Dollar Shave Club: Product Perfection, on Subscription

Let’s rewind to a cold 2016 evening in New York City, where Dollar Shave Club (‘DSC’) founder Michael Dubin and Unilever senior executive Kees Kruythof enjoy a long conversation over dinner. The two sides hit it off and what started with an exploration around advisory synergies ended with Unilever becoming an outright acquirer, buying DSC for $1 Billion, cash. The acquisition turned the quiet business of subscription ecommerce into a category Wall Street media junkies were paying real attention to.

The street began to understand why the acquisition multiple made sense to both buyer and seller. Paul Polman, CEO of Unilever believed with the growth of e-commerce and the loyalty behind DSC’s brand, this was a good fit. 

Dollar Shave Club’s innovative viral marketing, and its sales numbers made for an attractive asset. But, what many business analysts missed in the mainstream media storyline is the power of DSC’s unit economics driven by its subscription model. Recurring revenue from their sticky member-base was predictable and stable. In terms of actual retention, a metric experienced subscription operators pay close attention to; about half of Dollar Shave Club’s customers acquired in month 1 remained subscribers after 1 year. Further along the customer timeline, Dollar Shave Club saw about 24% of its customers retained by month 48 — that’s about 1/4 of its subscribers still subscribing to the service 4 years later.

The healthy retention rate at DSC is not by accident. It first begins with the product category itself. Men buy razors, and need to change the blades frequently. This consumption and replenishment cycle lends itself perfectly to a subscription play. Next, the experience of buying razors in store was, and still is frustrating, and as Dubin pointed out, most men dislike the actual experience of shopping for razors in store – another win. Lastly, and perhaps the one component many companies overlook, is the ability to properly build a relationship with subscribers through great customer service - DSC has worked at perfecting its multi channel customer servicing. 

If we can imagine for a moment some of the programs we subscribe to as a consumer: an OTT content service like Netflix, a music streaming service like Spotify, perhaps a food service like Blue Apron. Every great subscription business has a retention model like the one outlined in the aforementioned paragraph. What’s different is each company’s ability to retain members over time. Netflix for example, perhaps the best at maintaining its customers, is said to have a retention rate of about 95% after 12 months. In other words, only 5% of Netflix customers cancel their account after signing up a year earlier. A steady and sticky subscription business almost always beats a comparable faster growing subscriber count with poor retention. 

Dollar Shave Club started as an underdog, but smart marketing and superb operational execution allowed the company to catch the attention of the big players. Beyond the Unilever acquisition, rival shave giant Gillette launched a lawsuit against DSC while also attempting to copy the company’s vision with a razor club of its own. Shave on .... 



Will subscriptions save the cinema?

Netflix has officially disrupted the entire movie-going experience.  A night at the movies used to be relatively affordable, but today it’s anything but. With the increasing availability of other entertainment options accessible from the couch, consumers are no longer heading to their local movie theatre and traditional providers are scrambling.

But, could subscription commerce - the same business model floating Netflix - help save the old school movie business?

MoviePass an American-based subscription-based movie ticketing service allows subscribers to purchase a single movie ticket per day for a flat subscription fee per month. The service went through several pricing structures following its original invite-only launch (including those limited to 2 or 3 films per month, and "unlimited" plans, with pricing based on market size), before announcing this past August that it would switch to offering a plan with a single film per day priced at $9.95 per month.

Cinemark, another monthly Movie Club, lets customers buy a movie ticket a month for a discount price of $8.99, in addition to 20% off on concessions. The Texas-based chain, which owns about 350 theatres, allows members to roll over unused tickets every month and buy additional ones for friends at a lower price. Cinemark said that it has developed Movie Club after doing extensive consumer. Cinemark’s move appears to be a specific response to MoviePass.

MoviePass announced last month that it was debuting a limited-time subscription that allows users to pay $6.95 a month to watch a movie a day for a year, with the provision that users commit to a 12-month subscription.

