David: I have some great stats there from the industry. It's time to hear from people on the front line, sharing their insights on running a subscription box business. First, some introductions. My name is David Toon, subscriptions director at Jellyfish Connect. I'm also the founder of Subscription Radar. I've been documenting the rise of the subscription box industry for the last four or five years and it's great to welcome a panel of Subscription.
What's cool is I've been liaison for these years and watching you evolve, and really adding such innovation to the industry. So really, it's a bit of a mic check. It'd be great for each of you now to introduce yourselves and explain a little bit about the company you're from and the types of services you offer. Start with you, Daniel.
Dan: Cool, yes. So my name is Dan Bridgewater. I run a company called Buckt. We are a tickets and activities subscription box. So what that means is, every month, you get a little box in the post with five mystery activities that you can go and do around your regions. Everything from water zorbing to theater tickets to rage room. So basically, you get a baseball bat that you get to smash for an hour. It is incredible.
Janis: Hi. I'm Janis Thomas, I'm marketing director at Birchbox. We are the U.K.'s number one beauty box and obviously one of the companies that really kicked off this entire movement. We offer a personalized beauty subscription service. So essentially, we send you a mix of makeup, skincare, haircare, bodycare based on your beauty profile. So you tell us about, you know, do you have dry hair or greasy hair? What's your skin type? All of those things - we personalize those products for you. It's really about discovery and surprise and delight because for us, one of the most important foundations of what we do is, you will see a huge amount of advertising for the beauty industry and it's aimed at a very specific customer who is incredibly glamorous, knows exactly what she's doing, is quite happy to walk into Selfridges beauty counter and is not intimidated by the women who descend upon you. At Birchbox, we're not going after that audience. We go after somebody we call the beauty majority. So she's a regular woman who enjoys beauty as an interesting part of her life but she's not obsessed by it and actually being able to try new things and discover new things is really exciting and empowering for her.
Virginie: My name is Virginie. I'm the founder of Toucan Box. I'm the only one who took my product with me and we do subscription service for children aged three to eight. It's little craft activities sent through the letterbox.
John: I'm John. I am the co-founder of Crafts Gin Club. I must thank Janis for that introduction because we tend to introduce ourselves as the Birchbox for booze, easier that way. It's essentially a discovery box for Gin lovers. There's quite a boom in Gin, so, there's quite a few Gins out there to be had. We're filtering out and finding the best. We taste a lot of the product (terrible job).
And we just try to find some exclusives, some really good Gins and stuff that might not be in the country yet, and surprise people. It is that element of discovery as Philip was touching on before. Our club members are very surprised when they receive their box. They never know what they're going to get and that seems to be the key to their pleasure in subscribing and the occasional gin and tonic.
David: Thanks, guys. So, looking at your journey so far, I'd be interested to know some of the key changes or improvements that you've made along the way that have made such a positive impact on your journey so far. Daniel?
Dan: So we've changed significantly and I think that's all due to us constantly validating, constantly testing, and constantly speaking to customers. So, initially, the box was every two months. It was £45 as opposed to £25 which is what it is now. We had kind of mixture of ticketed activities and free activities and what we kind of found was when we were asking people why they were dropping off, they were just saying, "£45, it's just too much for me”, and actually, that £45, even if it's every two months, £25 every month felt better for them. And that just came from actually real people and I just find that quite interesting. Over the two-month period, it still works out more money, but they are more comfortable with spending £25. So we've changed very significantly, and due to just asking customers why you're leaving, why you're signed out, what you like, what don't you like.
David: So that feedback loop is obviously really important. I know Birchbox, you work a little with the feedback loop in the surveys. Is that one of the key improvements that you've made last with the customer engagement?
Janis: Yeah. I mean, I think, for us, data is absolutely vital. I think we're incredibly lucky that as I mentioned, we have this beauty profile data. We know what people have sampled, we get their feedback in terms of reviews and that does very much structure what we do. But I think in terms of our overall proposition, the idea that Cassio and Haley originally came up with was fundamentally such a great idea that we haven't really changed our proposition much. But I think our business is really, and our processes are really what we've had to evolve over the years - that it's very different. Now, we send out 160,000 subscription boxes a month. That's very different to when we were sending out only a handful and as the company grows, those processes have to change as a result.
Virginie: What's changed?
David: What's changed, yeah.
Virginie: The size of our box. So when we started, we had a massive box which was also more expensive, and I realized talking to our clients and our customers that actually, the delivery side of things was a bit of a pain because moms are busy. They don't want to go to the post office and collect their box if they're not in. And so we, over time, over the last five years, shrunk little by little the size of the box and decreased the prices as well.
So the box now, this one starts at £5.95. Our first one was £20, much bigger, more activities as well. So it's more affordable to more people and the beauty of that size is that it fits through the letterbox.
