From razors to pet food, the subscription box business is still going strong.
Ten subscription box companies and related services are among the fastest-growing private U.S. companies in 2018 and rank on the Inc. 5000. This is after Los Angeles-based subscription box for "geeks and gamers" Loot Crate took the No. 1 spot last year.
The trendy business model has kept pace even as the market has become more fragmented. There are now more than 5,000 subscription-type businesses, according to Chris George, chairman of the board of the Subscription Trade Association, who is also co-founder of Gentleman's Box.
With such big retailers as Target, Walmart, and Under Armour entering the arena, more mergers and acquisitions are expected, says George. The big challenge for most subscription services now is differentiating from Amazon, and the best companies do it with a great customer experience. "Amazon is the big gorilla and they sell everything," George says.
"There are some very small players who are uncovering various niches," says Jon Wood, global knowledge management director for Kantar Consulting North America, a specialist growth consulting firm in New York City. The most successful companies are those that apply careful market research to solve customers' problems, Wood says.
Here's a look at three fast-growing subscription companies that made the cut for the Inc. 5000 this year.
"Trending" is the key word in BoxyCharm's formula for success. BoxyCharm ships more than 500,000 boxes of five full-size brand-name or popular new makeup items valued at $100 or more once a month. The company grew 2,447 percent from 2014 to 2017, pulling in $49 million in revenue last year, putting it at No. 176 on the Inc. list. Its boxes have included such brands as Mac, Smashbox, ColourPop, and BareMinerals, according to CEO Yosef Martin. The company uses artificial intelligence to forecast market trends and learn more about what consumers want.
What's more, Martin says, his team notices social media influencers launching their own beauty brands and then works to foster relationships with them. For example, BoxyCharm has included Artist Couture by celebrity makeup artist Angel Merino, known online as "Mac Daddyy," and YouTube star Gabriela Trujillo's Alamar Cosmetics. YouTube video blogger Laura Lee's Los Angeles brand was in the August box, he says.
After earning $16.9 million in revenue last year, SnackNation, a subscription service that sends curated boxes of healthy snacks to offices, is No. 24 on the Inc. 5000, with growth of 9,200 percent from 2014 to 2017.
SnackNation CEO Sean Kelly says offices can choose to receive new boxes every day, every week, every month, or even every quarter--deliveries are customizable. But SnackNation is also a platform for emerging nutritional brands, he says.
SnackNation collects data and other insights that its partners can use to improve their products. About 50 new brands are introduced into SnackNation boxes each month, after a rigorous taste test. Its tasting panel tests 100 to 200 brands a month.
At its core, Kelly says, SnackNation aims to help people discover healthy food they love. Serving the aspirational customer is key for subscription businesses, according to Kelly. "Subscription businesses that act as a guide to their customers' positive transformation are those that win," he says.
While the founders of Grove Collaborative drew inspiration from traditional subscription boxes, their business is a bit different, CEO Stuart Landesberg says. Grove sells natural home and personal care products on a schedule that customers choose. Customers can opt for a subscription service that auto-replenishes products on a recommended schedule or cancel auto-ship and just order boxes to come in whenever they'd like.
And order they do. Grove pulled in $45.5 million in revenue last year and ranks No. 37 on the Inc. 5000 list, having grown 7,036 percent from 2014 to 2017.
The goal was to help build positive habits but also be flexible, Landesberg says. "Sometimes people go on vacation, sometimes your in-laws come to town, sometimes your daughter goes through more diapers than you expect," he says.
In the "Grove Guide" program, customers are assigned an employee who communicates via email, text, or phone for updates on deliveries and consultations about Grove Collaborative products (it sells its own brand and third-party items). Employees answer about 10,000 text messages from customers every month, Landesberg says.
"It's not just about the convenience of deliveries, but it's really about making sure that we have an environment where consumers feel excited to try new products," he says.