[Note: Some of the below span beyond the category in which it's listed. Additionally,I
will add more details per company when I get some time since there is a lot of funding going on below and each has a slightly different angle and many have celebrities at the helm.]Undergarments & Necessities BeautyMenswearShoes
- Sole Society
- Just Fabulous
- Send The Trend (though they don't send you items just customize a trendy collection for subscribers monthly)
- Style Mint
- Craft Coffee
- Healthy Surprise
- Doorstep Dairy
- Kiwi Crate (via Anonymous, founder of Skinny Scoop)
- Eco Emi (via Anonymous, founder of Skinny Scoop)
Sidenote: This model has also received a lot of traction historically with dieting services (food diet delivery is $1bn industry) -- think Biggest Loser Meal Plan, Jenny Craig, Nutrisystem and eDiets
In terms of performance and how they are doing... I will defer to Ken Johnson
. However, given they recently received funding from Dave McClure
's 500 Startups
's "3 million 'members,'" and that the default subscription is $39.95. If every membership is a paying subscriber that would work out to $120 million in revenue "PER MONTH" according to Business Insider
that actually quotes another fab Quorite Andrew Chen
). However, you only pay if you keep that month's selection. Thus, it depends on the conversion.Trunkclub
just raised $11M (http://techcrunch.com/2011/04/06...
). Thus, using that as a proxy, I'd say that the metric must be decent.Birchbox
raised earlier this year, but it is definitely sticky in nature, but it is unclear what their growth and growth rate is. Traffic data does not seem that amazing, but it's unclear.Jewelmint
seems to have a nice trajectory. Celebrities always help as catalysts and influence, especially in the fashion world.Models
There are a few different models within the subscription ecommerce play.Membership
You receive products every month with a flat fee. There are a few use cases for this:
Membership + Fee for Product
- Sampling: Birchbox sends you products that are samples. Thus, you get a taste of what you like.
- Convenience: Manpacks.com for instance is used for the convenience factor. It just shows up.
I think most companies that started this way (I believe Trunkclub began with this model). This can be an issue if people don't like the products. Some are trying it where they pay each month, receive items, and anything purchased , the fee is waived. However, if you receive items and return everything (for those with that option), most consumers are going to churn pretty quickly. So, this just doesn't seem sustainable.No Membership Fee+ Fee for ProductTrunkclub
sends you products in your 'trunk' each month, and you see which items you like and then pay for those you keep. You can send back all other items and pay nothing. Bernard Yoo
's company, Bombfell also leverages this model.OpportunityConversion Rates:
Consumers most like buy more stuff from these models for the following reasons:
- Clear Pricing - WIth a subscription fee, you know the value and it's clear.
- Convenience - It just shows up! Think about shopping cart abandonment rates vs. return rates. While different, this is somewhat similar because the amount of effort to return is higher than abandoning your cart. Thus, I suspect, more people just keep the stuff!
- Sampling - Getting new products distributed to a captive audience is a brand's dream.
There is an opportunity for this to become very viral due to it being part of your life. You engage with this brand each month rather than the few times a year you might actually buy from an ecommerce store. Thus, higher loyalty , which inherently is what's happening here, yields more word of mouth.IssuesShipping:
They can get screwed on this if returns get really high. Trunkclub for instance probably pays $10 each way for shipping. For example, you probably wouldn't start a subscription dog food company because there are low margins, and it's expensive to ship. Thus, the conversion and value of the items needs to offset the return rates and shipping costs associated with them.
[Note: most of them do not have a shipping cost explicitly, but an average it's worked into their economic models].Margin Control:
In typical e-commerce, you can adjust margins based on a % on each product. However, because many of the above have fixed monthly pricing, there are limitations on the products they can offer unless they compromise their margin. They are competing with other retailers with these products so they have to be conscious about the markup relative.