The big undo: Australians are ditching subscriptions

The couple ditched Foxtel, Stan and Amazon Prime in early April. “We still have Netflix,” says Julianne. “You have to keep something.” They too have switched from Woolies to Aldi and gone further by planting their own vegetable patch to circumvent supermarket price hikes. Her children are delighted with their new pet chickens and fresh eggs.

“There have been a lot of changes in my family,” she says. “We just don’t know what the foreseeable future looks like.”

Julianne Taylor has started growing a vegetable garden to circumvent rising supermarket prices for fresh produce.

Julianne, who launched her own swimwear brand in late 2019 which showed promising signs of success before the pandemic has decimated thousands of small businesses, now looking for extra work ahead of the interest rate hikes she knows are coming.

“Our mortgage will go up about $700 or $800 for us by the end of the year, every month,” she says. “It was a real shock to the system.”

Rising interest rates and the the cost of living has become the most pressing issue for ordinary Australians – and the dominant theme in the run-up to the federal election. And while the economy has rebounded strongly from crippling lockdowns and Australians are excited to get out and about again, they are also taking a long and hard look at their family budgets and outgoing spending.

Economists have begun to observe certain changes in consumer habits.

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“What we see are switches,” said NAB chief economist Alan Oster. Money was starting to flow out of non-essential retail items and into necessities like gasoline, he added. “[People] will slow down discretionary retailing, things you don’t necessarily need to go to. No need to go to a restaurant. »

At the supermarket, shoppers can opt for cheaper cuts of steak. “You might try to make do with lesser quality food, you might delay an internal renovation,” Oster said. “That’s usually what you see during a downturn.”

The ABC’s index of household spending intentions fell 3.8% in April after peaking in March. The largest declines were seen in buying a home (down 21.5%), health and fitness (down 14%) and transportation (down 8.6%). ), largely due to the reduction of excise duty on fuel.

Australians are rethinking family budgets and supermarket decisions as inflationary pressures mount.

Australians are rethinking family budgets and supermarket decisions as inflationary pressures mount.Credit:Getty Images

According to ABC economist Stephen Wu, vehicles, home furnishings, clothing and “miscellaneous recreational items” are among the first areas where spending could fall.

“I guess the question is…how households will react in the coming months as rate hikes are put in place,” Wu added.

Is Australia’s ‘Great Cancellation’ here?

For budget-conscious Aussies, subscriptions are an expense that is often on the radar. This masthead has heard of dozens of others who have canceled some sort of cost reduction.

They are the heralds of a seemingly global emerging trend that has been dubbed the ‘Great Undo’ UK. It’s not just streaming platforms that are going out the window (although Netflix has reason to worry); health insurance is an example of another expense that some have decided to do without. Fifteen per cent of Australians will not renew their health insurance this year, and a further 13 per cent will opt for a better deal, Finder data reveals.

Accountant Sheilana Prosper, whose micro business has faced cash flow issues during the pandemic, made the difficult decision with her partner to get rid of their health coverage last April despite both having chronic health conditions that require regular examinations by specialists.

Sheilana Prosper isn't sure if she can pay $500 a month for health insurance again amid rising inflation.

Sheilana Prosper isn’t sure if she can pay $500 a month for health insurance again amid rising inflation.Credit:Sydney Morning Herald

“It’s probably one of the ultimate subscriptions,” she says. “We just couldn’t afford it.

“It’s been a character-building exercise over the past two years.”

These days, Prosper’s business is doing better. But now that she has to deal with inflation and rising interest rates, she’s in no rush to get health insurance.

“We’re fine now, but it still comes down to that $500 a month commitment. Can we keep doing it? she reflects. Fuel alone costs him $100 a week. “It’s just local driving.”

Unlike Steven Kechichian, Prosper decided to keep Netflix and Foxtel for the family, at the expense of cinema outings.

“It’s not just the ticket. It’s all extras; you gotta have the popcorn, you gotta have the choc-top cone. It just gets a little out of control.

Companies fight to keep fickle customers

Like Prosper, many cling to their streaming accounts but choose to cut their budget elsewhere. Spending levels on digital goods and subscription services have yet to drop dramatically, according to data from research firm Illion. One of the reasons is that the pandemic has had a permanent impact on our lifestyles.

“Our spending patterns and what we define as discretionary and essential could potentially have changed,” said Louis Tsang, chief analytics, data and insights officer, pointing to the adoption of food delivery services like Uber Eats. or Deliveroo during lockdown. .

“It used to be that food delivery might not have been a staple of household consumer spending. Now it’s increasingly becoming the norm.

Nick Cherrier, strategist at subscription management software company Zuora, says it’s common for households to revise their entertainment budgets in times of mounting inflationary pressures, but doesn’t think there’s “subscription fatigue.” “.

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“What we’re seeing is a very competitive streaming environment,” he said. With Netflix, Stan, Binge, Disney+, Paramount+, Amazon Prime, Apple TV+ and more, consumers are spoiled for choice. “You would look at this and say: do we need all this?”

Smarter subscription services anticipate competition and pressures and provide a downgrade option. “Companies that do this are likely to have higher retention than companies with a very simple offer,” Cherrier said.

Through the end of 2021, data from Zuora shows churn levels actually fell from 6.3% to 5.4%. But Cherrier notes that the data is more than six months old and does not take inflation concerns into account.

“If we have the same conversation about six months from now, maybe I can say, well, this time the churn has gone up,” he said.

*Stan belongs to Nine who owns this masthead.

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