Dec 04, 2018

The Rise of Subscription Gifts- and why Direct Debit is the Best Payment Method

At this time of year, there is a gift-buying frenzy by consumers in readiness for the festive season. The organised few will have finished their gift shopping weeks or even months ago. Many would have waited for Black Friday and Cyber Monday to snap up some discounted deals. The majority however will now be in the throes of making lists of who to buy for, setting their budget, and then the all-important task of what to buy for each family member and friend.

Buying a gift which is appropriate, personal, and memorable is not an easy task. However, one type of gift is now a popular choice and fulfills those requirements: subscriptions. Subscription gifts, monthly gifts or subscription boxes, have grown in popularity over recent years. According to a recent report by Royal Mail, the subscription box market was worth £583 million in 2017 and is predicted to be worth £1 billion by 2022. Currently, over a quarter (27.4%) of UK consumers are signed up to a subscription box service, either personally or on behalf of somebody else.



The Perfect Option for Consumers

From a consumer point of view, due to the niche categories most subscription boxes fall under, they can make the perfect present.  For example, for the person who has a passion for home improvement, a home style magazine subscription will fit the bill. Or for a friend who has recently become vegan, gifting a vegan meal box subscription will help them to explore their new food choices confidently at home.  For many people who give a subscription, the attraction is that the recipient will think of them every time the item arrives through the letterbox.  Alternatively, it may be a decision based on finding something for the person who has everything – so a subscription is ideal.


The Perfect Sale for Retailers

For organisations offering subscriptions, there are multiple benefits. The main one is driving greater brand loyalty, tying customers into a recurring purchase.  The customer retention rate can then be a challenge, but by focusing on the community aspect of the product for the customer, such as encouraging social media followings and posts, organisations can improve retention rates further.


Recurring Card Payment or Direct Debit?

Many organisations choose to rely on recurring card payments for subscription costs. Certainly a first card payment can be ideal as securing the initial purchase amount straight away ensures prompt despatch for the customer. For ongoing payments however, the advantages of Direct Debit come into play. Direct Debit reduces payment complexity and can make account reconciliation easier. Also once set up to pay by Direct Debit, customers continue to pay the agreed amount on a set date, unless they or the organisation change it (whilst providing an advance notice to the customer), thereby encouraging customers to carry on paying and ultimately increasing retention rates. Lastly, compared with card payments, Direct Debit sees much lower churn rates, typically 0.1% for SmartDebit customers, compared with recurring card payments which can be up to 13% (Source:, so a move to Direct Debit can greatly improve payment efficiency.











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