The Supply Side: Consumers more conscious of subscription costs

With more households using subscriptions for consumables, services and entertainment, there is less need to shop in stores. Retailers of all sizes have felt the squeeze from Amazon and its 45 million Prime members who turn to that retailer first to ensure they are getting their money’s worth from a $119-per-year membership fee.

A recent report from Fetch, a mobile marketing agency, found consumers are most likely to have up to six subscriptions for services like music and video streaming, grocery or fashion/beauty. The report indicates six as a saturation point for subscriptions, and in most cases that’s an average spend of about $300. Just 6% of consumers have more than seven subscriptions and less than 10, and 3% have more than 10. Roughly one-third of households subscribe to only one service, most likely Amazon Prime given almost half of American households are Prime members.

With so many paid subscriptions services available, 77% said deciding which ones to choose can be a daunting task. As consumers are stacking subscriptions, another 69% are becoming more conscious about the costs.

The survey found consumers are empowered to make trade-offs that make the most sense for their household. While music and video streaming are the most popular subscriptions, they are also the most likely for consumers to cancel. According to the survey, 34% said they would cancel their music subscription in the next 12 months, while 40% said they are continually evaluating the value of their video streaming subscriptions as more competitors enter the space.

Deloitte reports Americans are spending an estimated $2.1 billion per month on subscription video services such as Amazon Prime Video, Netflix and Hulu. That helps explain why Walmart is reportedly considering expanding Vudu subscriptions, though the retail giant has not confirmed that possibility.

Deloitte found 55% of U.S. households subscribed to at least one video streaming service as of January, up from just 10% in 2009. About 48% of all U.S. consumers stream television content weekly, compared with 37% in 2016, Deloitte noted.

Fetch found 71% of internet users subscribe to a video streaming service. Another 10% are subscribing with a free trial, and 13% are researching the possibility of a subscription for video streaming. Fetch notes 78% of consumers said they have increased the number of subscriptions over the past year, and 68% expect to add more in the next 12 months.

The average consumer pays for three different video streaming services, including Amazon Prime Video, which is included with a $13 per month Prime subscription. The most popular video-streaming services include Amazon, Netflix at between $8 and $14 monthly, and Hulu at $8 or $12 without commercials. HBO Now is also a popular choice at $15 per month.

Music subscriptions are the second most common among consumer households. Fetch reports 29% of consumers have one, 27% are in a trial period, 25% are researching them and 19% are not interested.

The most popular music subscriptions can also add to household expenses. Spotify premium costs $10, or there is a family plan for $15. Amazon Music Unlimited costs $8 for Prime members, and Apple Music is $10, as is Tidal, iHeartRadio All Access and Pandora Premium.

Fetch found the average number of music subscriptions per consumer is two, with the average spend at about $20. As the costs rise for subscriptions, consumers are often willing to opt for the lower cost streaming service that includes ads as a trade-off. Fetch found grocery subscriptions like Amazon Prime Pantry, Blue Apron or Hello Fresh are slowly gaining traction. One in 10 survey respondents have one grocery subscription, while 9% said they are in a free trial period, and 31% said they are researching a service. Consumers with grocery subscriptions are among the most loyal as just 12% would consider canceling in a year.

Grocery plans are the most costly among subscription services with Blue Apron costing an average of $60 per week for three meals serving two people or roughly $240 a month.

A separate report from Field Agent, a retail auditing and insights firm in Fayetteville, found 58% of respondents have tried grocery subscriptions. A majority cited convenience of home delivery and ease of preparation as the main reason they subscribed. Roughly half said they liked not having to shop as often. Seven out of 10 said they would subscribe if prices were lower, and 35% of non-users said they expect to purchase grocery subscriptions in the next three years.

Beauty subscriptions still have room to grow with 18% of consumers having one. Field Agent found the most popular beauty subscriptions among its respondents were Ipsy and Birchbox, each costing $10 per month. PLAY! by Sephora is also $10, with Walmart and Target offering beauty boxes for $5 and $7 monthly, respectively.

The biggest reason consumers said they don’t subscribe to beauty services is because they are too expensive, as the boxes contain mostly samples. While the number of beauty subscribers remains small, it’s a loyal group as more than half of their makeup purchases are made from the subscription services.

Fashion subscriptions were had by roughly 20% of those surveyed by Fetch. Another 10% said they are in trial period, and 25% are researching them. Fetch found the saturation level at one among consumers with fashion/style subscriptions. Field Agent cites Stitch Fix as the most popular fashion subscription with respondents. The styling fee is $20 monthly, which comes off the price of the first item purchased. Trunk Club ranked second most popular with a monthly styling fee of $25, which also is credited against the first item purchased.

Field Agent found 55% of respondents with a subscription plan to continue that service over the next three years. About 18% said they obtain more than half of their clothing through personal styling services. A majority of respondents said they purchase up 25% of their clothing from the subscription service. The biggest reasons the subscribers gave for continuing their styling service subscriptions was it saved time because of the home delivery. Others said they like to receive items they wouldn’t normally choose for themselves.
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Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.