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OPINION

Buying nothing at a knock-down price

Buying nothing at a knock-down price
April 5, 2018
Buying nothing at a knock-down price

We don’t know the extent to which e-commerce will dominate the retail sector 20 years from now; who knows, policy makers may eventually dream up effective antitrust legislation (or transnational tax wheezes) to thwart the likes of Amazon (US:AMZN). But you could argue that e-commerce itself is having to recalibrate to meets the needs of its key demographic – Generation Y (or ‘Generation Whine’ as some uncharitably might have it).     

Curiously, the future of consumerism might not actually entail buying all that much – at least not in the conventional sense. Last week, it emerged that Apple Inc (US:AAPL) had agreed to acquire Texture, a digital magazine subscription service by Next Issue Media LLC, which gives users unlimited access to more than 200 magazine titles at a cost of $9.99 a month. Texture, an app-based service, was founded at the start of the decade by New Issue, a venture backed by publishing interests such as Condé Nast Inc and Hearst, along with the usual private equity interest, this time in the form of KKR & Co.

A day or so later, Bloomberg reported that BMW (ETR:BMW) was ready to roll out a pilot programme in the US for Access, the Bavarian auto giant’s car subscription service. The likes of Ford (US:F), Porsche (Ger: PAH3), Cadillac, and Volvo (Swe:VOLV-B) have already gone down this road, and speculation has it that Mercedes-Benz could follow suit later this year.

You may wonder what the difference is from a regular car leasing arrangement. Well, rather than being tied to an annual lease, subscriptions give you the ability to 'own' a car on a month-to-month basis. You generally pay a premium over an equivalent leased model, but insurance and maintenance services come with the subscription – everything is included bar the fuel. This flexible form of motoring is being pitched at millennials living in busy metropolitan areas; a demographic supposedly abandoning car ownership for the wonders of Uber and peddle power. Indeed, analysis by McKinsey & Co suggests that rather than destroying value, these types of new business models, along with the trend towards shared mobility, and the adoption of connectivity (digital) services, could expand automotive revenue pools by around 30 per cent, or $1.5 trillion, by 2030.

If further proof were needed of the growing prevalence of subscription services, by the time this issue hits the newsstands, Spotify would have made its debut on the New York Stock Exchange via an initial public offering that could result in a valuation upwards of $20bn. Unfortunately, last month’s horror show with Facebook could temper proceedings, as the streaming service won’t be immune to the fallout from the Cambridge Analytica scandal. However, it’s obvious that services such as Spotify have fundamentally altered perceptions over the direction of consumer markets, particularly as an estimated 71 per cent of its users fall within the 18 to 35 year-old age bracket.

Perhaps the rise of the ‘on-demand economy’ – and by extension, subscription services – is symptomatic of the way in which digital technology has become intertwined with the collective behaviour of an entire generation. Research from the B2B Retail Sector hub suggests that 87 per cent of millennials have their phones with them every second of the day. And if you’ve become accustomed to having infinite retail choice at your fingertips – a form of instant gratification if ever there was one – then you might start to look at goods purchases in a different light – as service propositions.