Since first meeting our most recent investment, Mindful Chef, we have become fascinated with how brands use subscription to delight their customers. Referred to as ‘subcom’ by those working in the space, it’s a business model that is attractive to both consumers and investors.
From a consumer perspective, subscription-based ecommerce brands are helping them save time and creating enriched experiences. From an investor perspective, it’s a recurring revenue model that allows you to recruit and retain customers effectively, whilst creating long-standing relationships.
So, for the latest GeekMeet, Piper’s popular quarterly roundtable of ecommerce minds, we gathered 11 founders from the UK’s leading subscription businesses to share war stories, insight, metrics and strategies. From alcohol, stationery, health, pet services, food, nappies and feminine care, there were striking similarities between their approaches and experiences.
The liveliest discussion was around when to move into more traditional retail channels. Using Graze (now prevalent in supermarkets in convenience stores) and Harry’s (has recently launched in Boots) as examples, there was a common belief amongst those in the room that, as a subscription brand, you need physical retail to boost awareness and create value for investors.
This may be true when these businesses reach a certain scale. However, for us at Piper, the focus in the early stages of a brand’s evolution is doing what you are good at even better. Retail requires a different mind-set and is not just about obtaining listings. Maintaining and evolving relationships with retailers involves a huge amount of resource and can lead to a loss of focus and a dilution of the core consumer proposition. The recent sale of Tails.com to Nestle Purina showed that there is significant strategic value in maintaining a direct to consumer focus.
There was also a common desire to give back and do something good for the world. It was humbling to hear that every brand has a strong altruistic culture, from buying acres of forestry, planting trees and creating food for dog shelters to helping kids go to school.
Mindful Chef explained the importance of becoming a B-Corp and announced its amazing achievement of donating 1 million meals to school children in Malawi under its One Feeds Two campaign. Above all else, this has helped the brand recruit talented people who share its values.
Unlike most GeekMeets, platform and tech didn’t feature as being a major blockage to growth. Many have adopted off-the-shelf apps such as Recharge or Bold, which are integrated with Shopify+, Woo commerce or a bespoke platform. The ease of scaling was demonstrated by one founder announcing that his brand had launched a website in the US that very same evening.
Payment options and final mile delivery were seen as important to the consumer experience as the product itself.
The group discussed the merits of payment providers such as Stripe (provider of choice for Shopify) and GoCardless, alongside the challenges of chargebacks, platform integration and general barriers to conversion from an authorisation perspective.
From a final mile perspective, several founders have seen customers cancel their subscriptions as a result of a negative brand experience such as failings with DPD or Yodel deliveries left in the wrong place or packages being damaged. Some had managed to reverse this churn by allowing consumers to ‘toggle’ and choose a preferred provider.
Alongside this, the founders spoke about the importance of gaining instant access to accurate data and metrics to support complex attribution models. They are looking at not just a CAC/LTV ratio, but at numerous CAC models depending on the consumer segment – if you know a certain type of consumer will spend more over the course of their life, why not spend more to target and acquire that type of consumer.
At Piper, we are constantly speaking to consumers to understand how they engage with brands. Our own most recent consumer research highlighted four meta-trends: saving time, looking after the world around me, taking care of myself and my family and making the most of my life. The modern breed of subscription brands define most, if not all, of these trends shaping consumer behaviour.
For more information, please contact:
Leon Hughes, Associate Partner
Phone +44 (0)207 727 3842