The Cancellation Economy

How many razor-of-the-month clubs do we need???

One of the most popular business models in Silicon Valley is subscriptions. The modern enthusiasm for this timeless payment mechanism began its ascendence with software-as-a-service (SaaS) companies in the early 2000s, who were disrupting the huge up-front expense of perpetual licenses (which often carried hefty professional services fees and annual maintenance on top).

From there, the model reactivated like a sleeper cell in consumer businesses. No longer just the domain of magazines, HBO and record-of-the-month clubs, subscription payment models began sprouting up for all manner of consumer businesses — fueled by the proliferation of credit cards, simplified mobile payments, and dozens of subscription payment platforms. The trend has become so ubiquitous that most tech companies speak of “ARR” (Annual Recurring Revenue), rather than just “revenue,” because the recurring subscription nature of their cash flow is just assumed.

The trend jumped from tech to consumer packaged goods with subscriptions for disposable commodities such as razors (Dollar Shave, Harry's, Billie, etc.), tampons (Bloom, LOLA, Cora, etc.), and even toothpaste (Quip, Boka, HiSmile, etc). With meal kits, medicines and pet food piling up, new services have spawned for such non-recurring products as socks, underwear, and scrunchies. It’s getting ridiculous.

This proliferation of recurring payment services has been described by some as the “Subscription Economy.” I have another phrase for it, “Shit You Don’t Need.” As much as I might personally be intrigued by a beef jerky subscription or bandana of the month club, there’s only so much crap you can consume. Not to mention only so many times you get burned before not signing up for another subscription, ever.

From the standpoint of companies and investors, the subscription model is genius. Rather than just selling someone one pair of socks, why not get their credit card and ship them three pairs of socks each month until they finally rent a storage unit for their excess socks, cancel their credit card, or just… die? From the standpoint of consumers, subscriptions are increasingly seen as evil. What is pitched as convenience and selection quickly becomes a headache after month one. How many damn pairs of socks do you really need??

I recently had to replace my credit card because I left it at a restaurant. My bank eagerly sent me a replacement card via FedEx along with a helpful email that listed the twenty or so monthly subscription services that were linked to my old card. Holy shit! I know I should be reading my statement more closely but some of these were for games our kids stopped playing years ago.

And herein lies the nefarious underbelly of subscriptions - most of it is for low-margin, low-quality products we don’t need and maybe didn’t even want in the first place, but we’re too lazy/busy/complacent to cancel. Companies know this. They know that most of us don’t look at our credit card statements. They know that we’ll forget about that “free trial” we signed up for until they start charging us. They know that even if we intend to cancel, it will be months until we get around to actually doing it. The game is to offer something, anything, tantalizing enough to get someone’s credit card number, then bill it in perpetuity.

The worst actors in the subscription economy deliberately make it as difficult as possible to cancel. They hide buttons, bury cancellation flows, force customers to call and wait on hold, and many other tactics. They prey on the most vulnerable people, many already drowning in debt. If you’re at one of the companies employing these tricks, affect change in your organization or consider a new occupation.

The signs of a backlash are growing. The “Cancellation Economy” as we could call it. Wells Fargo now offers a heavily-promoted (but surprisingly difficult to find) feature called Control Tower that lets users easily identify recurring payments on their cards. Apps like Truebill and Trim promise to help monitor and cancel unwanted subscriptions. Some people are even turning to single-use burner credit cards to avoid succumbing to subscriptions in the first place.

While subscriptions certainly have their place and can be a convenient way to purchase things of true value, the reality is not every product in our lives is something that needs to show up on our doorstep once per month. It’s January, so call it a resolution (check your credit card statements!) or a prediction, but I hope 2020 is the year consumers become more savvy, companies become more responsible, and we all have fewer subscriptions for useless products siphoning off our bank accounts each month.