From razors to cars, subscription services are expanding
Marketing prof says subscriptions help consumers ‘cut through the clutter’ and simplify their lives
Subscription services started with newspapers and magazines. More recently, it's shifted to streaming movies and music. But now, the business model is quickly expanding to industries you may not have considered.
The "Gillette On Demand" program launched in Canada this fall. It allows customers to subscribe to a monthly plan by choosing the type of blade and the frequency of blade changes.
It's a response to Unilever's "Dollar Shave Club," which offers something similar.
Trains, planes and automobiles
Portfolio by OpenRoad is a Vancouver-based company that will jump into the car subscription industry beginning January 1, 2019.
It's a model increasing in popularity in the United States and beginning to enter Canada. These aren't just any cars; they're luxury vehicles.
Beginning at $2,500 a month for a six-month subscription, customers can choose from brands like BMW or Mercedes-Benz. The price includes insurance, maintenance, repairs and roadside assistance.
Subscriptions are even moving from the ground to the sky. Surf Air is based in California and offers monthly "all you can fly" subscriptions within the state and to Texas. The price ranges from $2,000 to $3,000 per month.
The model was also offered in Canada last year by a company called FlyGTA, which offers commuting options for routes such as Niagara Falls to Toronto. Individual all access memberships were priced at $3,450 per month plus HST for unlimited travel on all routes.
The airline now offers packages of flight passes, but not an "all you can fly" membership, as companies learn when and where a subscription can work.
Subscriptions expected to become more popular and affordable
"Subscription services are proliferating, and there's a reason for that," said Niraj Dawar, a professor of marketing at the Ivey Business School at Western University in London, Ontario.
"We're in an economy where consumers are buying hundreds, if not thousands, of new products on a regular basis and they need to simplify — cut through the clutter," said Dawar. "And they need to be able to think less about what they purchase."
Dawar says there's added value in removing the decision making process and technology is helping streamline our habits.
He says as more of us buy smart speakers like Google Home or Alexa from Amazon and connect them to our online accounts, it creates what he calls "pods," which are self-contained units of information.
"The pods will then learn how quickly consumers are consuming a certain product and then will offer the possibility of placing the orders without human intervention," said Dawar. "So once those pods get at this idea, then subscription really takes off."
Dawar says that includes big-ticket items like flights and cars and, with time, those services will become affordable for the average user.
"The economics of subscription will work once you have scale; Once you have a large number of customers who are subscribing to the service," said Dawar. "And so turning cars into a service will become cheaper as we develop this model."
Portfolio by OpenRoad has cheaper options in their future. The company says it already has plans to expand from high-end luxury to a mid-level line up of cars by next year.