003 - D2C Product Subscriptions

003 - D2C Product Subscriptions

For Convenience's Sake.

You are reading the free version of I/O B2B SaaS You can get the full report here.

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Convenience Economy

In the age of automation consumers will gladly pay to outsource repetitive tasks to save time. Autopilot repurchases of consumer goods gel well with a generation raised on software subscriptions.

Brands bypass retailers to deliver their products directly to the end customer.
Brands bypass retailers to deliver their products directly to the end customer.

Cutting out the Middleman

An obvious one: Because of eCommerce, brands are less dependent on the brick & mortar traffic of resellers to get their product in front of customers and can reach them directly.

Inspired by Packy McCormick's image for
Inspired by Packy McCormick's image for NotBoring.

Supply Chain Commoditization

Most steps in the value chain other than R&D have been commoditized by software companies. Anyone with a computer can now set up a DTC brand rather easily.

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Brands want increased CLTV, and predictable cashflows. Customers want to minimize effort on repeat purchases.

Brand-side

No Control over Branding

Retailers control brand & positioning. Brands can leverage this, but cannot control their own narrative.

No Customer Relationship

eComm is noisy. To stand out, brands need a personal relationship with their end customers, independent of resellers.

Increasing Competition

'On-shelf' competition on platforms like Amazon is increasing. Brands want to set up their own shelves.

Consumer-side

Effort of Reordering

Reordering products is a repetitive process, occupying mental RAM. It's a hassle.

Consumer Guilt

Consumers increasingly feel guilty about their consumerism. They are more aware of their ecological and social impact.

Paralysis by Analysis

Consumers don't want to pick from 20 similar brands. They want one brand that fits their needs & identity, and stick with it.

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Applying the subscription model to consumer products, either through repeat delivery or a hardware-software hybrid.

Key Features

Quality Product

D2C subscription startups don't mass-produce from Day 1. They can differentiate by focusing on product quality through technology, craft or both.

Strong Narrative

D2C startups have more control over their commercial story. The most successful ones have very strong brands and identities, and therefore stand out.

At Home Delivery

Customers turn to Subscriptions for convenience mostly. Part of that is not having to go to the store.

Fixed Monthly Price

Customers, and businesses, also turn to subscriptions for predictable expenses / income. Subscriptions facilitate this by charging a fixed price per unit time.

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AttributeScoreComments
Cost
Moderate
Low cost of launch. High Ad competition.
Difficulty
Very Low
All the tools exist to set this up in a weekend.
Competition
Very High
Extremely low barrier-to-entry. High competition.
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USPs 🧲

Personalization

Nearly all successful D2C subscription brands had at least a small poll or quiz to personalize their offering.

Sustainability

D2C Startups can build a brand from scratch, and ingrain sustainability in their processes a way larger businesses cannot compete with.

Low Friction

Removing friction is the foundation of a convenience oriented proposition. Just look at tools like Fast.

4 more in Pro Report

Moats 🛡

Mission Driven Branding

Supply Chain Commoditization kills the ability to be unique. Strong mission driven narratives give consumers something to emotionally rally behind. See: Billie

Type: Brand

Gamification

Good gamification with the right incentives can prevent users from switching to the numerous competitors you're likely to have.

Type: Switching Costs

Product - Service Ecoystems

Apple creates product-service ecosystems that make it very inconvenient to have to change brands. Create interdependent products + services to lock customers in.

Type: Switching Costs

3 more in Pro Report

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Models 💲

How to make money?

Subscription

Charge a fixed fee per unit time for an ongoing delivery of product or service.

Razor & Blades Model

Sell a one-time product at a loss, that comes with recurring consumables at a profit. Can also be: Product (one-time) + Software (recurring).

Peloton Model

Financing of product with low monthly rates, giving a 'subscription' experience to a purchase. Peloton combines this with Razor & Blades Model with video-class subscriptions.

Upsell / Cross Sell

Optimize Margin/CAC by funneling customers into more expensive subscriptions.

2 more in Pro Report

Leverage 📈

How to scale money?

Margins Optimize the basket size / subscription level, so you get the most return out of your CAC.

Data If your subscription has a software component, or even an interactive profile, more data will lead to more monetization models.

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Go-to-Market Strategy 🛫

How to find and attract users?

Paid Ads

The CAC for Subscription D2C is high, and heavily Ad dependent.

Nichefluencers

HiSmile was able to grow $20k to $40M almost exclusively through influencer marketing – starting out in the niches.

Pre-Hype Campaign

The now infamous hype loop by Harry's shows that a good pre-launch campaign can create virality even before launch.

2 more in Pro Report

Cheat Codes 🎮

How to accelerate the Go-to-Market?

Use Exclusivity

Work with drops and exclusives to keep the hype-cycle going and boost demand through Scarcity.

Keyword Hacking

Through SEO & SEM target competitor keywords to steal some of their market share.

Loyalty & Referral Programs

Loyalty is crucial to reduce Churn. Create a gamified loyalty program. Referral programs are crucial for growth. Create incentives for Word of Mouth.

2 more in Pro Report

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MeUndies

'Collect them all' gamification to extend CLTV.

Harry's

Famous for their pre-launch referral campagn.

Little Spoon

Great personalization and awareness of a growing market (parenting x food delivery)

Hims

Great branding and product positioning. Smart strategic category expansion.

Soylent

Started from a niche (fanatic programmers). Disruptive from a product perspective.

Peloton

Tackled a niche that is fanatic by nature, and leveraged that to go mainstream. Smart product + software hybrid.

Atolla

Went deep on personalization. Counter-positioning traditional skincare brands.

Native

Strong sustainability-driven positioning.

HiSmile

Best use of influencer-based brand building I can remember.

Buy the Pro Report for even more Online Community Startup Insights.

What you get:

  • BONUS: +2 Business Models, +2 Cheat Codes, +2 G2M Strategies, +4 Moats & +3 USPs.
  • +4 Validation Methods: The best way to measure Product Market Fit & more.
  • +3 MVPs: A step-by-step roll-out of your startup.
  • +4 Key Metrics: What to track to guarantee startup success.
  • +3 Dream Team Members: The essential co-founders for a super brand.
  • +3 D2C Risks: The number one cause of failure for subscription D2C startups.
  • +3 Responsible Practices: The most important differentiator in a commoditized market.

👋 That's all, peeps!

See you next time.

⚡️ Need help launching your D2C Product Subscription startup? Check-out our startup coaching, and venture building offering.
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