Top Five Subscription Business Trends for 2021

As the subscriptions industry proves its resilience to the shocks of 2020, we look ahead to what big trends we think are in store for businesses in 2021, a year of consolidation and transformation.

Though the subscription sector weathered the storm of COVID-19 largely unaffected, with many companies even thriving amidst the economic downturn of 2020, businesses must now ask themselves if and how they can outlast this boom period. A range of new developments are set to further shake up the industry into 2021 and beyond as massive changes to the ways that we interact with the wider world become established.

Here are five trends that we think will define the subscriptions industry in 2021:

Voice commerce and chatbots

People are increasingly relying on voice assistant devices like the Amazon Echo with Alexa and Google Home with Google Assistant to do everything, including buying products online and accessing subscription services more conveniently.

Though consumer spending took a hit in the first few months of the pandemic, people still kept buying smart speakers, and those that already owned them used them more often. In fact, UK adults purchased up to 21 million new digital devices during lockdown, but it’s China that is expected to be the dominant market for the 163 million smart speaker units sold this year, with Alibaba, Baidu and Xiaomi catching up on their US competitors. As the international market for devices swells, Google and Amazon are pushing for greater regional language recognition in their devices too.

Leaps in voice recognition technology will reinforce this trend as the industry witnesses a surge in voice-based ecommerce. As AI and natural language processing continue to improve in accuracy and sophistication, voice commerce and the potentials for it within the subscription experience will only continue to grow.

Furthermore, analysts predict that more than 73% of all ecommerce sales will be made by mobile in 2021, with purchases expected to be worth $3.56 trillion. Social commerce, meanwhile, offers shoppers a seamless online experience, letting users make purchases directly from their social media accounts. Already, the likes of Spotify, HelloFresh and other subscription services are leveraging social media chatbots to increase sales. In fact, revenues from social commerce are set to increase by over a third in 2021.

This year, every subscription business must consider voice commerce and chatbots as part of their customers’ digital experience.

Progressive Web Apps (PWAs)

In the ongoing effort to enhance the customer experience, subscription businesses are increasingly thinking mobile-first when defining their online retail strategies, and that is leading them to the use of Progressive Web Apps - a website and mobile app hybrid, using the new capabilities of modern browsers to bring the experience of an app to more users.

First teased by Steve Jobs at the end of his famous 2007 keynote speech introducing the world to the iPhone and the App Store, the idea of PWAs was fleshed out in 2015 by Alex Russell, Senior Staff Software Engineer at Google. PWAs combine progressive enhancement with the native functions of a mobile app, including push notifications and API support, to provide greater user engagement. They offer improved speed, offline functionality, and browser accessibility without hogging valuable storage space on users’ devices.

When Twitter launched their Progressive Web App, it saw a 65% increase in pages per session, 75% more Tweets, and a 20% decrease in bounce rate, and its app size reduced by 97%; while streaming platform Hulu saw a 27% increase in return visits after they replaced their desktop experience with a PWA.

Rather than developing costly, native mobile apps, more subscription brands will take advantage of PWAs in 2021 to provide a faster mobile experience with the benefits of browser accessibility.

No-contract subscriptions

Though it flies in the face of commercial wisdom on contracts and consumer behaviour, no-contract subscriptions allow customers to opt out of their contract at any time, providing them much greater flexibility than being locked into a long-term commitment.

Consumers are reportedly 8% more likely to sign up if offered a no-contract subscription; easy opt-outs reduce customer churn in the long term, and may also improve the acquisition rate in some sectors, such as streaming subscriptions, with consumers attracted to the lower risk and greater freedom entailed by a rolling contract.

Particularly in video and music, companies such as Netflix and Amazon Prime offer rolling contracts, and the benefits are clear; consumers are 12% more likely to sign up to a streaming service if they are offered a no-contract deal. These platforms also enjoy the lowest annual churn across key industries, with only 13% of streaming subscribers cancelling after the first 12 months.

With no-contract subscriptions already the norm for most streaming services, more and more subscription businesses are freeing their customers from the shackles of a fixed-term payment period.

In 2021, subscription businesses must ask themselves – should they focus on locking customers into lengthy contracts, or are contract-free subscriptions the key to retention?

Maturing of subscription markets

Subscriptions have been a model serving relatively niche segments for decades, and thus many businesses have been slow to adapt and consider the need for a more flexible approach to billing, under the impression that they can do everything they need with just a payment gateway.

This was certainly the case for simple one-size-fits-all subscriptions, but then along comes the wake-up call of an economy-rocking global pandemic.

Now, it’s no surprise that 70% of businesses say subscription models are key to their plans for growth in the coming years. And for good reason; despite retail being among the sectors most suffering from lockdowns, the market for retail subscriptions grew in 2020. The retail experience has become the selling point rather than the product itself, and as such personalising the shopper experience becomes a provider’s unique selling point.

With a drop in global advertising sales, retention is the new growth, and subscription services are moving towards much more tailored offerings and bundled models. As the market comes into its own and competition increases, lowering the cost of entry and maximising use, while increasing the long-term value of a customer, will be the key to successful monetisation.

The need to future-proof billing operations and support the likes of prepaid allowances and usage-based pricing will be more important than ever in 2021. The bar has been permanently raised for customer subscription experiences, and providers this year must deliver more than a basic recurring payment when it comes to their offerings.

The subscriptions bounce back

As COVID disruption continues, more and more companies are waking up to the benefits of the subscription model, and the increased consumer data from which they can grow and foster more lucrative relationships with their customers.

While established retail and streaming services continue to plug the gap left by other businesses unable to continue operating, subscriptions are expanding into hitherto unreached areas; from virtual restaurants to micro-gyms with personal trainer subscriptions, industries that have been hit hardest by COVID and consider themselves vulnerable, such as hospitality, fitness and travel may seek to shield themselves from further financial shocks by adopting subscription models.

Thanks to cloud offerings from established vendors and start-ups, innovators in all fields can deploy cutting-edge tech with little upfront investment in tools, equipment or specialised people. The platform management responsibility is shifted to the service provider, freeing businesses from worrying about scalability or support.
In 2021 and beyond, this is going to become increasingly important and more possibilities will open up for everyone.

Ensure that your subscription business is powered by Cerillion Skyline’s charging and billing capabilities – find out more or book a demo today.