Subscription business model can future proof your company

The subscription economy is bigger than the sharing economy — it’s a significant shift in pricing from one time buy to pay per use to now a fixed fee monthly payment model for all you can consume.

Harvard studies have found that a 1% improvement in your pricing can add up to 11% to your profits. Subscriptions are the new pricing model that generates a predictable recurring revenue stream for the service provider

Subscriptions are not new. As per Wikipedia - the subscription business model is a business model in which a customer must pay a recurring price at regular intervals for access to a product or service. The model was pioneered by publishers of books and periodicals in the 17th century, and is now used by many businesses and websites. But today we are witnessing a rapid ascent of the subscription economy.  In the coming years we will see a digital transformation of traditional businesses with their products, services, and experiences to a subscription model.

Surf Air offers unlimited flights, 30-second bookings, and a new and easy arrive-and-fly process comes with every membership. Today it offers All-You-Can-Fly and Individual Membership from $1,950 per month - a perfect fit for frequent fliers. Surf Air eliminates the pain, hassle and wasted time that accompany current travel options. 

Dollar Shave Club sold to Unilever for $1 billion, marking one of the most successful exits for a VC-backed digital brand that had raised $163 million in funding. The Dollar Shave Club began in March 2012 as a membership subscription service providing razors by mail. Today the Dollar Shave Club’s success is the torch leader of the subscription economy.

With a ClassPass membership, you can visit multiple fitness studios. Access the best workout classes and studios with one membership. Creating your own custom workout schedule is easy — no extra accounts or log-ins are needed. ClassPass is a monthly recurring membership where you can try anything like bootcamp, cycling, Pilates, yoga and more.

HelloFresh is the leading global provider of fresh food at home. They aim to provide each and every household with the opportunity to enjoy wholesome, home-made meals with no preparation, no shopping and no hassle. It is America’s most popular meal kit offering the most recipe variety and meals starting at $6.99.

Recurring revenue-based business models have exploded over the last decade owing to digitally enabled, pay-as-you-go services. 

Vacation as a subscription, Saffron Stays provides you with your own private vacation home without any of the hassles. It offers the luxury of privacy, luxury of certainty with a limited member base to ensure exclusivity & priority access

MoviePass, Inc. is an American subscription-based movie ticketing service. Subscribers can go and watch any movie featured in the app. Using the MoviePass app, select the theater, film, and showtime, then hit check in!

Rent your furniture with CasaOne. Get furniture that works for you on a monthly plan with managed white glove delivery, installation and design guidance. Ikea, the furniture giant, has now started furniture as a service on a subscription model. Students in the Netherlands already have the option of renting a bed, desk, table and chairs for approximately $30 a month. For Ikea, whose $40 billion a year in sales makes it the largest furniture retailer in the world, going into the rental business could help it keep up with rapidly changing customer needs.

Stitch Fix is a personal style service for men and women. Fill out your Style Profile and a Personal Stylist will handpick pieces to fit your tastes, needs and budget—and mail them right to your door. Each box contains a curated selection of clothing, shoes and accessories for you to try on at home. Each shipment is completely customized to fit your individual preferences and needs.

Sassy is a dancer on a mission to help people achieve their dream body through ballet movements. Ballet Blast uses your body as resistance to burn fat and create long, lean, sculpted muscles.

Roam offers a new way of living, a home with a subscription. Roam is a network of global coliving spaces that provide everything you need to feel at home and be productive the moment you arrive. Join interesting people in interesting places - for a week or a lifetime.

Subscription business model helps you deepen your customer engagement & relationship as they have to renew your services every month. If you give them what they want they'll come back over and over.

Zuora cloud-based software company Research on the Subscription Economy says that overall, subscription businesses are growing revenues about 5 times faster than S&P 500 company revenues and U.S. retail sales. Subscription companies grew 18.1% versus a 3.6% average for both the S&P 500 and U.S. retail sales in the seven years from January 1, 2012 to December 31, 2018. The long-term historical average growth rate of the SEI level is 18.1%, and 2018 ended with an above average growth rate of 19.8%.

Subscription companies have grown more than 300% in the past seven years. 

 SaaS was the fastest growing sector beginning in January 2017. But once the IoT sub-index was introduced in mid-2017, this new IoT sub-index grew even faster. The only sector unaffected by the slowdown in 2018 was Telecommunications: Telecommunications accelerated in 2018 and ended up equal to SaaS for growth in this two-year period. 

We believe that in the future every industry will become a subscription business. We have already seen success with Netflix, Spotify and Salesforce subscription business models. Subscriptions are now a new way of thinking about any business, a way of generating predictable revenue streams and, most importantly, a way of building strong customer relationships.

At Mehta Ventures, we seek investment opportunities from entrepreneurs who are looking to build their startup with disruptive subscription business models. Please visit www.mehtaventures.co for more details on how to share your investment pitch deck.

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