David: Yeah, sure. So you've reduced that amount of customer complaints and people not being in.
Virginie: And damages.
David: And damages, yeah. John, what key improvements have you made?
John: Yeah, it's been three years now. So as you might imagine any young company that there's been hell of a lot of change. I suppose one of the biggest ones was moving from our bedrooms to a proper office - that was probably one of the biggest steps. But I suppose, in terms of product, we started off just by drop shipping from distilleries. They would stick a bottle in a box and send it out. As we grew, that became more difficult, I remember we were working with one distillery where they employed their father and mother-in-law to pack the boxes. It was like 600 boxes at the time, but we grew, it took them three days, poor people. And as we grew, we started to add stuff to the box. So Gin & Tonic, kind of logical, and then snacks so people can enjoy a bag of crisps or some chocolates, something like that so that people can discover a little bit more of the experience.
We started with a digital magazine which people would receive by PDF, which was also created in the bedroom. And then we ended up printing that and putting that in the box. So the product has certainly evolved and processes and everything else that goes along with the business as well. But, yeah, the product has certainly evolved.
David: You touched on processes there. Now, one of the key things around subscription, every moving part has got to work for that monthly cycle. So it'd be interesting to know, what challenges you guys could have around that, at the moment to make sure that, that customer experience is consistent?
Dan: In terms of consistency, because of what we do, we craft a box of activities and we have to try and make sure that those activities are going to take enough boxes and push people out the comfort zones, and do it often. So there's a whole research piece and there's a whole sitting there and actually pulling those things together and making sure that it fits together and fits perfectly because if you get one week where it's fantastic and the next week it's rubbish, they might stay along a couple more months, but actually you want to make sure it's consistent. For example, we've got like yoga, but I know I'm thinking about putting yoga in the box in three months' time, for example, because I know that won't fit with the box we've got going out now. So, yes, I think maybe not about logistics but actually consistency. It's just making sure you'd spend that time researching and understanding your customer and pulling that box together that works for them.
David: And that forward planning.
Dan: Yeah, exactly.
Janis: Yeah. I think we have very similar issues that...well, if you've got this particular product that's great for this particular skin type, then you need something else that's good for a different skin type. And how big are the different products that go in the box because you could have a number of different combinations and will all fit, but equally, what's the impression when you open the box? If you end up with five really tiny samples, you're potentially not as satisfied as someone who's got five really big samples. So how do you manage those? How do you look at what you've received in your last few boxes, for example? Actually, we had a hairspray three boxes ago, so therefore, you shouldn't get a hairspray again. But I'm constantly amazed by how our logistics team allocate the different products in the box to fit with different people's beauty profiles and all those different considerations - the algorithm that puts that together is a masterpiece.
David: Yeah. I mean, I know, Virginie, you've got similar fulfillment, state-of-the-art fulfillment system, your fulfillment center, which customizes the delivery of the boxes. Is that right based on what they've selected?
Virginie: Yes. So we are a little bit different in that we actually design and manufacture the products ourselves. So we don't rely on external partners in giving out samples. So we are a little bit more...I guess we are completely in charge of what goes in the box. That comes with challenges as well because you need to do a good job and you can't blame it on anyone else. But again, in terms of allocation, I usually say that our product is very low tech but everything in the background is extremely high tech. In that we have the profile of our customers’ children, who vary a lot in ability especially from three to eight, there's a lot of different things you can do or not do depending on your age, the preferences, etc. And we decided very early on, actually from the start, to do everything ourselves which means doing all the fulfillment, all the packing and everything out of our factory - that gives us maximum flexibility. The flipside is that we have a factory and it's expensive, but that gives us a lot of flexibility to ship the right product to the right customer at the right time.
John: So you guys are both very brave. We do one box, and it's a very simple. Stuff goes in, no algorithms behind it, a few products per month, so quite simple to put together. However, it's very interesting that you produce your own stuff because we obviously rely on other suppliers and that's certainly somewhat of a nightmare sometimes. They're all very lovely people, don't get me wrong, but they can keep you up at night.
For instance, we once worked with a distiller in the north of Finland in a small barn. They usually would bottle at 50 centiliters but obviously, we need to send 70 centiliters out, so we said, "Get a 70-centiliter bottle." And he did and everything turned up the warehouse fine and then we packed it and shipped it out and then every single bottle leaked, every single one. The top had not been calibrated to the new bottle correctly. So, we went into emergency crisis mode as you might imagine - relying on them is very difficult.
Another story, when you rely on others is we shipped from New Zealand once and they said, "Yeah, it's on the boat." "Okay. Just in time. Great." And then two weeks later they called up and said, "Actually they left that container at the dock." "Right. Yeah, okay." And it fortunately showed up just in time, but you know there's lines in your eyes and gray hairs popping out everywhere.
