Morillas is the owner of the Versus Clinics, two beauty centers, in Madrid and Alcoy, which offer beauty subscription plans. The objective is that the client can have weekly or monthly treatments to “maintain a beauty standard”. The most basic allows one treatment per month, such as a diamond-tipped facial hygiene. But there are more complete ones: "With a Medium Versus Plan you could choose a facial radiofrequency treatment, which stimulates the production of collagen in the skin, and a vitamin cocktail, which gives you luminosity", explains Morillas. Both once a month for 99 euros of recurring monthly payment.
A Deloitte report from April this year, looking at the turnaround in entertainment, places a particular emphasis on subscriptions.
According to the document, in the United States 82% of the population subscribes to at least one service
online video (
streaming
).
The average user would be subscribed to four platforms.
While those who subscribe to music apps would pay on average for two services at the same time.
Video game lovers pay for three.
Video services alone have around 1.5 billion users worldwide, with data from Statista.
The income generated by these platforms already amounts to 61,000 million dollars.
They are already a lucrative business whose model is being exported to other areas.
Today, applications to subscribe to a monthly clothing box proliferate, such as Pislow and Ecodicta. For 39.99 euros per month, they send the subscriber clothes and accessories according to their style, so that they can wear them during those 30 days. Then a courier arrives to pick up the return package and brings him a new one, to go on premiere in the next few weeks as well. In meals, the HelloFresh app undertakes to deliver another
box
to its subscribers
, in this case with the right ingredients and a recipe to cook them. They work with fresh ingredients and the user can customize their food preferences. A subscription to three meals a week for two people costs $ 63.
For companies, one of the great advantages of the model is in the automation of payment. “Subscriptions allow something that was more complex before. And it is that the collection is made in an automated way and accepted by the end customer, on a recurring basis. They do it as something natural ”, highlights Damián Carpintero, CEO of Debit2Go, an emerging company (
startup
) that helps SMEs to implement subscription models in their business. Morillas, who has turned to them, acknowledges that their clinics bill more with subscriptions. "We ensure these clients and those services and the client is satisfied by the continuity of their treatments and saves a little," emphasizes the owner of the beauty centers.
Carpintero points out that subscriptions have become very common in certain sectors, such as health, specifically in dental services. In other areas they are also gaining ground. "Now there are starting to be a lot of subscriptions in the law sector, to have a guarantee that you have someone behind you who can help you when it is needed", indicates the CEO of Debit2Go. He even cites a new type of housing rental: the user pays for a
Life Plan
and rents the right to a room or an apartment. So you can live a month in Madrid, another in Paris, another in Barcelona. Everything under the same monthly plan.
International brands are exploring the options of this recurring sales model. The Renault Group recently bought the Spanish Bipi, a
startup
that manages a subscription car rental platform. While Nike launched a monthly plan for children's shoes, which allowed to receive a new pair every 30, 60 or 90 days.
In its 2019 annual report, the Subscription Trade Association (SUBTA) estimated that by 2023, 75% of companies that have direct selling models will offer subscription services. It also noted that the global economy of subscription trading had grown at an annual rate of 17.33% in the last five years. The same association, in another document dedicated to reviewing the impact of the pandemic, points out that during 2020 the subscription market grew by 84%, coinciding with the rise of electronic commerce and digital services.
The other big advantage for businesses is scalability. Carpenter illustrates this with an example of a traditional business: “A baker has a sales forecast that dances, because he doesn't really have anyone who has a commitment to buy bread. Suppose this baker now happens to sell bread only on a recurring basis. From now on it will not sell 20 types of loaves of bread, now it will sell three plans: individual plan, couples plan and business plan. This greatly simplifies your proposal to the end customer. If you are able to create a few very well structured proposals and segment the client you want to have, it will be easy to grow the business. If the number of subscribers goes up then someone is hired to make more bars. But without a recurring model it is not easy to manage growth ”.
Fixed income and few scares in monthly billing to grow with guarantees. This is what subscriptions promise and what every company is looking for. Bookstores examine this model, according to Carpintero, and so do opticians, who pack certain services in exchange for the monthly payment. Some hairdressers, meanwhile, already offer subscription shaving the beard.
Morillas is satisfied with the recurring model: "The income is not like that of the bond, which is a higher price, but you ensure an average income every month."
In addition, the payout required by bonds sometimes puts customers off.
For Carpenter there is another crucial element in favor of the recurring model.
Subscription allows you to test the product or service and this is a highly effective method of attracting customers.
In his opinion, one-off sales will coexist with subscriptions, but he predicts great growth for the latter.
For customers, one of the main benefits is a price reduction.
Although, in the long run, people can spend more money.
Carpenter replies: "If you don't use the services, it's expensive, like everything else."
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