How Decathlon is embracing the Subscription Economy

In 2018, Decathlon started piloting its first test of a subscription service “Btwin Kids,” based on a circular model for its children’s bikes, ranging from €3 to €8 per month. In 2020, they then tested a “leasing”-type subscription program in France, with a 12/24/36-month commitment, with access to higher-end, adult sports equipment and e-bikes that typically have a price tag above €1,000. Finally and shortly thereafter, they piloted a third offering called “D RENT,” starting at €15 per month, allowing adults to flexibly subscribe to a bike or an e-bike from a “bicycle library,” with very minimal commitment (three months). Beyond providing access to a bike, these three offerings encompass multiple levels of differentiating services, such as maintenance, insurance, and roadside assistance.

Subscriptions may not sound like “rocket science.” These services involve a catalog of products and services, a customer, a user, and a transaction with a merchant – so at a high level, it may not look that different to retail. But upon closer inspection, they dramatically change a key element: the business model.

In fact, there is a massive difference. At its core, the subscription model is about shifting from growing by selling more units and pushing ownership to the end user, to growing through the monetization of an ongoing customer relationship, thanks to ever-improving, personalized services that continue to provide value.

In short, Decathlon Rental is evolving into a customer-centric service operator, focusing on maximizing lifetime value. In the subscription model, more than 70% of a company’s revenues come from their existing subscribers.

This leads to significant changes on the front-end, such as the value proposition, offering design, or pricing. But it also brings about changes on the back-end, impacting key supporting processes such as finance, supply chain, operations, and of course the underlying technology stacks. While the retailer’s focus used to be on a traditional sales checkout, it now needs to be expanded over the lifecycle of each subscriber, for example, every month. Also, Decathlon precisely manages its product inventory through KPIs such as Days Sales of Inventory (DSI), which is a critical measure for a retailer’s finances. Inventory is then forecasted even more precisely, based on complex sales and operations planning, involving factors such as the weather. In contrast, in the subscription business, inventories are turned into assets that need to be tracked, depreciated, or continuously serviced. This flips the existing business script upside down, creating further areas of complexity by impacting the overall stock management rules, associated balance sheet, and associated systems.

Small scale subscription testing may seem relatively straightforward, but scaling is much harder. Yet, once you get past the adjustment period, you’ll see the tremendous opportunities that are inherent with subscription and circular models. For example, in a traditional product model, a retailer does everything possible to bring customers back into their store, retention is the default customer behavior for subscriptions. First-party customer data is also now at one’s fingertips.

In a sustainable world that will require manufacturers to maximize their product lifespan and utilization, subscriptions are a holy grail. Many brands and retailers, including Decathlon, have also launched “resell” initiatives addressing such a requirement. In a resell strategy, a company has to spend money to reacquire both the physical product and the customer. However, in a subscription model, the subscriber and the physical products are “retained” by design and are part of the economic model from the beginning, which tends to maximize both the asset and customer lifetime value.