Corporate treasury needs to be aware of general trends in payment usage and how they could affect their cashflows and working capital management. One trend that could have a signficiant impact on cash flows is the use of subscription/recurring payments to replace one off payments/purchases. Over the last 2-3 years there have been several studies of the impact of subscription payment systems. An important one was the McKinsey study on subscription e-commerce trends, see, which concluded that the subscription e-commerce market has plenty of room to grow as more consumers become aware of it.
New ING study
ING Economics Department have just published a new report: “Now that we subscribe to music, are tools and toiletries next?” (Based on a study of 11,000 Europeans were questioned about the subscription economy: 1,000 respondents in 11 countries, representative for their populations. In addition, 12 experts were interviewed about their knowledge and experience of offering goods subscriptions to consumers. ) The study found that overall:
- Europeans households spend a monthly average of €130 on all subscriptions; market size EUR350bn; which represents only 5% of total EU household consumption
- Subscriptions to tangible goods only account for about € 80 billion in total
- Younger age groups and Eastern and Southern Europeans are most eager to take on more tangible goods subscriptions
- In durable goods subscriptions, Europeans value accessibility to a modern product while avoiding repair risk
- In consumable subscriptions, Europeans value the convenience of home delivery and reducing the ‘out of stock’ risk
- For tangible goods subscriptions the outlook is not as bright as for information goods subscriptions, although there are four important ways to promote the use of recurring payments for tangible goods.
Why “Recurring revenue is the golden goose for business”
Probably the most important chart in the report explains why businesses start using subscription payments:
Source & Copyright©2018 - ING Economics Department
The report then examines:
- How consumers look at added value and price
- Why consumers subscribe to durable goods and how to create success in durable goods subscription + Four case studies
- Why consumers subscribe to consumable goods and how subscriptions help consumers solve ‘issues’
- Creating success in consumables subscriptions and four case studies.
CTMfile take: This is an important analysis of the dynamics of the consumer subscription market and contains practical examples of how to free the golden goose in recurring payments. Well worth studying to see how your company could unlock your potential in the subscription market.
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