Online subscription businesses
Online subscription businesses have grown by more than 100% a year over the past five years. The online subscription business model is to charge customers a recurring fee to access a product or service, typically monthly or annually.
But, despite growth, online subscription success is another matter. That’s because the business model only works when customers continually see the value the company provides for them. Successful subscription revenue models improve customer relationships.
Most of us know some of the most successful online subscription businesses such as:
But there are many that fall by the wayside. And many more new entrants jumping in all the time. Here are 30 surprising facts about online subscription businesses.
30 surprising facts on online subscription businesses
- 80% of existing and new software vendors are offering subscription-based business models.
- 75% of organizations selling direct to consumers will offer subscription services.
- 75% of U.S. music revenue comes from music streaming subscription services.
- 70% of online subscription businesses are in the U.S.
- 70% of business leaders say subscription business models will be key to their prospects in the years ahead.
- 69% of households subscribe to one or more video streaming subscription services.
- 63% of publishers say turning audiences into paying subscribers is a key challenge when creating subscription products.
- 54% of online shoppers subscribe to a subscription box service.
Replenishments and cancellations
- 60% to 70% of meal kit subscribers cancel their subscription within the first six months.
- Only 53% of consumers know about even one of the top services.
- 55% who consider a service ultimately subscribe.
- 45% of people who subscribe last for at least one year.
- 41% of households subscribe to one or more streaming music services.
- Nearly 40% of e-commerce subscribers cancel their subscriptions.
- 35% of online shoppers belong to three or more online subscription businesses.
Reasons for use
- 28% of subscribers cite personalized experience as the most important reason for continuing to subscribe.
- 24% of subscribers cite convenience as the most important consideration.
- 23% of subscribers cite value for the money as the most important consideration.
- 24% of businesses are currently implementing subscription models. with less than one in ten (7%) generating significant revenue via membership.
- 24% of business leaders say they are trialing membership models but weren’t sure how they would evolve.
- 22% of business leaders say membership products have definite potential, but they are unsure how to approach them.
- 15% of online shoppers are signed up for one or more subscriptions to receive products on a recurring basis.
Where are online subscription businesses going
- 13% of online subscription businesses have stopped operations.
- E-commerce subscribers are most likely to be 25 to 44 years old, to have incomes from $50,000 to $100,000, and live in urban environments in the Northeastern U.S.
- Women account for the majority of subscriptions, but men are more likely to have three or more subscriptions.
- Many of the most popular services (including Birchbox, Dollar Shave Club, and Ipsy) charge relatively low monthly fees of $10 or less.
- Blue Apron’s average order value was $58 and its average revenue per customer was $245 in the third quarter of 2017.
- While 2018 saw the most amount of capital ever invested into subscription box businesses, the number of venture capital deals peaked back in 2016.
- Many brands, like Stitch Fix – which saw a 25% revenue climb and 25% growth in customer acquisition in 2018 Q4 – have their customers go through detailed questionnaires and lifestyle quizzes prior to signing up.
- Companies typically pay 2-4 months’ worth of revenue upfront to acquire a customer and they need that 5th, 6th, 7th month of renewals to actually make any profit on that customer.
Does the online subscription business sound attractive to your company? Is it a business model you want to pursue.