VMLY&R's Amandeep Singh on subscription as a service in India in 2020

Guest Column: Amandeep Singh, Business Director, VMLY&R India, talks about the growth of the subscription economy in 2019 and prediction for new launches in 2020

e4m by Amandeep Singh
Updated: Dec 3, 2019 3:26 PM


Subscription business model

As you read this article, think about the subscriptions in your everyday life. They can be in the form of the newspaper you receive each day or Netflix account you binge-watch, or milk coupons you redeem. Chances are, you have at least one from the list. The subscription business is reported to have grown more than 300% over the last 7 years. The Indian consumer is spoiled with choices in the shift of paying for outcomes, convenience, and shared economy, in all segments from mobility, living and food & beverages, to fashion & beauty or entertainment.

Subscription as a concept is misunderstood in our country by consumers as well as many business owners, who classify it as either a box or rental. However, at the heart of subscription lies Customer Centricity. It is all about putting consumers right in the center and creating a personalized experience for them enabled by technology.

Traditional business models are built upside down - one product is served to all customers through various channels, whereas the subscription model puts the customer at the center and works outward to provide a unique experience across multiple touchpoints, which are enabled and enhanced by layers of technology. In addition, real-time feedback gives the brand insights which can be used to constantly evolve the experience and customize it further.

Switching to a subscription model needs change on measurements and financials for a company. What makes the subscription model lucrative for businesses is the shift to “recurring revenue models” as compared to one-time revenue or unit sales. The key metrics of this model are MRR (monthly recurring revenue), ARPU (average revenue per user), retention, churn rate and more. For instance, a company worth 100 crores with 60% recurring revenue can count on 60 crores of revenue beginning of every year, making the business much more stable and predictable.

In India, big traditional companies are showing resistance towards the subscription model, but the success of new-age startups is forcing them to re-think their strategy. India is ripe and growing market with huge opportunities for subscription-based models. The evidence is right here – the number of companies launching subscription-based services, the increasing size of the market, traditional companies starting their own D2C small teams, which are working on agile and customer-centric mindset. No wonder these teams consist of experienced professionals from young subscription-based brands, entrepreneurs and e-commerce companies.

The market size for subscription business in India is reported to be around Rs 1200 crore for 2017-18, but it would have grown much more by the end of 2019. In India today, we have Zoomcar, Furlenco, Netflix, Amazon, Blue Tokai and Butt talks (yes your underwear can be subscribed as a service too). It is just a sample of the growing list of brands creating more convenience for their consumers and the trend is expected to continue.

For me, the subscription model which stood out in 2019 was Livepure Smart. The company provides RO water on a subscription model. Traditionally for drinking water, either one has to spend the substantial one-time cost of buying an RO (INR 8000 to 40,000) or to get packaged water jars, thus leading to the addition of cost over the years. With the Livepure model, the above pain points are resolved and the customer pays for the usage only. All you have to do is choose a plan depending on the number of household members and pay a small amount (INR 300 onwards).

I have been a big advocate for my clients to start switching to subscription models. For 2020, here is a list of brands I would like to see launching subscription services in India.

  • Air Travel Subscription

I would like to see Indigo launch a subscription service for its customers. You can pay a fixed monthly fee and take as many flights as you can. The subscribers would be able to see the seat availability up to 4 hours before the flight and book their next flight on the domestic network.

  • Agriculture Subscription

A lot has been happening in agriculture with startups and government initiatives. We already have “Uber for tractors” models like Trringo, which provide tractor and farm mechanization services in India, as well as many other services across the value chain, from input to output to market access and logistics. 2020 should bring the rise of a bigger ecosystem which works with farmers as the central focus and end consumer, providing them information and marketing intelligence as well as seeds, fertilizers, farm mechanization, and irrigation as subscription service.

  • Alcohol Subscription

This is a category that is heavily regulated, but I would really like to see the launch of a wine or beer subscription service in India. These exist elsewhere, such as the New York Times Wine Club and Winc, and with the alcohol retail market in India valued at approx. $35bn which is the third-largest in the world, I believe these could flourish.

Wine is a category that needs education and evolution of consumers and what better way than a subscription model. You would get a box of wines every month with an app educating you and getting your feedback. Backed by Artificial Intelligence and Machine Learning – it will turn you into a true wine connoisseur. With a 65% market share, Sula should take a lead on this.

  • Healthy Family Breakfast Subscription

This is an interesting space for an FMCG player like Marico or Nestle. Breakfast is the most important meal of the day and the challenge is always to make it tasty, interesting and healthy at the same time. Instead of buying all the ingredients or products separately – why not receive it as a subscription – Oats, Muesli, Dosa batter, Idli mix, poha, and juices? A mobile app that sets up a weekly menu, interesting recipes, and nutrition information. Imagine the experience and delight which can be added apart from convenience for Indian families.

  • Sound System and Speakers

Sonos is already experimenting with this in the Netherlands. I would like to see JBL launch plan in India in 2020. It would be a 3-tiered plan which will give you a set of speakers. The consumer can choose a plan, get new versions during updates for free and so on. 

  • Kitchen Appliances

Whirlpool has been doing some interesting work by launching subscription services in Ovens and washing machines. Their smart ovens are integrated with a popular recipe app which helps you find recipe, organize grocery shopping, streamline cooking preparation and sync up all temperature and cooking settings We should also see a similar launch where the companies stop selling boxes which cook food or spin water to wash clothes but offer services to cook gourmet food. With connected devices and IoT – the possibilities are endless. Apart from Whirlpool itself, Philips or Panasonic could launch this in India.

There is no end to what subscription services can offer in India, where consumers are varied and are beginning to expect unique experiences that cater to their needs. With the country trending towards more digital adoption, I expect to see a rise in not only physical subscription services but also new-tech enabled options where AI is used to enhance everyday experiences.

Disclaimer: The views expressed here are solely those of the author and do not in any way represent the views of exchange4media.com

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