There is no doubt that the subscription economy has seen rapid growth. There has also been hope that this form of business will encourage a shift away from take-make-dispose consumption, and towards a more circular, sustainable model.
Looking again at this trend during a pandemic, we ask whether the impact of Covid-19 has accelerated the shift to subscription-based services. And if so, are we reaping the sustainability benefits?
The subscription model
What is a subscription-based service? Rather than a one-time purchase of a product, a customer subscribes to access to a product or service over a period of time. This might be a regular vegetable box, children’s science kit, or subscription to media services, such as Netflix and Amazon Prime Video.
The upside for the customer, is the convenience of regular delivery and automated payments, as well as personalisation. To the business, it means a better forecast of revenues, reliable client data and better consumer engagement.
But how has this model been affected by the Covid-19 pandemic?
The pandemic’s impact on the subscription model
The Covid-19 pandemic has, in a short time, changed people’s habits – whether it be shopping, working, eating or socialising. All the evidence suggests that these changes have not only accelerated the shift towards e-commerce and online shopping, but for many consumers, pushed them towards subscription-based purchasing, perhaps for the first time. Recent surveys show that one in five UK homes signed up for a new video streaming subscription during Covid-19 lockdown, and similarly one in five Americans had purchased a retail subscription box. According to some sources, e-commerce sales during Covid-19 are up 25%, with one report showing that four of five subscriptions companies are still growing, despite the economic impact of the global pandemic.
Does this growth translate into sustainability benefits?
The subscription-based model is theoretically supposed to be good for the planet, as we transition from an ownership model to a sharing-based one, maximising resource efficiency and minimising waste. But how far is the growth in subscription-based services delivering on the sustainability promise?
A recent UN Environment Programme (UNEP) study argues that most subscription services are not delivering on sustainability. There are unseen environmental costs, such as excess packaging, costly returns ending up in landfill and the potential to encourage overconsumption.
But when it works well, this model can result in waste reduction, more carbon-efficient direct-to-door delivery, and a wider range of environmentally friendly alternatives (such as vegan and plastic-free), that you won’t find on the high street.
And despite the growth of subscription-based models, real sustainability-focused offers have not proliferated.
A few examples offer some hope. Ikea is trialling the renting of furniture, in what it believes could lead to a new way of customers owning products. The Los Angeles-based Joymode provides access to low-utilisation items (such as camping gear); Ford GoBike offers a bike-sharing system featuring thousands of bike options; and Rent the Runway offers rental of day-to-day clothing, reducing the number of clothes purchased. There are also several fruit and veg delivery boxes, such as OddBox and Wonky Vegetables, who have capitalised on “imperfect” produce heading for landfill, therefore reducing food waste and offering an affordable, healthy food service.
Yet these remain a few outliers. There is a huge opportunity for businesses to do more.
The disruptive impact of the pandemic, gives business space to explore new business models. When we look at this again in 2021, a new generation of sustainability-led subscription models may have emerged.
Rupali Patni, Associate Director, EMEA
Janaina Stewart-Richardson, Sustainability Consultant, EMEA