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Data for today’s episode is provided by Mercator Advisory Group’s Blog – Subscription Economy Accelerates as Stay-At-Home Lifestyle Spurs Demand
Retail Membership Clubs Offer a Contrast to Box-of-the-Month:
- The business model for Costco, Sam’s Club, and BJ’s is to sell goods and services at almost break-even prices and generate profits from annual membership.
- Costco is the largest warehouse club and has 105 million members representing 55 million households.
- In 2019, Costco made $768 million in membership fees that range from $60 to $120.
- Costco has a highly loyal member base as evidenced by a 91% and 88% renewal rate for the combined U.S.-Canada market.
- Other retailers also use a membership fee as part of their model: Restoration Hardware charges $100 fee for product and shipping discounts.
- Beyond warehouse clubs, membership fees are a difficult strategy for brick-and-mortar, many of which are in dire straights.
- One suggested route to engage a customer base is through integrated mobile apps that include in-store and online shopping, payment, and loyalty benefits.
The subscriptions economy has become a growth segment of the U.S. services economy. While subscriptions go back many years, it’s been the digitization of commerce and consumer purchase behavior that now drives the subscriptions market. Through 2022, online subscriptions will find higher growth due to continued consumer popularity of streaming services and software. Payments firms, including ISVs, merchant acquirers, and payment gateways, must understand the subscription management requirements of sellers and key trends that are driving market growth. A new research report from Mercator Advisory Group, Subscription Economy Accelerates as Stay-At-Home Lifestyle Spurs Demand, sizes up the U.S. online subscriptions market and its future direction.
“Video and music streaming has led the rapid growth of online subscription services for stay-at-home households during 2020. Online subscriptions have become a growth area within e-commerce and will continue in the foreseeable future. Bundled subscriptions prove to be a winning marketing strategy for the leading industry players such as Amazon and Apple and consumers have responded enthusiastically,” commented Raymond Pucci, Director, Merchant Services Practice at Mercator Advisory Group, the author of this report.