There's advantages and disadvantages to every business model. That's one thing about the subscription box industry, in general, is that, yeah, we all have a similar model from the subscription side of things, but everything else behind the scenes is going to be completely different for every box. We can learn from each other but there are certain learnings that are going to be specific to certain types of boxes as well.
David: And you talked about relying on others. And, Virginie, it sounds like you've taken quite a lot in-house. But I'd be interested to know what you guys, if any, outsourced the different services, are you outsourcing fulfillment? I know you've taken it in-house or outsourcing any other parts of the business. Daniel, you're taking it all on, at the moment.
Dan: Yeah. So very recently we've pretty much done most things in-house which is when you're putting boxes together and you're getting cuts on your hands if you're putting that many boxes together. Honestly, I can put boxes together in my sleep, it's ridiculous. But we're literally in the process of outsourcing our marketing, Facebook paid marketing, paid advertising. We've started outsourcing video production but the actual crafting of the box, I think that's one of the things where you have to keep it in-house. Not have to keep it in-house but for us we have to because we need to take control, we need to make sure that that it is right for the customer. And that's I guess that's what is interesting about what uOpen and what you’re trying to do.
But I want to focus on creating a box and the marketing is a bit of a headache for me. I want to crack the box, I'm going to go test the product and test the activities and if I can get the marketing to somebody else, fantastic. But obviously, it's a cost thing for us, we're just at that point now where we can afford to actually do that properly.
David: Yeah. So, John, we're hearing of a lot and you're spinning so many plates and you just want to focus on that point. Same with Birchbox, you take quite a lot in-house or do you outsource various different elements of the business?
Janis: Yeah, I think very much as part of a growing business, you do have those questions about what do you keep in-house and what do you outsource. I think marketing is an interesting one that for us, for example, social is so important to us. That is one channel we 100% manage with an in-house team because they can be so much more responsive and reactive than an agency can. For us, that integration across the business, between we do all of our creative in-house for example. So the same team works on everything, from the box designs to the emails that you see, to the website, to the social posts. That integration and that look and feel that comes together from doing that kind of activity in-house rather than outsourcing to a number of different people, is just so powerful - that really resonates with our customers when you have this joined-up approach. When essentially you have a completely different product to market every single month.
David: Virginie, you take quite a lot of in-house, is anything outsourcing for you?
Virginie: I'm trying to think actually, I don't think there's a lot. Apart from we work on the marketing side with agencies, but apart from that.
David: Yeah, you keep that control. John, same for you?
John: Yeah, we're similar, I suppose, to Janine where we do all the marketing in-house and kind of look at ourselves as a marketing company to a certain degree and all of the logistics gets outsourced. Plus, we don't want to deal with HMRC, you know, those licenses you need to deliver booze. So somebody else does that for us, it's a little bit easier.
David: I think we've got a little bit time for one more question before we get some questions possibly from the audience before or while on a coffee break. I suppose, really, it's been interesting to know over the next 12 months what was the focus for you guys?
Dan: So for us at the moment, we're only in the West Midlands, so it's expansion. In my head, I know what the threshold is that we need to get to, to allow us to expand to London and Manchester and it isn't that far away. So for the next 12 months, it's just about getting to those areas and growing our subscriber numbers so we can catch up with these guys and just make sure we've got a good spread across the country really.
Because I think we've got, like I said earlier, we tested the product that much and had that feedback loop back into our customers, that we know this product works and we know this product is a good product, and our retention right now is really high. But we just need to get into those new areas and get ready to...
David: Get ready to replicate into those cities now, isn't it? Yeah.
David: And for Birchbox, over the next 12 months, I know you've sampled some pop-up stores and things like that. Is that a sign of the future as well?
Janis: I think, you know, who knows what the next year will bring on that front. I think for us, it's about continuing to grow and innovate and reach new people and understand our audience and what do they want, what do our potential audience want and really capitalize on that.
David: Yeah. Virginie?
Virginie: Yeah, same. We ship 100,000 boxes in U.K. We want to ship more, so continue to build in U.K., and then in parallelDavi, launch in other countries. So we've launched France and Italy last year. We'll be launching in Germany in two weeks' time and then sort of roll that from there in Europe.
John: Yeah, growth, just the same as those guys' growth. So managing the growth is always difficult from hiring staff to sourcing product, to making sure you got enough warehouse space. I suppose, just very similar to you guys, we've kind of grown the company pretty cheap and dirty to be honest, so it's time to grow up a little bit. Looking at metrics and things like that is something we'll be diving into a little bit more, maybe some tech as well - we're very low tech today.
David: Well, thank you, guys. There's been great insight here.