Subscription services have boomed in the last few years, reaching across industries and even providing niche products and services to their customers. Brands like Stitch Fix and Rent the Runway provide personalized and high-end fashion, while Birchbox and Ipsy provide skincare and beauty supplies. Hello Fresh and Freshly provide healthy and gourmet meals that are easy to prepare, and Netflix and Hulu put a lock on entertainment. Dollar Shave Club and Harry’s have even cornered a particularly niche market: razors. The list goes on, and Millennials spearhead the shift toward this kind of product as a service model. (For example, 70% of those 18 to 29 use a streaming video service, 6 points higher than those who pay for traditional TV.)
There’s a host of reasons behind this trend, although perhaps the core reason for why Millennials are obsessed with subscription services can be traced back to their financial position. Namely, the average 20-year-old Millennial’s income is higher than previous generations at the same age — in fact, their disposable income is a third higher — but they have far lower wealth than previous generations did at the same age. This has impacted whether they decide to own a home or even a car, but we’ll take a closer look at five reasons why this increases their interest in subscription services.
Why Millennials Love Subscription Services
Access over Ownership
Nearly 60% of Millennials would prefer to rent a home than buy one, and this is just the tip of the iceberg for an entire shift in perspective. Millennials are also leading proponents of the share-economy (e.g., Uber) and a return to trading. Again, this is due in part to their financial position, which created a generation that actually cares less about ownership. Most approach meeting needs and desires in a non-centralized way and prefer to have access to whatever type of product or service they want that’s within their means, rather than be tied to one purchase.
An outflow of our last point is connectivity. More than 70% of Millennials want to be connected to a service across all devices, giving them access to that service at any time. As we mentioned, Millennials are cord cutters, and part of that can be attributed to the fact that streaming services are easily available across any device they feel like using, from smartphones (39%) to laptops (58%) and even to their gaming consoles (22%).
Desire for Efficiency
Connectivity has generated a new desire, that is, efficiency on demand. This kind of desire has led to other generations labeling Millennials as selfish and entitled (71% and 65%, respectively, according to one poll). But the truth is, subscription services are more suited to the way they perceive their needs and the associated solutions. They need to spend their dollars wisely, and that means only spending on what suits them best.
We already mentioned the unique imbalance of income and wealth for Millennials compared to previous generations of the same age, but it’s important to contextualize that. According to Forbes, 61% of Millennials admitted that they couldn’t afford a house. This inability to leverage wealth for traditional major purchases means they approach how they spend differently. Subscription services allow Millennials to spread payments out without going further into debt, as well as start and stop a service whenever they need to, and some even allow customers to skip a month without completely canceling the subscription.
No Strings Attached
That pricing and model have made it easier for Millennials to avoid commitment. Some attribute this to Millennial’s incredible fear of missing out, since subscription services make it convenient to try out a service without being tied down to a product permanently. This applies to more than just the financial aspect, though — Millennials want brands that foster a relationship more akin to a friendship. That is to say, they want dependable information and personalized marketing and contact — a study from comScore and YouTube shows 47% of Millennials pay more attention when viewing personalized ads. Most subscription services are highly customized; brands like Stitch Fix have made it core to their business model.
The emphasis on accessibility rather than ownership, brand relationships, affordable pricing, cross-device availability, and efficient delivery reflect their unique position as powerful spenders with limited wealth. These are five of the biggest reasons why Millennials are obsessed with subscription services, and it illuminates a lot about how brands ought to be reaching out to this spending group.