Do Netflix subscriber headwinds hold lessons for retailers?
Netflix reported a drop in subscribers for the first time in over a decade on its latest earnings call. This experience raises questions for retailers developing their own membership plans, among them: is subscription fatigue setting in, and is inflation cutting into how many subscriptions consumers take on?
Netflix’s subscriber drop is somewhat misleading. The service initially added 500,000 members before deciding to quit the Russian market and its 700,000 subscribers, causing a net loss of 200,000.
Current membership remains strong at 220 million, but the shortfall to Netflix’s forecast of 2.5 million subscriber growth is troubling. Several factors are likely at play.
Netflix in January raised the price to $19.99 for its premium membership, up from $18.99, at a time when rivals offer less costly alternatives and consumers are being forced due to ongoing inflationary pressures to increasingly weigh discretionary purchases against their everyday needs.
Retailers should consider taking a position against price hikes during the current inflationary time. Old Navy recently paused increases on kid’s basics through the back-to-school season. Aldi pledged to keep its prices low compared to its many grocery competitors.
General subscription fatigue may also be setting in. There has been a recent notable increase in ads for budget apps such as TrueBill and Billy which provide visibility to a full list of subscription charges and allow for easy cancellations. Messaging from these apps highlights that, although each subscription may be a low figure, charges add up quickly to a large total.
Retailers with paid subscription plans including Amazon, Bed Bath & Beyond, Best Buy, Costco and Walmart should keep a careful eye on signs of membership fatigue at a time when consumers are increasingly aware of the need to stretch their dollars.
Lastly, with the lifting of pandemic restrictions, less time at home translates to less time streaming. This also marks an incremental shift back to bricks from clicks at retail. Merchants should shift accordingly to support physical operations while reevaluating product mixes based on ongoing changes in consumer behavior, such as more out-of-home activities.
- Netflix Releases First-Quarter 2022 Financial Results – Netflix
- Netflix Has Raised Prices Again – Here’s How It Compares to Other Streaming Services – CBR.com
- Are price freezes and pledges worthwhile in inflationary climates? – RetailWire
DISCUSSION QUESTIONS: Do you think consumers are going to scrutinize their retailer subscriptions as inflation affects their daily lives? What lessons do you think retailers with subscription programs can learn from Netflix’s recent experience?