MoviePass pays theaters the full price for a ticket, so it is in essence subsidizing its users’ movie going and losing money each time they check out a film. The average movie ticket costs $8.60 through the first three quarters of 2017, but in major cities, such as Los Angeles and New York, tickets often cost more than $10.

AMC, America’s largest chain, threated to take legal action against MoviePass in August and predicted that the company would fail because its business model was not sustainable. While subscription services like these are available to consumers in the U.S., Canadians wait patiently for someone locally to follow suit.




Celebrity Turned Entrepreneur: Jessica Alba’s Honest Company

How fast can you grow a successful subscription commerce company? Pretty damn fast. Just ask Golden Globe nominated actress Jessica Alba. The Honest Company, co-founded in 2011 by Alba, is an American consumer goods company selling non-toxic household products online. If you haven’t heard of the company, you’ve likely been binge watching Game of Thrones, paying little attention to what’s happening in the burgeoning world of subscription commerce. In it’s first year of selling products the Honest Company hit $10 million in revenue. By 2013 the company eclipsed $50 million and in 2014, that number reached a whopping $170 million.

The early days were inspired by a real need and a void in the marketplace. In 2008 Alba attended a baby shower thrown by family and friends, where she remembers her mother advising her to use detergent to prewash clothes she’d received as gifts. She used a mainstream brand and immediately broke out in hives.

Alba spent late nights researching the contents of the detergent and everything in her kitchen and bathroom. What she found was shocking: most household products included petrochemicals, formaldehydes and flame-retardants. Jessica began to hunt for alternatives.

During her search for eco-friendly options, Jessica experimented with her own products made out of baking soda, vinegar, etc. When she came across Christopher Gavigan, who for 7 years led a non-profit called Healthy Child Healthy World, she asked him what to buy. With limited companies producing all things eco-friendly, safe and nontoxic, a professional relationship and business plan were in progress.

By 2011, Alba had turned herself into an expert on consumer products even going so far as traveling to Washington, D.C. to lobby for updated legislation. She was (and still is) particularly focused on reforming the 1976 Toxic Substances Control Act, which has allowed more than 80,000 chemicals to remain in household products. Only five are regulated by the Environmental Protection Agency; just 11 are banned from consumer goods.

Alba and partners began their new start-up with an initial seed of $6 million, according to a source close to the deal. The group called their new venture The Honest Company – a nod to its values and transparent ingredients.

While Alba and team intended for The Honest Company to remain online, they began selling products in a limited number of boutique stores. When Costco came calling in 2013 wanting to sell baby shampoo in family-size packs, the Honest team relented. Since then, Whole Foods, Nordstrom, Buy Buy Baby, Destination Maternity and even discount giant Target have started carrying Honest Company products. Notwithstanding its brick and mortar presence, 75% of revenues are online commerce generated, with the majority of those sales coming via the company’s $79.95 monthly recurring bundles of diapers and wipes – a leading indicator of the true power of subscription revenue.

Today, the $1 Billion+ valued Honest Company has strong charitable missions connected to Toms ShoesWarby Parker, and Etsy. It donates products, revenues and labor.


Subscription Box Profile: The Boodle Box

The Boodle Box is an Orlando, Florida based sub-box company that sends a monthly dose of beauty and fashion accessories to teen and tweens. We connected with co-founder and CMO Desiree Stahley to get the scoop on her company, as well as her advice for other sub-box company owners.

Hi Desiree! Tell us a bit about yourself.

Before co-founding The Boodle Box in 2014 with my mom, I was the VP of Marketing for a real estate company. I went to Stanford for my undergrad and masters, and then to Duke for business. Once I finished school, we started this company. I now work at our San Francisco location.

 What is the story behind The Boodle Box?

It started by a fluke. One Christmas, I gave Birchbox subscriptions to a couple of my aunts. As the boxes started coming in every month, their daughters were jealous. We did some research and found that there weren’t really any sub-boxes for girls their age. So we started our own.

What’s inside the boxes?

