Subscription demand dips but Christmas hints at recovery.

Subscription demand dips but Christmas hints at recovery.

Subscriptions were all the rage during the pandemic but the demand for such recurring-revenue products in these current tough economic times has fallen back with meal kits and drinks boxes suffering particularly badly.


Over a third (35%) of UK consumers are now using fewer subscription services than during the pandemic, with only 17% using them more, according to research from Virgin Media O2, which also found the retreat from subscriptions is most notable in London where 48% of people have cut back on their usage. 


Among those people surveyed, meal kit subscriptions were used by only 10% in the last two months compared with 13% during Covid-19 and wine and beverage subscriptions are now used by 8% of people versus 10%. There has also been a decline in the number of people using fitness and wellbeing subscriptions, with a fall from 12% to 10%.   


The performance of meal kit business Gousto is indicative of the changing state of the subscription marketplace. Revenues declined by £10 million in the year to end-December 2022 as losses increased to nearly £160 million. 


The company suggested the decline in its figures was down to the cost-of-living crisis and the return of consumers to restaurants when the markets opened up after Covid-19. Gousto has stated that a reset of its cost base will enable it to return to profitability in 2023 when it forecasts it will deliver underlying trading profits of £20 million.


As shown with Gousto, rising costs are having a profound impact on the subscriptions market. For 48% of people the cutback in subscriptions is down to cost considerations, which is followed by 33% citing less free time and 30% said it was down to them returning to a normal routine post-pandemic.


Bucking the trend in subscription usage are streaming services such as Netflix, which now have 50% of people signed up as users compared with 48% during Covid-19. Music and podcast subscriptions have also fared well with users increasing from 18% to 20%. 


Also proving particularly robust is fresh petfood subscription service Butternut Box that has recently raised £280 million to add to its previous £100 million fundraising and which is understood to give it a valuation of over £500 million. The funding will help the DTC (direct to consumer) business to further build-out its European expansion programme. This will see it reinforce its position as Europe’s largest fresh dogfood brand with operations in the UK, Ireland, Netherlands, Belgium and Poland. 


Other forms of subscriptions might also enjoy something of a fillip as a result of demand at Christmas, according to research from Recurly, which found 38% of consumers in the UK expressed an interest in giving a gift subscription this Christmas and 24% of people stated they had previously received subscriptions as a gift. The average person stated they are willing to spend a maximum of £75.


It is the food and drink subscriptions that are most likely to benefit from this gift-giving as the likes of Beer52, Candy Club and Naked Wines are cited by 32% of respondents as among the most popular subscription options to receive as gifts. This is followed by 26% of people preferring health & fitness subscriptions and 23% going for streaming video services.


Another positive factor for subscriptions is the survey’s finding that 63% of people would consider continuing with their service after the gift period has ended.