Built on a foundation of novelty, convenience and automatic credit card payments, local entrepreneurs are trying verticals as varied as kid’s craft and men’s underwear in their subscription commerce businesses.
A co-founder of Our Little Foxes, Phoebe Adams, was inspired to start her business providing monthly kid’s craft kits after signing her own family up to Hellofresh, the recipe-and-ingredients dispatcher which has raised $250 million over the past three years and become one of the successes of subscription commerce.
“It gets you cooking new things, it saves shopping time and there’s no leftovers,” she says.
Our Little Foxes aims to solve the same problem for craft, supplying time-poor parents a monthly box of ideas and all the paints and pipe cleaners they might require.
Adams and creative director Donna Armstrong launched Woolworths’ Baby & Toddlers loyalty program two years ago and Adams says Our Little Foxes is built on the same ethos.
“We want to get kids away from screens and bring families together.”
After month researching subscription commerce models, Adams learnt a key to growth is to scale early. Pooling funds with co-founder and Entrepreneurs Organisation member Luis Lequerica, Our Little Foxes has started with six fulltime staff and the ability to loss-lead in order to gain traction for the brand, with an eye to eventually becoming a craft kit supplier to restaurants and airlines.
The start-up sold 130 trial offers of a six month subscription for $60, which will barely cover Australia Post’s bill but “gets people talking about the product”, Adams says.
Working the opposite way is Nicholas Egonidis, founder of DailyJocks.com whose ‘Underwear Club’ will turn over $2.5 million in 2014/15.
He started as a lone blogger in 2009 pointing men towards discounts on designer briefs, in the “good old days” before Facebook started charging businesses to post. By 2012 the Melbournian had 100,000 email addresses and relationships with 45 underwear and swimwear brands, few of whom wanted to pay the higher advertorial rates that Egonidis thought his growth had justified.
“I had the problem of ‘how can I monetise this database?’. I never wanted to be that guy sitting at this kitchen table packing orders, but my community were telling me they wanted it, so I pivoted from marketing to subscription commerce,” Egonidis says.
Over 6000 members of The Underwear Club – 60 per cent of them in the US – now pay up to $65 a month to be sent three pairs of designer jocks.
“It sounds weird, but guys seem to enjoy the mystery of somebody else choosing their underwear,” Egonidis says.
He advises that subscription commerce is easier from an existing database.
“I had 2000 members within a month of launching, so it’s always been in the brands’ interest to give me a deep discount on retail. They know that sampling works for getting repeat customers.”
Selling the underwear that’s featured in previous sample boxes is now the fastest-growing part of DailyJocks.com.
Such ‘replenishment revenue’ was baked into the business model of NoToxBox, supplier of a monthly organic food and homewares box, when it launched in 2013. Founder Sharon Chung says 25 per cent of her revenues now come from customers buying full-size versions of a product they originally sampled, often on an automatic recurring payment as well.
She warns that for mature subscription commerce businesses, such automated payments can be a temptation to “go on autopilot…It actually takes effort to stop being a customer, so we need to keep offering a product mix that’s relevant and will keep our customers happy”.