We make boxes for two age groups: ages 6 to 11, and ages 12 and up. The younger group gets things like bath stuff, school supplies and age-appropriate beauty products, and the teen group gets makeup and accessories.

There are five to seven items in each box, usually centering around a theme. For example, in January, the boxes were filled with panda bear stuff. Our boxes have a message as well. Each quarter, we focus on a cause that speaks to this age group. Pandas are endangered, so we had a “Save The Pandas” bracelet in the panda box, and proceeds from that quarter are going toward building a panda nursery.

Who tends to buy the boxes and what has their feedback been like?

Mostly grandparents, other relatives and parents. The feedback has been really sweet. We’ve heard from parents saying that their daughters love the boxes. We’ve heard from grandparents saying that gifting a Boodle Box to their granddaughters has given them something to talk about every month. One quarter, we focused on anti- bullying, and we heard from a mom who said it gave her daughter the courage to talk to a teacher about a bully in her class.

Tell us about your slogan, “uncover us. discover you.”

The subscription box industry as a whole is about discovering new products you wouldn’t normally find in stores. It’s especially fun for teens and tweens because they’re at the age where they’re finding out who they are and what they’re interested in.

Are there other sub-boxes like yours? What sets you apart from them?

There have been a few similar ones that have popped up since we started. We feature great quality products, and our price point is the lowest amongst our competitors.

How do you promote your company?

Social media has been huge for us to connect with our audience. We also have a number of companies and mommy bloggers who we send our boxes to, and they do a great job of promoting us. We were featured on The Talk over the holidays, and we’re still recovering from that!

What is your advice for fellow sub-box company owners?

Brace yourself! There are so many things that go into this business that you wouldn’t anticipate.  You’ll never have everything totally put together, so just pull the trigger and go. You’ll figure out the kinks along the way.

Canadian subscription companies making the grade, EH!

Get Canucked

Get Canucked is a sub-box company that connects people all over the globe with their favourite Canadian snacks. These snacks are virtually impossible to come by in the US and other parts of the world. Get Canucked allows customers to receive great Canadian snacks, monthly.

Launched by Jim Campbell, people all over the world can now enjoy a variety of snacks that are only available in Canada. The goal of this Canadian-based subscription company is simple. The company wants to share the Canadian snacking experience with everyone, worldwide. It is Jim’s passion for Canadian snacks (they taste so good, who wouldn’t be passionate about them) that led him to create this unique sub-commerce model.

Jim’s sister and her 4 children, all Canadian natives, made a move to the US years back. The kids were desperately missing tasty staples such as Mr. Big bars, Coffee Crisp, and Ketchup chips. Every time they had the chance, the kids would beg their uncle Jim to mail these exceptional Canadian made snacks over the border. With that in mind, Get Canucked was created as a way to ensure that individuals with a passion for these Canadian treats would be able to get their hands on them monthly.

For fellow subscription box owners Mr. Campbell offers up a word of advice, “try to be really organized from the start, keep track of everything, and spend time to understand the inner-workings of your business as you grow.”

Roasters Pack

Roasters Pack started from a love of coffee and an inability to find good roasters. The solution – created by founders Suneal Pabari and Adam Frank was to source delicious artisan coffee independently roasted from all over Canada. Their mission also included the desire to help customers discover new and interesting coffees every month, while creating a unique experience. Suneal was introduced to great coffee in Costa Rica, prompting curiosity and passion to create something on his own.

Today, from a small office in Oakville Ontario, just west of Toronto, Roasters Pack is continuing to grow and they boast a YouTube channel that has been viewed over 100,000 times. The channel helps coffee lovers learn to brew, taste and absorb the art and science of coffee. They’ve worked with well-known roasters such as Baratza, Abid, De Mello Palheta, Detour, and others. Suneal explains the many elements that go into brewing a fresh cup, including the way grinding, impacts the brewing process.

Future goals for Roasters include learning to continuously grow their subscription base, expand into B2B by way of offices and other start ups, and continue to deliver the best coffee experience in Canada.

