Consumer NZ is focusing on subscriptions that are easy to get into but really difficult to cancel. File picture. Photo: 123rf
It might be a "holy grail" for retailers, but there's a warning that shopping on subscription can be fraught with problems for consumers.
One of the word's best known subscription retail brands, HelloFresh, has had criminal charges filed against it by the Commerce Commission, which alleges it misled customers it was trying to encourage to sign up to its food delivery service again.
Subscriptions are offered in New Zealand for everything from energy drinks and wine to underwear, toothbrushes and pet food.
Consumer NZ spokesperson Jessica Walker said "subscription traps" were something that Consumer would focus on this year.
"What we are worried about is when it's really easy to get into something and really, really hard to get out of it."
She said sometimes people might be able to subscribe with one click, but then had to go through a longer process, or an entirely different one, to cancel.
"The term for this is 'sludge', it makes you stick. It could be that you can't get out the same way you got in, things might be put in the way to incentivise you to stay..."
Research in Australia found three-quarters of people had a negative experience trying to cancel a subscription. A third said they felt pressured into keeping a subscription and 10 percent said they had given up trying to cancel.
With more people conducting more of their transactions online, it was becoming more of an issue, Walker said.
Marketing expert Bodo Lang, from Massey University, said subscriptions had become more common.
"Companies like subscription models because subscriptions provide a stable, predictable income stream. And subscriptions suit all sorts of businesses. Industry giants like Costco utilise subscriptions," he said.
"Costco's annual membership fee is responsible for more than half of its profits. Subscriptions are also valuable for start-ups because the predictable revenue stream makes it easier for an entrepreneur to get a business off the ground.
"Having a subscription model also makes it easier to attract funding from venture capitalists because VCs favour businesses with lower risk and more predictable revenues."
But he said they could become a problem if consumers ended up paying for more than they needed, or beyond the point where the subscription was useful.
"This is common, and it can be a real drain on consumers' pockets. This is a particular issue in the current New Zealand economic climate."
Chris Wilkinson, from consultancy First Retail Group, said "recurring and reliable" income was the holy grail for retail and service businesses.
But he said New Zealand consumers were less inclined towards the models than people in other countries.
"There's a number of reasons including a greater propensity for online shopping in places such as the UK and US, with downstream opportunities for subscriptions. Another is busier lifestyles in these more populous countries which relegate 'chore shopping' needs to set-and-forget channels like subscriptions.
"Research we've done in the past suggested that NZ consumers liked to be more in control, however trends continue to evolve and if there is financial advantage, then this can encourage consumers to participate in a subscription scheme."
Walker said people who were trying to cancel a subscription should keep notes of their interactions with the retailer or provider.
If they continued to be charged, they were within their rights to request their money back, she said.
They could ask their banks to issue a chargeback on a payment taking from a credit card, and they could complain to the Commerce Commission.
"We think they need to know when this kind of thing is happening."
Reading the terms and conditions of any subscription would also be important, she said, so that shoppers knew what they were signing up for.
Lang said the US Federal Trade Commission was requiring businesses to offer a "click to cancel" service. "This allows customers of online subscriptions to cancel with the same number of clicks they used to sign up. Also, in-person sign-ups should have an option to cancel online or over the phone without having to go through a myriad of auxiliary questions or another complicated process."
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