The Surprise Box: A New Twist On An Old Marketing Ploy

Editor’s note: This story appears in the latest magazine issue of Talk Business Arkansas, which you can read online at this link.

For a brief time in my childhood, my mom subscribed to some kind of monthly gourmet food basket service. Each month, when the box would arrive, it was better than Christmas to her. She would lovingly pull each item out of its packaging and read over suggested recipes dreaming of the delectable meals she would prepare for our family.

My sister and I were slightly less enthusiastic about this monthly ritual. As far as we were concerned all this meant was weird food on the table, and since our middle school and junior high age bracket cool factor required it, we rejected anything that might seem experimental or outside the very clear rut we wanted to live in.

My mother eventually deemed us lost causes and ended her subscription. Some years later as an adult, I heard my step-dad complaining about all the “foofy” coffee in their house. A quick look in their pantry revealed she’d found a new subscription service. She was trying all new kinds of coffee each month. Her desire for culinary experimentation remains strong.

What the food industry figured out decades ago is there are a lot of customers like my mother: people who want to branch out of what is available in their local stores, but don’t have the time or resources to find other options. They are also people who genuinely love serendipity, and will pay for the opportunity and convenience to have all of that delivered to their doorstep.

Now other industries have decided to target this same customer. In the past three years, countless new companies, including at least two in Arkansas, showcasing everything from cosmetics to socks to children’s crafts have sprung up.

Like any trend, some are doing it quite well; others will probably not last long. None we spoke to believe what’s sold “in the box” will be the end game for their business model. Each sees this as the entry into new customers’ homes and ultimately their pocketbooks.

The box services can be broken down into two main business models: sample/marketing boxes or product boxes.

SAMPLE/MARKETING BOXES
If you’re a woman aged 18-35 and participate in social media, you probably know each month when Birchbox subscriptions arrive. The company boasts 400,000 thousand subscribers, and they seem to be a vocal group.

When customers sign up for the beauty and cosmetics service, they fill out a form with preferences and skin type. In theory, this allows each box to be tailored to each customer.

Paige Thurmond of Little Rock said when comparing notes with friends who also subscribe to Birchbox, she notices they do get different items, but they are not necessarily properly matched to each subscriber.

Still, she definitely enjoys the service and recommends it to others, “There are months that are hit or miss, however I always feel like I get my investment back. There are months that full-size samples are included.”

Birchbox runs about $10 per month, which makes it an attractive price point for sampling in the beauty and cosmetics world, where products can be expensive, especially if they go unused. The company doesn’t plan to stay in just this market though.

“We’ve always believed that the Birchbox experience is replicable across multiple verticals, not just beauty,” said Katia Beauchamp, co-founder and co-CEO of Birchbox. “We’ve been blown away by our subscribers’ interest in home, entertaining, and lifestyle products, as well as the success of Birchbox Man.”

Bro Box is another company trying to break the “guy gift-giving barrier,” according to C.E.Bro Chris Klecyngier. The company just launched this year and sent out their first boxes in June.

Aimed specifically at millennial males, the $15 per month service focuses on products with minimalist packaging and personal products that “don’t smell like flowers.” Also, all products sampled in the box can be purchased online, eliminating the need to enter a brick and mortar store for products customers like, a barrier Bro Box believes to be significant for 18-34 year-old males.

In Arkansas, Jamie Walden and Keith Hoelzeman founded Treatsie this year. The artisan candy sampler costs $15 per month. Hoelzeman said the idea came from his frustration trying buy high-end candy online and his wife’s Birchbox. He felt the lack of curation in this market made it a prime candidate for a sample box.

Walden added that shopping online has become a double-edged sword, “Consumers become overwhelmed by information and noise, so much so that we’ve begun turning to recommendation engines. Subscription sample boxes like Treatsie offer a try-before-you-buy way to discover new products with much less risk. They cost less than a full size product and there’s a variety so you’re likely to find something new that you love.”

The subscribers seem to love what they’re getting. Hoelzeman said every confectioner featured in the box to date has asked to be back in because of the bump they’ve seen in their sales.

Long-term, the two built their business so that the subscription box is just one piece of it. Their website is a full e-commerce site where customers can buy what was in this month or previous month’s boxes. They don’t have to be a subscriber to do so.

PRODUCT BOXES
“I should probably get on the payroll at Kiwi Crate because I tell EVERYONE about them,” said Stephanie McCratic of Fayetteville. “I was immediately blown away by the concept and quality. The crafts on their website are so thoughtful and cute. I just don’t have the time or energy to figure out fun crafts for my daughter, and here they are all packaged neatly and delivered right to my door.”

At $20 per month, Kiwi Crate delivers 2-3 hands-on projects for parents to do with their children ages 3-7. The company’s design team develops each crate to be something only they provide.

The company boasts more than 100,000 crates shipped through 2012 and revenue growth of more than 115% quarter-over-quarter throughout 2012.

“People are placing a lot higher value on their time and on great experiences, rather than simply getting a lot of stuff,” said founder Sandra Oh Lin. With all the information and resources available on the web today, there are literally a million things to do with your kids that you can choose from – we narrow the choice for you by curating and vetting the projects, then make the procurement literally no effort by offering it as a subscription.”

The low-effort gift is what inspired Bryan DeLuca and his other co-founders to create Foot Cardigan, a $9 per month subscription sock company.

He believes the price point set at a low, expendable income spot allows people to get the benefit of staying on the mind of a remote loved one each month without actually having to go to any effort.

The company has just turned a year old and is claiming roughly 2,000 subscribers, many of which came along at Christmas time as stocking stuffers.

DeLuca said 60 percent of their subscriptions are for men, but women pay them for. “Often women want their men to take more fashion risks. Socks are a safe place to start.” Even for men who would be willing to branch out, he said many of his male subscribers are bound by specific dress codes, either suits or scrubs, because of their profession. Socks are a place to make a statement without making waves.

Foot Cardigan has begun to manufacture its own line of socks, so the monthly subscription box is the only place to get them for now. They plan to begin selling through their website in the near future.

For Arkansas-based Bourbon and Boots, the decision to get into the subscription box business came after more than a year of direct sales from their website.

“We wanted another way to provide a great product to our loyal fans,” said co-founder Matt Price. “We also thought it was a good way to test out some new products to see if our fans enjoy them.”

For $42 per month, a seasonally curated group of products are delivered to subscribers. Price said initial reaction has been positive. Vendors who already sell through the site are vying to be included, as well as new vendors not previously associated with the company. So far, he says 90% of subscriptions have been to women.

LONGEVITY?
It’s hard to say that an old idea like an “of-the-month” club is fresh or inventive. Birchbox thinks they can take their sampling model through multiple channels, from beauty and grooming to home, garden and food. Kiwi Crate believes the subscription model will hold up as the core of its business model, but it has added ancillary pieces to its website, such as party favors.

Perhaps Walden of Treatsie is on to the key to help companies be profitable in the long run.

“It’s just fun to come home to a surprise box of treats on your doorstep,” said Walden. “We think the smart companies are ones that are tightly integrating with social media so that you don’t just eat your Treatsie box alone. You share the experience with thousands of other candy enthusiasts online.”