The Subscription Economy and the End of Ownership

Things people used to buy can now be rented, sometimes at a huge economic advantage.

In the not too distant past, owning a lot of stuff was seen as a status symbol. If you could afford a houseful of goods, the reasoning went, then you were doing well—and everyone could see it.

Today, however, the needle has shifted. People still want to have things, but they aren’t so concerned about owning them, per se. As Vala Ashfar of ZDNet puts it, “People aren't as interested in filling their homes with physical goods anymore. They don't want to deal with upfront costs, the hassles of maintenance, and the frustration of obsolescence. Why buy and own something if there is an easier way to get the same or even better outcome?”

This changing viewpoint has come about in part thanks to what is termed the “subscription economy.” This term refers to the new economic reality that things once obtainable only by ownership can now be rented, sometimes at a huge economic advantage. Perhaps the prime example is music. Just a few years ago, people had to purchase CDs at a cost of $15 to $20 each if they wanted to enjoy their favorite band’s new offering. Today, for a subscription price of about $10 per month, they can enjoy unlimited music from unlimited groups through services such as Spotify and Pandora. True, they do not own anything—but what difference does it make when they can listen to the music they love anytime, anywhere, at the push of a button?

Fueled by this change in the music industry and others, organizations of all types are trying to figure out how to take advantage of the subscription economy. Some products and services are an obvious fit for this model. Others are more of a stretch. But innovative executives are figuring out how to make the shoe fit in all sorts of unexpected industries—and they are changing the world as a result.

Executives need to understand this reality in order to compete. This knowledge can be obtained through programs such as Washington State University’s Executive Master of Business Administration Online. An online Executive MBA degree offers a high-level understanding of the current marketplace and prepares anyone interested in becoming a business executive to compete in today’s changing world.

Driving Change

What is driving the rise of the subscription economy? According to ZDNet, a recent survey of 13,000 people around the world revealed that 5 main factors are influencing the world’s changing economic reality.

  1. More than half of the people surveyed wished that they could own less stuff. Almost 6 out of 10 people (57 percent) said they didn’t want to own things—and advancements in technology and subscription services now make it possible for them to do without.
  2. A person’s status is no longer defined by what they own. Owning expensive goods used to be considered a status symbol. But today, that is no longer the case. Our social media feeds are full of pictures of the cool things we are doing, not the cool things we possess. “Experiences are the new status symbols,” says ZDNet. As a result, consumers are gravitating toward flexible services that offer better value and experiences along with fewer hassles.
  3. Subscriptions remove the burden of ownership. Today, people can subscribe to everything from food and health care to camping gear and movie tickets. They free themselves from maintenance and upkeep on all of these things. Why hassle with ownership when you can just use things whenever and however you need them?
  4. In the future, people will subscribe to more services. More and more industries around the world are adopting subscription business models, and people are ready for them. Internationally, 74 percent of adults believe that subscription models are the wave of the future.
  5. The number of subscription users is growing rapidly. Today, more than 70 percent of adults use at least 1 subscription service. 5 years ago, the figure was around 50 percent. As the subscription economy grows worldwide, so does its customer base.

Common and Not-So-Common Subscriptions

Over the past 5 to 10 years, many subscription services have become familiar to consumers around the world. Along with the previously mentioned music subscription, services like streaming TV/movies, audiobooks, digital newspapers, and even car and bike rentals have become so commonplace that they are more the norm than the exception.

Other services are not yet familiar, but companies are working to change this perception. A prime example is the clothing industry, where pre-owned, repaired, refurbished, and rented apparel is seeking to gain a foothold with consumers. This idea is extremely practical: a recent survey shows that 1 out of 3 young women consider clothing to be “old” if it has been worn once. Rental and resale clothing therefore make good sense, if companies can figure out an efficient way to make it work.

One organization that is finding a path is outdoor clothing giant Patagonia. Patagonia has pioneered a program to buy back its own lightly used clothing, repair it, and resell it at bargain prices. It is marketing this initiative as a “green” option. “The single best thing we can do for the planet is keep our gear in use longer and cut down on consumption,” the company proclaims on its website. If Patagonia can translate this philosophy into a subscription model—which it very likely can—it will open up a whole new avenue of sales with very little overhead or effort.

How to Excel

These examples are exciting and, perhaps, inspirational. But how do new players really learn to excel in the subscription economy? According to Neil Patel, cofounder of NP Digital and a top internet influencer, several strategies can contribute to a company’s success.

  1. Emphasize uniqueness and differentiating qualities. Every successful business needs to set itself apart from others. Subscription businesses must emphasize what they do differently and what they can offer that pay-per-service cannot. Examples might be product discovery (getting new and exciting items that buyers might not otherwise know about) or saving shoppers trips to the store. Let consumers know exactly how your service is unique.
  2. Emphasize convenience. Subscription services are undeniably convenient. They save people time and make products easier to find. They eliminate trips to the mall and the hassle of finding a parking spot. They allow shoppers to dodge hard-selling sales representatives. Emphasize these “pluses” to make people appreciate your model.
  3. Emphasize variety. A gaming service might allow subscribers to choose between thousands of games. A snack delivery service might send things people would never think to try on their own. A music streaming service might let listeners choose any type of music they could dream of at any moment. This type of variety is a huge benefit of the subscription model that regular stores simply cannot match.
  4. Emphasize simplicity. Some people want fresh razors or contact lenses delivered every month, without having to remember to shop or ask for them. A subscription service simplifies these everyday tasks for them.
  5. Use both pay-per-product and subscription. Yes, you can do both. Amazon is a good example. This retail behemoth offers its Amazon Prime subscription service that covers most shipping costs and some other services, while continuing to offer pay-per-item sales. This business model has proven to be hugely popular with consumers, who often order preferentially from Amazon to save on the expensive shipping fees charged by other sites.

By following these simple guidelines, companies can dip their toes into the waters of the subscription model and see how things go. With good leadership and a good plan, any business should be able to benefit from the growing subscription economy.

About WSU’s Executive Master of Business Administration Online Program

Washington State University’s Carson College of Business delivers one of the top-ranked Executive MBA programs in the nation. WSU offers an Executive MBA curriculum designed to equip students with the tactics, knowledge, skills, strategies, and other MBA resources utilized by today’s high-profile business leaders. For more information, visit WSU’s Executive MBA Online website.


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Innovation Design and Planning: Innovation Process Management for C-Suite Executives 



Basics of the subscription economy – ZDNet

Five factors driving change – ZDNet

Common and not-so-common subscriptions – Business of Fashion

How to excel – Neil Patel