How to keep the subscription economy from slowly emptying your wallet
The pandemic accelerated the rise of subscriptions for things like grocery delivery to digital workouts, taking up a bigger share of our budgets.
Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about oureditorial standards
and how we make money.
Subscriptions are now a part of so many things we do. Working out. Buying groceries, or toilet paper. Going to the doctor’s office. These days, it seems like you can access just about anything, as long as you pay a recurring monthly fee.
Streaming subscriptions like Netflix and Spotify have been popular for years. Direct-to-consumer box services, for necessities like coffee and paper towels to niche products like bagels and whiskey, had been steadily growing in popularity. But thanks to the pandemic, they’ve taken off, occupying a bigger share of Americans’ wallets.
As consumers spent more time indoors and shopping online, businesses pivoted to offering digital subscriptions for activities from gaming to meditating to working out. Individual creators began offering their content for a monthly fee through platforms like Patreon, Substack and OnlyFans. The market for the “subscription economy” is expected to more than double in size to $1.5 trillion by 2025, according to research from UBS.
So why are subscriptions everywhere? And can you avoid subscribing your life (and wallet) away? Here’s what you need to know.
Recession-proof your money. Get the free ebook.
Get the all-new ebook from Easy Money by Policygenius: 50 money moves to make in a recession.
Subscriptions give companies recurring and regular revenue. The model also makes it easier to build long-term relationships with customers and gain more data and consumer insights over time, said Amy Konary, chair at The Subscribed Institute, a think tank backed by subscription management company Zuora .
“Before, transactions were very one-off,” said Konary. “Businesses didn’t know anything about the customer. There was no data. There were no future opportunities to really monetize the relationship. Now it’s all about relationships. You can offer a more personalized service, you can continue that conversation.”
Some subscriptions behave more like rentals, like furniture start-up Feather, which lets you temporarily keep furniture for a monthly fee far below its retail cost. Or Rent the Runway, which lets you borrow designer clothing. Other subscriptions act more like utilities, such as the ubiquitous Amazon Prime, or Instacart, which picks and delivers groceries right to your door for a monthly (or weekly) cost.
Other subscriptions appeal to our emotions, said Konary. This includes subscriptions for products like cosmetics, dog food and plants. While you could go to your neighborhood retailer and pick up these products, subscription services make it possible to curate a selection of products based on your preferences, which makes the purchase feel more special, she said.
One of the major downsides to subscriptions is price. For some subscriptions, you may be paying extra for convenience. In other cases, avoiding an upfront cost may have you paying more in the long run. Take an expensive item like a sofa. The ability to pay a smaller, regular fee and ditch the sofa whenever you’re done with it may be cheaper than spending hundreds of dollars upfront. But if you rent the item for years, you may end up paying more in the long run.
Plus, much like renting an apartment instead of buying a house, when you subscribe to a physical item, you won’t end up owning it and you can’t sell it.
While many subscription prices seem innocuous, costing less than $20 a month, those charges can add up. Individuals spent an average $640 a year on digital subscriptions, streaming services, cloud storage, dating apps and online productivity tools, according to a report from the New York Times and Mint.
“In many cases you’re just adding more onto what you would already be spending,” said Lauren Greutman, a budget coach and consumer savings expert. “For example, if a grocery subscription was replacing your entire grocery bill, then that’s one thing. But most of the time, you’re going to the store as well as getting that box in the mail.”
Begin by identifying how many subscriptions you’re signed up for and what they’re costing. If you have many different subscriptions, it can be difficult to keep track of them all. Apps like Trubill or Outflow can help automatically track recurring purchases and help you cancel or, in some cases, negotiate lower costs.
“People can get really numb to the cost,” said Rob Bertman, certified financial planner and founder of the Family Budget Expert. “It’s about making conscious decisions and taking a closer look at where your money is going. There are definitely things you can’t live or move through life without. But a lot of the other stuff you probably could. Really consider the value.”
Determine how much you use each subscription and if its use is worth the cost, he said. If you signed up for a free trial, set up a cancellation reminder to avoid being charged. If you are having difficulty cancelling your subscription or beleive you’re being scrammed by a company, here are some options for recourse.
“The best part about subscriptions, is that you can always go back,” Bertman said.
Image: d3sign / Getty Images
Get essential money news & money moves with the Easy Money newsletter.
Free in your inbox each Friday.