Australia’s lockdown and social distancing has been a boon for the subscriptions economy. Streaming services, e-learning, video conferencing have seen growth during COVID-19, but other businesses are finding resilience and adapting their models to tap into the subscription economy. Ecommerce giants like Amazon are doubling down on what made them great: convenience. To take this further, they introduced the Prime Model that enabled them to charge a recurring fee for free delivery. This delighted customers, while growing a new revenue stream.

The popularity of subscription services isn’t new. Blockbuster was a type of subscription business. However, it was centred on just a handful of industries. Today businesses in almost all sectors have been turning to subscription models over the past few years due to the value in extending the customer relationship outside of one-time purchases. From luxury items like dresses to commodities like razors to meal delivery kits, consumers are now accessing goods, all for a monthly fee.

The subscription model has seen significant increases in interest since the COVID-19 took a hold of the retail industry. According to Zuora’s latest Subscription Impact Report, just under a quarter of companies (22.5%) are seeing subscriber acquisition rates accelerate during the pandemic, at a rate far quicker than pre-COVID.

The landscape of the subscription category is rapidly shifting and the proliferation of subscription models is on the up, and it’s not only due to the current pandemic or the rise of ecommerce. Streaming services like Netflix and Spotify in the B2C space, and the likes of Slack, Zoom, Atlassian in B2B, have pushed subscriptions past an industry fad and into becoming an industry onto itself that is very likely to continue to grow.

Gartner estimates that by 2023, three-quarters of all companies selling products direct to customers will offer subscriptions to those products as part of their sales strategy.

Subscription businesses are proving to be resilient in the current climate, and here’s why.

Recurring revenue

Businesses in every industry are looking for ways to transition from one-time transactions to ongoing customer relationships based on the premise of continuous value delivery. However, during economic cycles and a time when customers are changing their purchasing patterns, that regular revenue may be hard to achieve.

Besides attracting and retaining customers, there’s a significant advantage for subscription companies: ongoing, predictable revenue. Instead of a one-time payment, subscription businesses can ensure their cash flow is reliable by collecting ongoing fees (whether it be weekly, monthly or annually) before sending out the product or service. Ultimately, new payment vehicles from recurring transactions to the subscription economy are changing the ways we buy and sell and helping businesses to get paid faster.

Keeping your customers close

Companies across all industries are shifting how they’re building relationships with customers. That age-old business mantra – customer is king – has never reigned more true. Businesses are looking for ways to stop these transactional relationships and instead curate enduring relationships built on continuous value. Subscription models are playing a big role in this shift.

Customers today expect an end-to-end shopping “experience” and this is where subscriptions have a chance to shine by developing long term relationships with consumers. It’s a win-win. With a subscription model, businesses gain an ongoing interaction with customers — creating opportunities to add value by offering new services, new products, helpful content and to ultimately build brand loyalty.

Moving to a subscription model is also a  great way to retain customers and stay flexible amid uncertainty. Part of the value businesses have found in subscription models is the ability to adjust quickly to the business climate in ways that allow them to work with customers.

Australian wine subscription startup and Stripe Billing user, Good Pair Days, is an example of a business doing just this. Since the beginning of the pandemic, the team have listened to their customers, offering flexible subscription cancellation options and helpful content around social-distancing friendly deliveries.

To give platforms more control over the end-customer experience, we introduced a new customer portal for Stripe Billing. By giving customers more control over their subscriptions and more options to pay with international bank debits, platforms can use Stripe’s infrastructure both to improve their end-customers’ experience and increase their own bottom line.

The new norm, what’s next?

The businesses that will thrive during these times of unrest are those that are the most adaptive. Now is the time to continue to innovate and provide new value to meet today’s new and evolving demands. For those who are struggling and may not have a subscription aspect to their business, now is the time to seriously consider shifting to a recurring revenue business model.

Mac Wang is head of Australia and New Zealand at Stripe