The subscription model is evolving. When upstarts like Birchbox, Dollar Shave Club and BARK crashed the party in the last five years, they were disruptive. Now they are all billion-dollar companies with a business model we expect.
Dollar Shave Club has expanded its product line to skin, hair, and cologne. Everything that makes sense for their target demographic. BARK can now be found in Target. Birchbox is partnering with companies like Disney to guide them in to the subscription box space.
You shouldn't view subscriptions as a separate business model. Instead, look at them as the first step in the process of acquiring market share from an existing industry. As a startup you're never going to be able to compete on the same playing field with large conglomerates, so level it.
Create a subscription service in another industry. There are plenty of industries still ready to be disrupted. Gain market share. Then, with the leverage you acquire through that market share, go out and compete at the highest level.
Here's how to create a subscription service and then use it to compete and partner with the largest companies in the world.
1. Connect with an audience.
Having enough patience to start small and narrow is tough. But your main goal in competing in established industries is to create a loyal audience. This is your leverage. And your vision should be long-term.
"BARK's long-term vision is to make every dog happy and healthy by ensuring BARK is available to all dog parents," said Joe Garafalo, vice president of finance, BARK.
What started as BarkBox, has evolved. But that was always the intent. Starting with subscriptions was the fastest and best way to introduce customers to the brand. The U.S. pet market is $86 billion in 2018 and growing.
"There is no one-size-fits-all solution for our customers," added Garafalo. "Dogs have distinct personalities and needs, and our ambition is to be able to serve each of them as individuals using any number of experiences depending on customer preferences, from self-service to full-scale concierge. We're rapidly scaling our operations for growth, while maintaining a lean and incredibly talented team to drive exciting new content and experiences for the dogs we love."
So, have a plan on how you want to grow and define the market-knowing that you're not going to appear in Target right away and that's completely fine. Your advantage as a startup is that you can move quickly and innovate. And the common thread you see with every successful company that started as a subscription service, is that they were very deliberate about how they connected with their target market.
2. Have a plan to scale.
This is something a lot of entrepreneurs, including myself, don't have at first. You're focused on achieving the first goal. But you're going to need to do something with the 2 million active customers you acquire, in the case of BARK, when you're successful.
Their plan was to use data and real-time insights to drive further growth. They found a partner in NetSuite, which allowed them to take their massive amounts of customer data and turn the data into insights. This allowed them to improve order management, purchasing, and inventory systems for its retail partner network, allowing it to make quicker, more informed decisions.
You shouldn't define yourself as one thing in 2019 and beyond. You're not a furniture company anymore, you're creating data-driven solutions for the future of work. A narrow focus gets you in the door-a broad appeal let's you stay in the house.
3. Create a retail plan.
This may sound like crazy advice. Why would you aspire to be a retail company at a time when retail struggles? It's the same reason why you aspire to be Budweiser if you're a craft beer company. Craft beer still only accounts for 15 percent of the overall beer market. The same is true for subscription services. They are growing but there's still considerable money in retail partnerships.
Look to create partnerships with large retailers before they try and create their own product. Target now has a Beauty Box to compete with Birchbox and Sephora.
Your best position is to become an ally for large retail. If you build a loyal following of customers, they want that. They want your cool factor, your demographics, your customer data. Create that and then use it as leverage.