For lovers of Canadian made snacks and top of the line coffee, Get Canucked and Roasters Pack offer great options to indulge.

Any subscription companies you’d like to know more about? Drop us a line and let us know.

Glossary of Fulfillment Terms

The process of receiving, packaging and shipping orders for goods.

CRM Software
Customer Relationship Management Software

Direct to Customer

Drop Shipping
The term ‘drop shipping’ is often used interchangeably with ‘order fulfillment’. In many cases, however, a ‘drop shipper’ is a company that offers products for sale, and delivers them to the seller’s customer. This practice is commonplace with eBay and other auction sellers, where the seller will offer the drop shipper’s products for sale, and collect a commission if and when the product is sold.

Emergency Order
For a number of reasons, a particular order can be assigned priority, and treated and processed ahead of other orders in the queue. Emergency orders can be assigned by the merchant, or by the fulfillment center.

Fragile/ Special Pack
Those items treated and earmarked as fragile, are stored and packed accordingly. The fulfillment house gives these items special consideration.

International Shipping
Scriberbase defines “International” as those orders processed and shipped to markets outside of North America.

Kitting refers to grouping several different items under a single SKU, and shipped accordingly. For example, as a merchant you might offer a ‘Widget Variety Pack’ composed of a blue widget, a red widget and a yellow widget. The order fulfillment center receives separate shipments of widgets, and ‘kits’ them together under a single SKU.

Light Assembly
Some items may be shipped to the fulfillment center directly from your supplier, and some assembly may be required in order to have the final products ready to ship. Light Assembly refers to manual, non-automated assembly.

Logistics refer to the organization, processes and services needed to ensure the efficient flow of merchandise and orders from storage to shipment and delivery.

Pallets are used for freight shipments. The industry standard for a pallet is 4x4x4′. Pallets are sometimes used as a way to estimate storage fees.

Pick and Pack
Pick and Pack implies packaging several different SKUs from the same merchant into a single box. For example, a customer may order 2 blue widgets and 3 red widgets from the same merchant, in a single order. The order fulfillment center will then pick and pack the order as required; both customer and merchant can benefit from lower proportional shipping costs, known as combined shipping.

An order is a directive issued by the inventory owner, or merchant, to ship one or several items or SKUs to a particular customer. Orders can be received manually, either individually or through bulk upload, or in real-time through an API

Order Fulfillment
Order fulfillment represents the steps that need to be taken in order for a customer to receive his or her order, after they complete their purchase. It generally involves packing the order in the appropriate, safe packaging, and dispatching the purchase through a carrier service.

Packing List
A list included with every order that details the SKU, description and unique identifiers of every item or unit of sale included in an order. This list is produced by the fulfillment center and typically enclosed with the order.

When a fulfillment client issues a purchase order to stock a warehouse, the products must be inventoried, labeled, and assigned a bin location. The system will typically update this information to reflect the change in inventory.

Serial Number
The number or code assigned to a single item to differentiate it from others. This differs from Stock-Keeping Units, or SKUs, as those are used to represent a type of item rather than an individual one.

Shopping Cart Integration
Scriberbase can integrate its software with a merchant’s existing shopping cart solution, allowing the fulfillment house to receive the order information within seconds of payment by the merchant’s credit card processor. This allows for reduced processing time and increased customer satisfaction.

SKU (Stock-Keeping Unit)
A SKU, or Stock-Keeping Unit is a unique identifier that refers to a type of item or items for sale. It is used for sales, shipping and inventory purposes.

Service is Survival – The ScriberBase Whitepaper

Download our whitepaper and learn how online subscription models get ahead with good service.

Imagine you own a thriving online subscription business. Your customers place orders on the website, but they have questions about their subscription, problems with their order, billing issues, etc. Your team regularly answers email support tickets, but response times begin to lengthen as the volume of inquiries increases. If the cycle continues, business suffers as customer frustration trumps satisfaction. This scenario is all too familiar when dealing with customer service for many sub-commerce businesses.