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12/16/2020

Life as a subscription

Max Askwith
0 min read

Socioeconomic and environmental macro trends are driving change in the nature of ownership. From the disparity between rising house prices and stagnant wages to the environmental impact of their consumption, the so-called Generation Rent is growing more conscious about how their choices Influence every aspect of Iife. According to research by IBM, nearly six in ten consumers are willing to change their shopping habits to reduce environmental impact, and about seven out of ten Gen Z and Millennials declare they have rented or want to rent products instead of purchasing.

For a long time, only wine and spirits makers could credibly claim that the older their products get, the better they become. However, the emergence of technology and software updates has created a new model: the perpetual product upgrade. Today, Apple WWDC and Google I/O annual conferences resonate far beyond their original audience of developers and have turned into true cultural tentpoles. As firmware evolve, connected devices can and are increasingly expected to improve over the course of their lifecycles. Updates present multiple benefits for users. They provide new features and enhanced security without requiring a new device. They also increase the perceived value of products that consumers have already purchased; rather than depreciating, devices actually get better over time. Yet, this approach has limits when brands stop supporting older models, and it can even drive consumer backlash, for instance, when brands brick devices through updates (i.e., making them unusable).

Subscription as a Service is progressively becoming a new norm. Subscription-based models and on-demand renting solutions now encompass a wide range of product categories. Luxury is no exception. Platforms such as Front Row enable customers to rent pieces designed by the most prestigious fashion houses for a few days. As a result, consumers can change their clothing more frequently without paying the full purchase price, and brands can reach new audiences of potential buyers once familiarised with the products. Additionally, as almost eight out of ten Gen Z and Millennials now declare they have purchased or want to purchase pre-owned, repaired, or renewed products, more retailers are exploring new forms of ownership that encourage refurbishment and recycling. For example, in line with its circular economy ambition, IKEA aims to develop subscription-based leasing offers for furniture, through which customers may lease a piece of furniture for a while and then upgrade, with the old piece being refurbished for other users.

We also see how data sophistication is leading to innovation in the subscription model. For instance, some fashion enterprises remove the stress of the in-store fitting experience by letting customers receive a variety of products and choose which bits they like before sending back everything else. Through algorithmic curation, data from past product interactions can be used to refine the products featured in the next shipment. This increased personalisation improves the relevance of the selection, reducing waste and countering the anxiety that can result from too many options. In the backend, brands are learning to adapt their supply chains to cater to this new way of processing shipments and returns, and adopt the right commercial terms to be regularly featured in the recommendations of such services.

As technology creates more opportunities to buy from home, retail spaces need to reinvent themselves to focus on experiences and to shift their focus from single purchases to longer term subscriptions. Brands invested in brick & mortar spaces have a unique opportunity to reallocate their square footage and move from purely logistics considerations, such as storing stock, to new approaches to entice customers, such as real-world product tests, specific classes for advanced users, community events or art installations.

Economics, technology and climate change are reshaping peoples’ expectations about ownership. Consumers want affordable products and services, personalised to them, minimising waste, improving over the course of the product lifetime, and easily accessible at their doorsteps. When they venture outside their homes, consumers expect retail spaces to offer more than what they could order online in their living rooms. In order to future-proof their businesses, brands need to rethink and adapt their offerings to address this changing nature of ownership.

 

This article is excerpted from the new Vizeum report Future of Home. Download it now for key insights on the trends shaping the home revolution.

Max Askwith

Global Digital & Innovation Director

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