Subscription Revenue Model Makes Deep Inroads Into Indian Businesses

By : Raj Darji | Founder and CEO | Aarav Solutions


The subscription model of business is in vogue globally and India is no exception. However, the subscription-based business model was not popular in India historically. Things are changing of late though. Digital revolution, growing startup ecosystem, and changing customer behaviour are driving this trend. The major factor supplementing this trend is the perception of a sense of ownership. A survey conducted by market research firm Harris Poll found out that 68 percent adults of the world no longer believed in status and around 70 percent adults surveyed opined that subscriptions untied them from the burden of ownership. The same sentiment is reflected among the millennials and Gen Z population of India. The country, which has been used to milk and newspaper subscription model, has taken a giant leap in this regard. Currently, India has a thriving use base of ecommerce platforms, edtech companies, OTT (over-the-top) media services, SaaS (Software as a Service) solutions, and digital payment platforms among others.

Different hues, varied users:

India had over 749 million internet users in 2020, which is projected to grow to more than 1.5 billion users by 2040, indicating the market potential in internet services, according to market research firm Statista. In fact, India was ranked as the second-largest online market globally following China. Similarly, Counterpoint Research said India’s smartphone market is set to hit a record high of 173 million units in 2021, growing at 14 per cent year-on-year. These two data points indicate the prospects of a subscription-based business model in this South Asian economy. 

Currently, the subscription model of business is witnessing a lot of adoption in ecommerce sector. With India surpassing the US to become the world’s second-largest base for e-commerce, users are rapidly embracing the subscription model of business for online shopping. Ecommerce firms such as Amazon, Flipkart, BigBasket, Ola, Uber, Zomato & Swiggy among others have come up with attractive subscription models that have found many takers. During the Covid-19 pandemic, this model has seen explosive growth as people migrate to digital interfaces amid lockdown measures. 

Not only ecommerce, but this model has also expanded to various other internet-enabled businesses. For instance, India’s online video user base has scaled to more than 350 million people, growing at 24 per cent annually from 2018 to 2020, according to a Bain & Company report. Users have hooked into many OTT platforms like Netflix, Amazon Prime, Disney, and Hotstar among others that come with various subscription-based fees. The adoption of SaaS platforms has also risen as businesses across the spectrum migrate to enterprise cloud in India during the pandemic. A Nasscom report said India’s SaaS revenue has reached $3.5 billion, with many marquee startups emerging in this space. Flexibility in payment, pay per use or subscription-based pricing are making this migration faster among users.  

Similarly, India is fast seeing an emerging ecosystem of startups ranging from edtechs, medtechs to fintechs which have based their revenue model built on subscription-based payment systems. Especially, many fintech firms in India are currently offering billing, subscription management and auto invoicing services under this payment mode. 

Revenue stickiness & better projections:

The subscription model of business is a win-win proposition both for the companies and consumers. On one hand, customers get their desired products or services at a lower price point without upfront investment and companies get the customers for a longer period of time on the other hand. The objective of this model is to keep users engaged for a longer period of time, leading to predictability in revenue flows. As businesses enjoy visibility of future revenue streams, investors are comfortable in infusing capital for future growth. Also, longer-term engagement with users leads to lower customer acquisition costs, and higher up-selling and cross-selling opportunities. Subscription-based companies also disrupt traditional firms by offering lower upfront prices, more flexibility, and an incentive to continually upgrade their products for customers. Such a revenue model also creates a level-playing field for small and medium businesses in the marketplace as they are not handicapped due to a lack of huge investable capital. 

Aarav Solutions’ Adptx Suite is smart and unified subscriber management, billing, and monetization platform that enables service providers to manage their subscriber-based billing solutions efficiently at optimum cost. This solution can be deployed with on-premise IT systems or in the cloud as a Software as a Solution (SaaS). Adptx Suite not only enables enterprises to be agile and cost-efficient but can also be deployed at scale with a minimum time lag. 

The wave of subscription-based businesses is likely to sweep the global marketplace in the coming years. Gartner predicts that 75 per cent of organizations selling direct to consumers will offer subscription services by 2023. Even traditional industries have started offering such payment flexibility to their users. As businesses jump into the bandwagon of the subscription model, the right technology partner can make the user experience seamless and efficient, attracting more customers under its fold.