The Subscription Model Isn’t Just for Gym Memberships

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As a consumer, we are living at a pretty cool time.  New online companies are popping up on what seems to be a weekly basis that are competing for our hard earned dollar.  Many of these companies are backed by venture capitalist money and are constantly trying to get a solid read on what the business is worth.  That said, it can be difficult to predict revenue on a monthly basis, sales could fluctuate wildly based on weather, economic conditions, or even fashion trends.  How can a business stabilize sales a bit, the subscription model.  Over the last few years, companies offerings subscriptions have exploded.  Whether it is the wine of the month club, to Birchbox, PopSugar, MeUndies, Dollar Shave Club, or even Bark Box for your dog, this is a fast growing segment of business, and the thought process makes too much sense.

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Let’s take MeUndies for example.  The company was started in 2012 and was basically just selling men’s boxer briefs.  As a man, I can say with confidence that we don’t spend all too much time thinking about our underwear  I heard an advertisement for the company on a podcast six months ago, and thought I would check out the website.  It was very sleek, and basically suckered me in to trying them out and I purchased one pair for $24 (including shipping), which is quite a pretty penny for a pair of underwear.  After I received them, I thought they were quite comfortable, and thought, why not, and signed up for a subscription.  Now I receive a new pair with a different design once a month at 33% discount.  Its good for me with the discount, but also creates the idea of a continuous revenue stream for the company.

Its also funny to see how invested the consumer gets with these subscription products.  For a birthday present, my cousin received a six month subscription to PopSugar.  I had heard of the company, but didn’t know much about it.  For roughly $40 per month, she receives a box that is said to valued at over $100.  I happened to be at her home when she received hers this month and you would have thought the UPS driver was Santa Claus himself.  There was make up, a hair band, some strange honey mustard, a bingo set and more.  All things that you are not sure that you wanted, but the opportunity to try out some new things.  She said to me it was like having your birthday once a month, which as a business, what more could you want for your customer?

If you would told me two years ago that I would have a subscription for $20 boxers, I would have laughed out loud, but I think these subscription companies are truly up to something.  The key is to find something that the consumer needs and makes them feel comfortable about it on a monthly business.  Come to think about it, that sounds a lot like the home warranty business!!

Interesting Entrepreneurial Success Story

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You often hear of fun entrepreneurial stories about how someone started a business in their basement or something of that nature.  I also wrote about the disruption in the mattress vertical over the last 18 months, and what an exciting business that seems to be in an industry that has been around for hundreds of years.  I have to say though, I really like the story of the guys who have put together Ring.com, which is a wi-fi enabled doorbell.

What makes their story so interesting is that the founder, Jamie Siminoff, was filmed on an episode of ABC’s Shark Tank in September of 2013, under their previous name of DoorBot.  The premise of the product is that it mounts outside of your front door and has a 180 degree motion sensor camera.  When someone approaches the door it sends a message to your phone where you then can see and speak to whomever is at your door, whether you are on the couch or in Costa Rica.

While the team had high hopes for Shark Tank, all of the ‘sharks’ dropped out minus one who wanted to extend a loan for future holdings in the company, Siminoff politely declined, and walked away a bit rejected.  I’m assuming that felt a bit like the end of the road for Siminoff and their team, but they decided to go back to the drawing board and work on the product.  Sales were growing, as they stated they brought in over $250K in sales the month of the taping.  Two months later they received the call as to when the show was going to air.  The episode did finally air later that year in November and gave the company the exposure they so desperately needed.  Orders were coming in like crazy, and while there were no true interested investors on the show, Siminoff received a call that changed his life forever.

Virgin Airlines founder, Richard Branson was vacationing in the Caribbean and a person next to him was using the Doorbot software to speak to a delivery person.  Branson was astonished with the product and reached out right away in effort to become an investor.  At this same time, they decided to invest in the domain of Ring.com, and rebrand a bit to look more professional.  The name change and the spot on television provided increased credibility and they were now being sold in both Lowes and Home Depot.  Branson joined a group of investors and the company was now valued at $60M.  All of this took place in a matter of months after the show airing!  Now the product is appearing on many of the holiday gadget gift lists, and the company is set for even more growth.

Its almost hard to believe how quickly the company took off after the Shark Tank episode aired, but also a sign for all entrepreneurs out there, that you just need that one break, you never know where it is going to come from, but when it happens, you need to take advantage of it.  I’ll be keeping a close eye on the team at Ring.com for years to come, and congrats on your successes.

Does REI Boycotting Black Friday Matter?

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Seattle based outdoor enthusiast company, REI, made an interesting announcement last week.  They will be closed the day after Thanksgiving or better known as ‘Black Friday’.  The company is using the hashtag #optoutside, asking people to spend time outside with their family instead of going out an shopping.  Its also a great nod to their employees who don’t have to spend the craziest shopping day of the year at work.  All of that sounds great, but I’m a big cynical.

Let’s face it, businesses are put together to bring in revenue.  Actually, the sole purpose of a publicly traded company is to create shareholder value, therefore, does it make sense to close your doors on the busiest shopping day of the year, thus passing up a tremendous amount of sales?  In this particular situation, it actually may make a ton of sense.  REI was able to do multiple things with their announcement last week

  • Earn a tremendous amount of goodwill with their employees, by giving them this day to spend with their family.  It also says something about the company culture for people who are looking for employment in the future.
  • Earn brand awareness by putting their decision out in the news.  The story was covered by just about every major media outlet.  They also made a point to target the branding.  The are not simply closing the store so people can spend time with their family, but they make a point to say they should take the day to spend time “outdoors’.  It just so happens that all of the products they sell are geared toward spending time outside.
  • The decision isn’t just to close the stores, but is a talking point to the commercialization of the holiday season.  As the week of Thanksgiving comes around, this topic will be brought back into the news cycle once more, as a bit of a moral play.  Therefore REI, being the first mover on the decision to close on Black Friday will get even more press
  • Shopping habits have been changing every year over the last ten as more and more people are doing their shopping online.  I can guarantee you that REI.com will be up and running on Black Friday and that plenty of people, because of this news over the previous month will be even more apt to place their orders through the website.

Its really an interesting and exciting move by REI to buck the trend and close up shop for the day, however will other companies follow suit?  My guess would be no, as REI, being the first to go down this road has taken all of the headlines.  Another company doing this would not garner nearly the same attention.  It takes a lot of guts to not be open for the biggest shopping day of the year, it will be quite interesting to see what this does for REI’s numbers over the holiday season, I don’t see it becoming a trend, but nevertheless an ‘outside the box’ idea by REI may just pay off.