Subscription services continue to evolve

Sandwich and coffee chain Pret A Manger was in a desperate position during COVID-19, with the bulk of its stores being in central London where a deserted capital over a prolonged period almost put its future in question.

Caffeine rush

Critical to its survival and return to profitability post-pandemic has been its coffee subscription service that was lunched at a price of £20 per month, giving subscribers up to five barista-made drinks per day.

It has since been increased to £30 on the back of its success and recently combined with a Pret Club loyalty scheme offering discounts of 20% on all products. This combined proposition has led to rising subscribers and drinks redemptions. As many as 17.8 million drinks were redeemed in the April-to-June period – up 31% year-on-year.

Subscription innovation

This move highlights how subscriptions have expanded out from the traditional area of magazines and now encompass a myriad of goods and services – from on-demand streaming of TV, to razors, meal kits and health & beauty boxes – that can all now be delivered on a regular basis to consumers.

A recent launch involves online card company Moonpig whose Moonpig Plus subscription service offers members 30% off all cards for a sign-up fee of £10 and has quickly proven successful at boosting shopping frequency. 

Such initiatives have led to an explosion in the size of the market – which hit £395 million in 2021 and the forecast had been for it to reach £1.8 billion by 2025, according to research from Whistl. The research also found 81% of people surveyed signed up to at least one subscription in 2021, compared with 65% in 2020, and that the average UK consumer spent an average of £52 on subscriptions last year.

Reality bites

However, these figures might have to be revised somewhat because the current tough economic backdrop and cost of living crisis is having a negative impact on subscriptions and demand has fallen back – with meal kits and drinks boxes suffering particularly badly.

Over a third (35%) of UK consumers are now using fewer subscription services than during the pandemic, with only 17% using them more, according to research from Virgin Media O2, which also found the retreat from subscriptions is most notable in London where 48% of people have cut back on their usage. 

Among those people surveyed, meal kit subscriptions were used by only 10% in the last two months compared with 13% during COVID-19 and wine and beverage subscriptions are now used by 8% of people versus 10%. There has also been a decline in the number of people using fitness and wellbeing subscriptions, with a fall from 12% to 10%.   

The performance of meal kit business Gousto is indicative of the changing state of the subscription marketplace. Revenues declined by £10 million in the year to end-December 2022 as losses increased to nearly £160 million. The company is currently addressing its cost base to turn things around. Sadly this is too late for US-based clothing subscription company Stitch Fix that recently closed down its UK operations after suffering ongoing pressures and sluggish demand.

Leisure love

Bucking the trend in subscription usage are streaming services such as Netflix, which now have 50% of people signed up as users compared with 48% during COVID-19. Music and podcast subscriptions have also fared well with users increasing from 18% to 20%. 

Also proving particularly robust is fresh petfood subscription service Butternut Box that has recently raised £280 million to add to its previous £100 million fundraising that will help the DTC (direct to consumer) business to further build-out its European expansion programme. 

The gift that keeps on giving

Regardless of the economic backdrop the subscriptions market has constantly evolved, with the specialists tweaking their businesses beyond the initial pure subscription model. Consider some of the earliest market entrants: healthy snack brand Graze moved into selling its goods in retail chains including Boots as well as the major supermarkets. It’s a similar story with shaving subscription Harry’s that can now also be found in many retail stores.

There might also be some good news on the horizon for subscriptions because of predicted demand at Christmas, according to research from Recurly, which found 38% of consumers in the UK expressed an interest in giving a gift subscription this Christmas and 24% of people stated they had previously received subscriptions as a gift. The average person stated they are willing to spend a maximum of £75.

The most likely beneficiaries of this gift-giving are the food and drink subscriptions providers such as Beer52, Candy Club and Naked Wines, which are cited by 32% of respondents as among the most popular subscription options to receive as gifts. This is followed by 26% of people preferring health & fitness subscriptions and 23% going for streaming video services. 

Final thought

Adding further positivity to the subscriptions category is the survey’s further finding that as many as 63% of people would consider continuing with their service after the gift period has ended. We’ll have to see how many extra Pret A Manger discounted Christmas sandwiches are sold this year to its growing subscriber base.

Glynn Davis

Glynn Davis is a business journalist specialising in the retail and food and drink sectors. As well as writing for publications including Retail Week, Ecommerce Age, Propel, Caterer and Retail Bulletin, he’s also the founder and editor of Retail Insider and Beer Insider.