By John Lofstock, Editor
Industries everywhere are being shaken up by the rise of the “Membership Economy,” a business strategy that has organizations working to build long-term, formal relationships with their customers.
To do this, some companies charge their members a subscription fee. Others simply charge on a per-usage basis.
This brings us to the auto industry, which right now is in the throes of upheaval. Airport parking lots sit empty while ride sharing app pickup zones are packed. A big part of the problem is that Millennials aren’t buying cars the way their parents did. Ride sharing apps and car subscription brands have cultivated this generation to access transportation whenever and wherever they need it.
How all of this plays out will have an enormous impact on convenience stores, and not just fuel sales, but on in-store visits as well. There are still plenty of consumers who prefer to own their own cars, but Membership Economy expert Robbie Kellman Baxter said companies like Uber and Zipcar signal a much bigger disruption looming for the auto industry.
“People who 10 years ago couldn’t imagine not owning a car now find that today it’s a very viable option,” said Baxter, author of The Membership Economy: Find Your Superusers, Master the Forever Transaction, and Build Recurring Revenue. “The way consumers view car ownership is shifting dramatically. Disruptor brands like Zipcar and car2go provide a great alternative to ownership. Turo lets you access other people’s cars when they aren’t using them, and Uber, Lyft, and the other ‘ridesharing’ companies have dramatically reduced the appeal of car ownership.”
Baxter said these factors have Big Auto seriously thinking about new models. Some auto manufacturers have already responded with their own subscription services, like Maven by General Motors, BOOK by Cadillac, and Ford’s Canvas.
Under this model, dozens, if not hundreds of people will essentially share a handful of cars. This will significantly reduce trips to convenience stores. More importantly, the shift to a subscription model is often permanent.
Baxter stated several cases as to why people are giving up on cars:
Car ownership isn’t necessarily the best value for everyone. At one time, people wanted to own a car because of factors like reliability, choice of model, customization and their choice of price point. However, today, factors like depreciation, maintenance costs, taxes and the huge initial price tag give consumers pause—especially when there are so many new ways to access a ride when consumers need one, she said.
Owning a car is expensive. It’s far easier for lower income people to come up with a small amount of money for a single ride or even for a subscription to a car-sharing service than it is to save up for a big down payment and hefty monthly payments.
People are paying more for experience and less for ownership. “Consumers today like having the best or newest thing more than owning something,” Baxter said. “The same goes for car ownership. People want to ride in style, and they don’t need to own a car to do that.”
Baxter also points out that while Big Auto is the industry that should check its rearview mirror now, nearly every industry should be on alert. For example, snack food subscription clubs are popping up, like KIND Snack Club. CPG brands are getting in on the action, like Gillette Shave Club, even the air travel industry has responded with unlimited subscriptions like Surf Air.
“Essentially any industry that relies on marketing to build competitive advantage is ripe for disruption,” Baxter said. “That’s because the Membership Economy is all about putting the customer at the center of everything and evolving to serve their needs. The bottom line: Any business that loves their products, processes or employees more than their customers is at risk.”