By all accounts, Cyber Monday was a great day for commerce in America. Prior to the all-day digital shopping festival, analysts had predicted it would surpass $9 billion. When the results were in and tabulated by Adobe, those expert predictions held, as Cyber Monday brought in $9.2 billion.
While the things bought — the AirPods, Nintendo Wiis and Baby Yoda plush toys — get most of the attention, one of the more interesting phenomena of the Cyber Monday shopping crush over the last few years is how many people are choosing to give the subscription experience instead of a one-off discrete gift, Recurly CEO Dan Burkhart told Karen Webster in a recent Cyber Monday post-mortem conversation.
According to Recurly’s 2019 Cyber Monday recap figures, Burkhart noted, there is not only big growth for subscription businesses during what is arguably the biggest eCommerce day of the year, but “strong sequential growth” each year. By the numbers, year-on-year growth for 2019’s Cyber Monday, on a site-by-site average, was 81.68 percent. This was an increase over 2018’s growth of 77.42 percent, and 2017’s growth at 72.45 percent.
Moreover, site-by-site vantage point indicates the growth is, more or less, distributed across the board at subscription businesses of all kinds, as opposed to being mainly locked up in a few Amazon-sized behemoths.
However, while the growth in the recent past has been explosive and attention-grabbing, in some sense, the move toward gifting subscriptions is not. Food, wine and various “of-the-month clubs” have been around for decades. The digital instantiation of the subscription boom, he noted, isn’t nearly as new as it might feel to some.
“I think what we are seeing now is people are more acclimated to the subscription model, and they are simply becoming a more pervasive part of people’s lives,” he said. “And really, you can credit a lot of that to Netflix, and [its] Give the Gift of Netflix campaigns that [it] started when [its] main business was sending DVDs to people in the mail. [The company] really began training people to think that giving an experience is a totally worthy gift, as opposed to a one-time physical purchase.”
In fact, he noted, in a sense, a subscription is a gift that keeps on giving to a consumer year-round, and that idea has begun to resonate with customers, and change the way they think about products and services. In addition, it’s changing the way they purchase and pay for them, particularly during the holiday season, he said.
Redefining The Gift-Giving (And Getting) Experience
When Recurly looks at those strong sequential growth numbers, Burkhart noted, that data may not quite be what it appears. When one is looking at year-over-year end points, it is possible that what they are seeing on Cyber Monday is just a reflection of incremental growth in process — nothing particularly special about the season. That’s why, when Recurly reviewed the data, it also looked at performance in the week leading up to the big event to get an idea of the baseline traffic.
The results, he noted, were undeniable. Compared to an average day during the study period, Total Payment Volume (TPV) on Cyber Monday was 55.22 percent higher.
“We see the sales are absolutely spiking on Cyber Monday,” Burkhart said. “What that tells us is that subscription merchants are really figuring out how to take advantage of the shopping moment, and create that demand through better marketing promotional offers, virality and tapping into their existing subscriber base[s].”
What those moves look like vary greatly by the subscription service itself. Gift cards have been a particularly powerful player as the subscription-gifting economy has grown up — because they are an easy way to transfer the funds to pay off a subscription instantly and digitally (i.e. a Netflix account), without having to necessarily know a lot of personal details about the person getting the gift. Plus, gift cards are easy ways for merchants to make value-added offers or build in freebies — one popular variation is a $100 gift card for one year’s service that can be purchased at a discount rate of $90.
Furthermore, he observed, what people are buying on subscription is changing. This year, the top-three categories Recurly noted are both surprising and not. On the “not” end of things was the top spot, owned by digital media streaming services. The silver-medal finisher (also not terribly surprising) was the wide gamut of box-of-the-month clubs — delivering beer, wine, books, chocolate, pet supplies, beauty products and a host of other things to consumers’ doors, starting in January.
However, the number-three spot is surprising.
“Education was actually the number-three category: online courses, learning how to cook, learning how to code. What we’ve seen is a big buying push when it comes to subscribing to learning skills, or investing in professional development,” he said.
So, a Merry Christmas and highly educated New Year is already on the way — or maybe it’s already here.
However, what’s being bought isn’t the only thing changing. How consumers are paying is shifting as well.
An Alternative Payments Christmas
Among the surprising data that Recurly has seen rise this year is how many consumers are thinking beyond the card when it comes to footing the bill.
“Not only did we see the growth this year, we also noted an impressive amount of it was flowing through the alternative rails,” Burkhart said.
All in, alternative payment method TPV experienced an 89.87 percent growth over the entire study period when compared to 2018. Among what Burkhart called the three best-known players at that part (PayPal, Amazon Pay and Apple Pay), PayPal was far and away the strongest player with the biggest growth. That is unsurprising, Burkhart and Webster both noted, given that — of the three — PayPal is easily the most-widely adopted by merchants across the web, and the most-easily accessed.
He also noted — initially, with some alarm — that the average transaction size on Cyber Monday was $23.97 for subscription merchants, versus the roughly $130 average reported for general commerce merchants.
“At first, it made me, [of] course, ask myself [why the] average order value for subsections [is] so much lower. But then, it hit me: Because their cost is going to be reflected as a single monthly fee. Those bigger averages represent big-off purchases that are, more likely than not, lower margin than what we are seeing with our merchants,” he said.
Perhaps more important, a subscription purchase is, hopefully, the beginning of a relationship with a new customer, not an end. Cyber Monday saw new subscriber rates surge 30 percent — as people are buying subscriptions as gifts for others or taking advantage of deals to get themselves signed up.
Not all of those customers will stay. In fact, depending on the service, as much as two-thirds will churn out. However, one-third of those customers will stay, he noted, making those services profitable. Those customers may even become the type of customers who want to give the gift of the subscription experience to someone else as well.
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