Subscription-based businesses, which offer the use of multiple products and services for a set price over a fixed period of time, are on the rise. The kind of consumerism that places emphasis on experiences, without worrying about possessing an actual object, is also becoming more popular.
With subscription services involving home appliances or automobiles appearing one after another, businesses using the model now go beyond digitally based areas like movies or music. Amid all this, there have also been companies that have decided to abandon this business model, and there are issues that need to be addressed to keep subscription services running smoothly.
The word "subscription" originally described the regular purchase of and payment for things like magazines. A subscription makes even products with high price tags easily accessible for consumers, and it also offers the benefit of charges not increasing beyond what was anticipated. Meanwhile, subscriptions offer companies not only the benefit of selling goods, but also the prospect of stable revenues thanks to ongoing relationships with customers.
Sony Corp.'s pet dog robot, aibo, is one such example. In addition to the actual product, which costs approximately 200,000 yen (1,800 dollars), monthly costs of 2,980 yen (excluding tax) are also involved for "rearing" the electronic pet. Aibo is equipped with artificial intelligence and grows through software updates and information that the robot is exposed to. This is why Sony asks aibo users to pay a regular fee.
Even the PlayStation brand boosts revenues for Sony through such services, thanks to the presence of approximately 36 million subscribers. Subscription-related sales in the game business for fiscal 2017 were in the range of 270 billion yen, an increase of 40 percent over the previous year's sales.
Toyota Motor Corp. also began offering subscription services in February for luxury brand cars such as Lexus. Shinya Kotera, president of the operating company KINTO Corp., which has investment from companies including Toyota subsidiaries, said, "We are able to stimulate demand by increasing the number of fans among consumers such as young people who had given up on the idea of buying a new car."
The subscription service that Kirin Brewery Co. launched in June 2017 is running smoothly. Members can enjoy having beer in household server units delivered directly to their doorstep from the factory. Currently, almost 10,000 people have signed up for the service, and those who apply now may have to wait until next year.
Subscription services are nothing new in and of themselves, having been in existence since the introduction of gym memberships and others. They have gained much attention since around 2015, when movie and music distribution services such as the U.S. companies Netflix Inc. and Apple Inc. started operating in Japan. With changes in consumption habits -- including the spread of smartphones and the shift from outright ownership to monthly payments -- the adoption of subscription services has become more widespread in a range of industries, including fashion and eating out.
There are also times when subscription services do not go so well, however. The suit service that leading menswear company AOKI Inc. started last April folded in about six months. With the increase in the number of users, "costs [for inventory management and maintenance] mounted much further than had been anticipated," a spokesperson for the company said. The U.S. company General Motors Co. has also shut down the subscription service it started in 2017 for luxury cars in the United States.
As Prof. Masanao Kawakami of the University of Hyogo, business administration, pointed out, "While there are companies who limit their billing method to subscriptions, services that do not satisfy customers by updating their services in line with user needs and continually build their relationship with customers are going to fall prey to natural selection."
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