Subscription-Based Startups Size Up Amazon, Brick-And-Mortar Stores

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looking to launch or expand an e-commerce platform, it’s clear that buying and selling items online is something that’s here to stay.

Still, Getz says some of the other startup companies that offer subscription services and have grown quickly “are just going to crash and burn.”

“The writing has been on the wall for a long time,” he says.

One company Getz singled out was New York-based Birchbox, which followed a rapid growth period with multiple announcements that it was laying off employees. The company is similar to Wantable in that it ships items directly to customers each month, but Birchbox focuses mostly on makeup samples. It also tries to beat competitors on price—subscribers pay $10 a month, while Getz says that Wantable’s rates for a box of goods, any of which can be returned at no additional cost, start at $36.

But with the core service that fueled much of Birchbox’s growth, products are not matched to the skin tones or preferences of individual clients. The idea was on top of spending $10 a month for samples, subscribers would visit Birchbox’s website and buy more makeup from its partner vendors à la carte.

“But that didn’t work,” Getz says. “All the vendors that sell to Birchbox are telling us, ‘They’re asking us for free samples but they’re not buying any of our product.’ Nothing, to me, paints a better picture of the flaw in that business model.”

Other competitors in the makeup subscription business faced challenges in 2016. Seattle-based Julep settled a lawsuit brought by the Washington state attorney general stemming from complaints that it enticed customers with free or discounted initial shipments that were difficult to cancel.

Wantable has raised more than $5.1 million since launching in 2011, and the majority of that total has come in the past year. The company reportedly has 73 employees, and in the coming months plans to move into a larger space a couple miles away from its current headquarters in Milwaukee’s Walker’s Point neighborhood. Last month, Wantable announced that it will soon begin shipping boxes to male customers containing athletic apparel. Still, the startup “will remain a female-centric brand,” Getz wrote in a post on the new business line.

Getz believes subscription services startups can justify a premium over Amazon or physical retailers by selling each consumer a box of items selected specifically for her. Wantable makes selections using a combination of software and human judgment, he says.

That’s also part of the value proposition with Bright Cellars, a startup that sends customers boxes containing four bottles of wine, with the option to add cheese. Each month, subscribers rate the most recent shipment, and the company feeds that data into a proprietary matching algorithm to create the next shipment, custom tuned to an individual’s tastes.

Bright Cellars co-founder and CEO Richard Yau says that the service is not designed with wine connoisseurs in mind, but rather to help people learn more about wine and understand what makes them like or dislike a particular vintage.

“I could ask someone, ‘What’s your favorite type of wine?’” Yau says. “Pinot Noir comes up a lot. A lot of people don’t realize that it’s a lighter-bodied red wine. I [might then] ask, ‘Do you … Next Page »

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