Why Would Anyone Abandon the White Hot Subscription-Based Business Model? We Did. Here’s Why.

3 years ago by in Best of The Web, Mentors Unplugged, Retail Tagged: ,

This awesome article originally appeared on Built In Chicago.

By Sharon Schneider, Founder and CEO, Moxie Jean, @sharonschneider

When a founder shares the nitty-gritty we listen and this is a good one.

Subscriptions models are hot: high lifetime value with a low customer acquisition cost adds up to strong investor interest. So why would anyone move away from a subscription model? We did. Here’s why.

Good Karma Clothing for Kids got some nice press in the last six months (Crains, Mashable, Technorati, etc.) for an innovative subscription model aimed at the coveted mom demographic. We solve a real, never-ending problem for busy moms, which is that babies go through 7 sizes of clothing in the first 2 years of life. That’s a new wardrobe, including onesies, sleepers, comfy everyday clothes and a few sweaters, jackets, socks—and don’t forget dressier outfits for church or family outings—every two or three months. Busy moms find it difficult and expensive to keep up with the constant wardrobe turnover, especially since babies often wear an outfit only once or twice before growing out of it. With a Good Karma subscription, moms could always have 7 right size, right season outfits in their possession, trading them in for the next size or season as necessary. What could be more convenient for mom?

With this subscription model, which reporters like to call “Netflix for baby clothes,” we won a high-profile competition in New York City during Social Media Week to be named “Best Collaborative Consumption Startup” and we even got in to Excelerate Labs this summer.

And, like many entrepreneurs, we had tons of positive feedback for our idea from the marketplace. Moms would constantly tell us “that’s awesome! I love what you’re doing.” (Often followed by “I wish I could subscribe, but…”)

At first, we were only listening to the first part of those sentences, the part where they loved our concept. But as the weeks went on, we started to realize that everyone loved our concept and (almost) nobody was signing up for the subscription service. It was a rough few weeks and we tried to tweak our web site and our messaging to increase conversions.

And then, during one talk by a seasoned entrepreneur, we heard a statement that summed up our dilemma: “there is a big difference between prospects who say ‘I love what you’re doing’ and those who say ‘I love what you’re doing and here’s my credit card.’”

So we started listening to the second part of the feedback from real moms. The part where they explained why they just couldn’t subscribe even though they wanted to. And we heard some concerns about the subscription model that we hadn’t considered before; In short, instead of a convenience, the subscription model felt like a burden to moms. Monthly subscription implies monthly turnover, and they didn’t necessarily need new outfits every month (and we didn’t necessarily want them to return it every month). Subscription means the clothes still belonged to us, and moms felt the burden of caring for them, keeping track of them and therefore “saving” them for special occasions. All these factors added up to more work for busy moms, not less. One mom told a mutual friend that the subscription “would stress me out.” Hmmm…that was the opposite of our intended result.

And so we lifted the subscription model off the top of our business. The rest remains the same: moms can now purchase high-quality, like new baby and kids clothes that have been inspected, steamed at high temperatures and styled into a few compatible outfits that we call a “bundle”. When they receive their bundles in the mail a few days later, they also receive a prepaid returnable mailer that they can stuff with like-new clothes their kids have outgrown and leave it for their mail carrier. When we receive the bag, we’ll send them store credit for the value of the clothes, which they can use to purchase the next size up. Or, if they just want to clean out their closets but don’t want to buy the next size up, they can donate their credits to the patients of the Ann and Robert H. Lurie Children’s Hospital of Chicago.

While lifting the subscription model off our business, we also changed our name and our branding to better reflect this broader audience appeal. Good Karma Clothing for Kids is now Moxie Jean, “kids’ consignment made easy.”

It may sound like the reasons our subscription model ultimately didn’t gain traction are particular to the baby clothes business, but in some ways I suspect they are broadly applicable. In essence, subscriptions first sound like a convenience but can quickly morph into a burden: the weekly copies of Forbes or Fast Company or (god help you) The Economist start to look like an accusatory stack staring at you from the coffee table; the weekly delivery of organic produce tortures you by rotting in the fruit bowl; the monthly delivery of personal care products starts to pile up in the hall closet making you feel like a burgeoning hoarder.

Yes, you can start a business providing a monthly subscription for almost anything (see Member.ly for instant subscription business creation), but after a few weeks or months of novelty, the steady supply of coffee/chocolate/razors/stuff might start to feel like a burden to subscribers. How do you keep them from burning out and cancelling their subscription?

My fellow Excelerate Labs portfolio company Whimseybox has been thinking about how the monthly subscription aspect of their business serves as an affordable entry point and discovery tool for crafters who then go on to purchase products they love, through Whimseybox of course. Founder Alicia DiRago shared with me the advice she heard from Inventables founder Zach Kaplan: Make sure your customers’ needs are driving the decision to offer a subscription service and not your own need for recurring revenue.

Maybe the subscription aspect of your business is only for the hard-core fans who will appreciate and truly use it up between deliveries. Maybe it’s a low-cost or low-barrier entry point for consumers who want to sample new options within a category they care a lot about. Maybe subscribers should be able to fine-tune the frequency of their deliveries to match their real-life situation. (I keep imagining the mobile app for a subscription service that provides regular deliveries of consumables—it has only one function: a button which says “Ship my next delivery.”)

Have you found a way to make subscription services sticky and fine-tuned to consumer needs? What do you think are the keys to success for subscription models? As a consumer, have you signed up for some of the new subscription services? What do you think of them?

Share your thoughts with us!
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