Barefoot Investor: Subscriptions a shoe-in and they’re here to stay
Businesses are clearly attracted to subscriptions for the lucrative recurring revenue but beware of corporate gangsters out to sign up your kids, writes the Barefoot Investor.
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Did you know that Nike is launching a Netflix-style monthly subscription for kids’ sneakers?
It’s called the Nike Adventure Club, it’s aimed at two-year-olds to 10-year-olds, and it started in the US on Monday.
There are three tiers of subscription: $US20, $US30 or $US50 a month. Meaning that parents who sign up get a brand-new pair of sneakers once a month, once every two months or once every three months respectively.
Sidenote: What kid needs a new pair of Nike sneakers each month?
When I was a boy, I scored my older cousin’s Dunlop Volleys. Problem was they were about four sizes too big, which meant that every so often I’d kick the footy and my shoe would fly off and hit my cousin in the short and curlies.
When I protested to Dad, he got on his knees and pressed down on the empty toes of my shoes: “Plenty of room to grow into these,” he cheerfully announced.
(Nowadays my wife worries that our 18-month-old doesn’t have enough “arch support”. But I digress.)
Marketers are following the lead of tech companies and moving to subscription-based payments.
Today you can pay a monthly subscription for Amazon books, but what about renting your bookshelf?
Well, you can.
Ikea has announced it’s trialling a furniture rental subscription service across 30 countries. (Which makes perfect sense, especially if you’re a renter. When your lease ends you can just hand back your hacked-together bed, rather than throwing it out or trying to sell it on Gumtree for a few bucks.)
Businesses are clearly attracted to subscriptions for the lucrative recurring revenue: why bother going through the costly exercise of selling to the same customers over and over again, when you can charge them a small monthly fee? Case in point: scrappy start-up Dollar Shave Club took a razor to global giant Gillette by launching a monthly shaver subscription.
They quickly signed up 3.2 million customers to a monthly autobill, and in less than five years sold the business for a cool $1 billion to Unilever.
The final reason businesses like subscriptions is that they build a deeper relationship with the consumer:
“One of the things (Nike CFO) Andy Campion gets excited about, is that we are now building relationships with kids from two years old,” says Dave Cobban, general manager of Nike Adventure Club.
Okay, so that’s next-level corporate creepy (hello, Dollarmites).
Then again, these guys are the original gangsters: their $60 kiddie shoes really only cost about $2, and are probably sewn together by Nike’s other youth-based stakeholders — dirt-poor Bangladeshi kids working in sweatshops.
Whatever the motivation, one thing is clear: subscriptions are here to stay.
Tread Your Own Path!
Q&As
THE STOCK MARKET IS FREAKING ME OUT
MANDY WRITES: The ABC reported the other day that “ASX tumbles $60 billion on US recession, China slowdown fears”.
I know you are a big supporter of buying shares, but how is an ordinary person like me (age 25, medium income) supposed to follow your lead when the market can lose $60 BILLION in one day?
It freaks me out, and makes me think it’s a lot safer to just stay away from the market altogether.
BAREFOOT REPLIES: Mandy, Mandy, Mandy!
At your age, you should be getting down on your knees each night and praying for a share market crash.
More than that, you should be hoping that the stock market falls and stays low for decades.
That’s not going to happen, of course — though it would be the best outcome for you.
Reason being is that you have 45 years of investing left, and you ideally want to purchase your shares while they’re on sale.
Remember, the share market is not only the greatest compound investment machine on earth, it has also never failed to reach new highs.
In other words, the cheaper you buy today, the wealthier you’ll end up.
WITH KNOWLEDGE COMES A HECS DEBT
SARAH WRITES: I am FURIOUS. I study full time (business at UTS) and work round the clock in real estate to support myself, while all my uni friends bludge off the government.
Last year I earned $48,000, and to my absolute disgust my accountant tells me I’ll be up for HECS even though I am still studying! This is wrong on so many levels. You should do something about this.
BAREFOOT REPLIES: As Tony Jones says on Q&A, “I’ll take that as a comment”.
What old stubby-fingers your accountant was telling you is true.
The government has reduced the amount you need to earn to start repaying your HECS debt to $45,881, regardless of whether you are still studying.
Is that unfair?
I don’t think so. Your HECS debt is effectively an interest-free loan, tied to the general rate of inflation. So it’s a lot better than the massive student debts that burden students in America.
My advice?
Don’t be furious, and quit comparing yourself to your friends: it’s a recipe for unhappiness.
Besides, paying tax is a good thing: it means you’re earning money. And the more money you make, the quicker you’ll get rid of your HECS debt.
DON’T BE DISTRACTED BY POCKET CHANGES
CHRIS WRITES: You have been sitting on my bedside table for a full 12 months. Yet, after a year of my fiancee threatening to not turn up to our wedding unless I read your book, I have read it and am raring to start investing. I am a Commbank customer (have been since my mother signed me up as a Dollarmite!), and I would like to know your thoughts on Commbank’s new app Pocket. It looks pretty good, and it only charges $2 to buy $50 worth of shares.
BAREFOOT REPLIES: I’m always happy to help the groom make it past the broom!
I had a play around with Commsec’s new app Pocket, and I actually think it’s pretty good. It’s clearly aimed at first-time investors who don’t have a lot of dough.
As you’ve mentioned, you can kick off your portfolio with a $50 investment and only be charged $2 a transaction (though you’d want to invest more than that, otherwise it works out to be a hefty 4 per cent fee).
There are seven different “themes” you can choose to invest in, which sounds cool, though they’re really just regular off-the-shelf exchange traded funds (ETFs). Still, they’re a much better deal than investing in an expensive CBA-Colonial managed fund.
Okay, that’s the positive.
Now for one big negative.
The only reservation I have with all these investing apps is that they can lead to you checking your balance too much.
Behaviourally, the best thing you could do is to delete the app off your phone and forget about it for a few years while you focus on your fiancee. Then you could give Pocket a try.
CANCER REVEALS BENEFIT OF BEING PREPARED
JANELLE WRITES: One minute I was living the high life at a business awards night in Cairns — two weeks later I was diagnosed with breast cancer.
I heard the big “C word” and felt the walls come crashing in around me. What followed was six months of high-dose chemo, an operation, eight weeks of radiation, and another six months of preventive chemo.
Yet I am happy. I am living in the present moment, and above all else my finances are in order — no credit card debt and only $80,000 left on my mortgage.
The trick was that (before my illness) I’d read your book, many times in fact.
You have saved me so much worry, Scott.
I have also had the courage to put all my financials in order for my family. Thank you, sending positive vibes your way!
BAREFOOT REPLIES: In a week that’s been dominated by front-page doom-and-gloom finance headlines, your story stands out like a shining star.
People waste a lot of effort thinking about things they have zero control over, but put off the things they have total control over, like getting your own situation sorted.
Here’s to your continued health and happiness, Janelle. You Got This!
If you have a burning money question, go to barefootinvestor.com and #askbarefoot
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice.
The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need (HarperCollins)RRP $29.99
Originally published as Barefoot Investor: Subscriptions a shoe-in and they’re here to stay
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