Web-Based Subscription Businesses Surf A New Wave
The newspaper boy and the milkman might not come around as often as they used to, but the days of subscription and delivery aren't over. The Internet and overnight delivery have combined to make a new type of subscription business possible. The sales pitch is part convenience, part price and part cool factor.
Making Razors Cheap, And Cool
Some of the most successful business ideas are born out of frustration. For Michael Dubin, that frustration was buying razors.
"You have to go in the store; you have to find the razor fortress; it's always locked behind some Lucite case," Dubin says. "You've got to find the guy with the key; he's always texting his girlfriend; it takes five minutes. And then you get to the register, and it costs 20 bucks — and who wants to do that?"
Dubin is now CEO of Dollar Shave Club, which he launched last March with a video of him walking through a warehouse.
In the video, Dubin says "And do you think your razor needs a vibrating handle, a flashlight, a back-scratcher and 10 blades? Your handsome-ass grandfather had one blade. Stop paying for shave tech you don't need."
The ad went viral. Within the first week, Dollar Shave Club had 25,000 new members. Dubin says the site crashed, and orders were put on hold. One person who signed up early was Russell Holly.
"The first time I saw it, I absolutely thought it was a joke. But it really was a legitimate service they were offering," Holly says. "And I was amazed at how [inexpensively] they were able to deliver the exact same thing that I was already getting from the store."
Before he signed up, Holly spent between $20 and $25 a month on razors. And like a lot of men, he'd run out and end up paying top dollar for brand name blades at a local convenience store. Now, he pays seven bucks a month — including shipping and handling — for a set of four razors.
"By the time I'm down to one razor, another one has shown up on my doorstep," Holly says.
New Growth For Subscription Businesses
The subscription-based business model is nothing new. But right now, e-commerce subscriptions are exploding. Just name the item you're looking for — socks, T-shirts, baby toys — and there's a company that puts it in a box and will deliver it to you monthly.
Or, in one case, it delivers every 28 days. That's the schedule for Sent Her Way, started by Bryn Jurkens. The business delivers inconspicuous packages of panty liners, tampons and pads to women each month.
Jurkens has been called the female version of the "Dollar Shave Guy." And like Dubin, she and her roommate got tired of paying high prices for personal hygiene products at corner stores — in her case, in New York City.
"We would fly home and bring extra suitcases, and then we would stock up at Costco," Jurkens says. "And my roommate and I were lucky enough that we had storage bins on our rooftop on our apartment."
That's right: Desperate for a good deal, she stored tampons in storage bins on her roof.
"When it would rain, we would always go out and check, to see if there was anything leaking or anything," Jurkens says with a laugh.
At SentHerWay.com, you customize your box of goodies and choose how often you want it shipped. The cost is about a dollar more than what you'd pay at a local drugstore.
Benefits For Customers, And Entrepreneurs
"From the consumer's side, it's a wonderful timesaver," says Jim Schleckser, who runs a business-coaching firm called the CEO Project. Over the past few years, he says, he has seen a lot of young entrepreneurs embrace the subscription model.
"They love to have submodels because they can predict how much volume they're going to have, they know how much revenue is going to come in," he says. "And they can build an efficient way of supplying it. So their costs are lower."
The model is particularly attractive in a down economy. Once you lock customers in, there's no need to worry about them coming back for another purchase.
Last year, online retailer Amazon got in on the game with its Subscribe and Save program. Schleckser says there's no way a small company like Sent Her Way or Dollar Shave Club can compete on price with giants like Amazon.
"They can't make it about the product; they have to make it romantic somehow," he says. "They have to make it cool, hip, interesting, fun."
Forming A Connection
Which brings us back to Dollar Shave customer Holly. Other than razors, it turns out that he uses Amazon's subscription service for pretty much everything from light bulbs to air filters and crayons. The reason? In part, it's because of the little postcard that comes with each package.
"Two months ago, I got one where the postcard was bragging about a new label-maker that they'd gotten, and how proud they were of this label-maker," Holly says. "And there was a blurb that said, 'Five labels a second — what up.' It's a real quick thing, but it makes me laugh. And it reminds me that I'm spending money with guys who have a good sense of humor."
If startups like Dollar Shave Club and Sent Her Way expect to compete with big retailers, they'll need to make grooming and personal hygiene not only convenient, but also entertaining.
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