How Companies Are Pushing Forward in the Age of Subscriptions

Growth of Subscriptions

Paying for a series of monthly or annual subscriptions is common for many Americans, often on a credit or debit card that renews automatically. In 2021, digital subscriptions for products and services totaled $29.11 billion, accounting for around 3.2% of all US online retail sales. Just a few years ago that same figure was at 2.9%.

Subscriptions for things like magazines or morning milk deliveries were common decades ago, but the spending category has become much more diverse in the digital age. Consumers now routinely set up subscriptions for pet food, streaming music packages, and fast-delivery service from companies like Amazon (AMZN). Analysts note, subscriptions are attractive to many companies because of recurring revenue and the ability to build stronger relationships with customers.

Factors Toward Change

As e-commerce grew during the pandemic, so did subscriptions. Analysts say this trend played itself out as people spent more time at home, and had less opportunity to buy products in stores. Some who had previously been less inclined to buy things online found they appreciated the convenience of securing essential items by way of subscriptions.

Another reason that companies themselves are more focused on subscriptions involves a recent policy change from Apple (AAPL), which limits the ability to track app users’ data. Now, acquiring new business is even tougher, so holding onto existing customers is that much more important.

Tacos, Salads, Even Plane Tickets

The growth of subscriptions has not gone unnoticed, and many companies that haven’t traditionally sold products or services in that manner are seeing if the model could work for them. This includes Alaska Airlines (ALK), which launched its Flight Pass subscription program last month, with plans starting at $49 per month. Executives say college students and business travelers are the target.

Hungry diners are getting in on the subscription trend as well. Taco Bell (YUM) has a subscription club called Taco Lover’s Pass, in which you pay $10 for a 30-day pass, and a taco of the day. Salad chain Sweetgreen (SG) tried out a similar program in January of this year. The growth of subscriptions in the digital age is undeniable, and as more industries get into the game, it could translate to even more auto-billed items for Americans’ bank accounts.

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ABOUT Meg Richardson Meg Richardson is a writer specializing in markets, technology, and personal finance. She loves breaking down seemingly complex ideas and making them readable and interesting for everyone. She holds an MFA in writing from Columbia University. When she is not writing about finance, she enjoys running in Central Park and drawing cartoons.

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