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The third annual report on sign-up products and services by Barclaycard Payments reveals how the subscription economy has evolved as the cost of living starts to impact consumer spending, following the huge growth seen during the pandemic*. Barclaycard Payments – which processes £1 in every £3 spent on credit and debit cards in the UK – found that, on average, businesses which offer subscriptions estimate nearly two fifths (36 per cent) of their revenue has been generated from these sales over the past 12 months, an 11 per cent year-on-year uplift.

However, with footfall on high streets returning to pre-pandemic levels as consumers’ lives get back to ‘normal’, the growth of the subscription economy has begun to decline, with Barclaycard proprietary data showing a 5.7 per cent fall in subscription spending in May 2022 when compared to May 2021.

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Alongside this, concerns around the rising cost-of-living have also prompted seven in 10 Brits to be more selective about the subscription services they use. Over a third (36 per cent) of consumers say they’ve cancelled at least one subscription because their disposable income has fallen as interest rates and inflation increase, with 31 per cent citing higher prices as a reason why.

On average, Brits have cancelled two agreements each, with entertainment platforms (17 per cent) and beauty and grooming kits (nine per cent) among the categories most likely to have been cut back on. The number of households signed up to subscriptions has dipped by 14 per cent points in a year, from 81 per cent to 67 per cent.

The Barclaycard Payments’ research does show, however, that the appeal of sign-up products and services remains strong, despite economic uncertainty. Almost four in 10 (38 per cent) believe subscriptions offer good value for money and 34 per cent say they help them manage their finances at a time of rising costs. Convenience (42 per cent), reassurance that key products will be regularly delivered (42 per cent), and the ability to try new items, which they may not normally purchase (55 per cent), were also cited as key benefits.

Businesses remain bullish about the future of subscriptions

Many businesses made sizeable investments during the pandemic to increase their subscription offering, and despite inflationary pressures, the majority remain confident in the returns they expect to see. Seven in 10 (69 per cent) forecast the subscription economy will continue to grow and nearly two thirds (64 per cent) will offer sign-up products and services for the foreseeable future. Of those planning to launch a subscription offering, a quarter (25 per cent) expect to do so in the next six months and 42 per cent in the next year.

Subscriptions remain high on the business agenda

While over half (51 per cent) of subscription providers are planning to cut prices on their subscription products, almost as many (47 per cent) intend to increase prices due to soaring inflation and supplier costs. Three in five (61 per cent) plan to launch lower cost subscription products and services to give customers more choice, and two thirds (65 per cent) will do this in time for key retail moments, such as Black Friday.

To encourage more customers to sign up to subscription services, over half of businesses (54 per cent) stated they provide free delivery on products, while almost seven in 10 (67 per cent) offer discounts. Some retailers (18 per cent) also have plans to offer subscription customers a bespoke loyalty programme, in a bid to increase value for money.

Subscribers value convenience despite cost concerns

The Barclaycard Payments report also shows many Brits continue to prioritise the products and services they obtain digitally or direct to their front door. Three fifths (59 per cent) say they use subscriptions because they provide exclusive access to content and over half (54 per cent) believe they save them time. Meanwhile, two in five (45 per cent) believe subscriptions offer a personalised experience and almost two fifths (37 per cent) state subscriptions help them to organise their life.

When asked what would make them more likely to sign up to subscriptions in the future, Brits chose good value (38 per cent – up from 33 per cent in 2021), a free trial (32 per cent – up from 29 per cent), free delivery (27 per cent – consistent with 2021) and flexible contracts (21 per cent – up from 18 per cent) as the most appealing features retailers can offer. Over four in 10 (42 per cent) also believe subscriptions make great gifts, with 38 per cent expressing an intent to purchase a subscription for their friends or family.

Changing consumer preferences

While many consumers report seeing value from their subscriptions, others are cutting back on the number they are signed-up to. This is primarily due to the rising cost-of-living, but also reflects that Brits are spending less time at home, streaming their favourite boxsets and movies on demand, as the country has opened up again.

A three-year review of popular subscriptions

Category

2022

2021

2020

Entertainment (e.g. music and film)

30 per cent

46 per cent

48 per cent

Beauty and grooming

8 per cent

12 per cent

7 per cent

Books and literature

6 per cent

11 per cent

6 per cent

Alcoholic drinks

6 per cent

9 per cent

6 per cent

Cleaning products

6 per cent

8 per cent

4 per cent

Health

6 per cent

11 per cent

7 per cent

Technology

5 per cent

14 per cent

9 per cent

Fitness

4 per cent

11 per cent

6 per cent

Pet food and supplies

4 per cent

11 per cent

4 per cent

Arts and crafts

3 per cent

7 per cent

5 per cent

Kirsty Morris, Managing Director, Barclaycard Payments, said: “Subscriptions saw huge growth during the pandemic as Brits spent most of their time at home, so it was inevitable this would steady as the economy opened back up. Yet, as the rising cost of living continues to squeeze finances, many consumers are re-evaluating their discretionary spending and cutting back on some products and services they no longer deem essential.

“It remains clear however, that consumers still value the ease, convenience and often additional extras they can access through subscriptions; whether that be through digital services, or products delivered regularly to their door. Many retailers adapted quickly during the pandemic to meet changing demands, and those which continue to evolve their subscription offering to respond to this new set of challenges will be best placed to benefit from increased consumer loyalty and satisfaction.”

Barclaycard Payments offers businesses a range of payment technologies to meet changing consumer demands, including solutions to seamlessly process subscription payments, along with offering exclusive subscriptions to customers which banks with Barclays. To find out more visit: https://www.barclaycard.co.uk/business/accepting-payments

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