Brian Breslin

Are subscription models the future of retail?

If you follow my business interests either through twitter or facebook posts, you know that I love subscription/recurring revenue models. I absolutely love them. Seriously. SaaS or PaaS or whatever you want to call it, is the future for stabilizing cash-flow models and distributing software in my opinion. Now the question is, does this model translate to retail goods?

Dollar shave club is one of the new kids on the block doing this for men’s shaving products. Effectively DSC is trying to become the bathroom subscription for men. They are selling razors, shaving creams, butt wipes, and I am sure they have a handful of other products in the pipeline. DSC is clever in that they don’t even make unique razors, they resell DORCO brand razors and mark them up 200%. One of their most direct competitors, Harry’s (who I prefer), even recently bet so big that they bought the factory that makes the razors and raised over $100 Million in capital.

There is a big opportunity in becoming the subscription source for consumables for people, as the margins may not be high, but the volume is consistent, and these are long term customers. The lifetime value of these customers is the real beauty of the model though. This is something I’ve been thinking about a lot over the last year, and if I had a team of MBAs with backgrounds at P&G or Unilever I would attempt this.

Imagine a business like DSC that grabs teens or young adults, and then evolves with them, or graduates them to their older brands as they age. Imagine AXE doing subscriptions. They hook teens to using their razors/shower-gel/deodorant on a subscription basis at 16/17 (using their parents credit cards), and then grow with them for the next 10 years until they migrate them into the James Bond themed brand of skincare/bathroom products. The revenue potential for these customers could be huge. The kicker is you keep these customers OUT of forming the habit of going to target/walmart/cvs/walgreens to buy consumables and make them think it is ridiculous to not have your bathroom consumables come to you.

Once you can figure out the model for customer acquisition costs (could be high), lifetime value of the customer (could be huge), and the logistics costs, this could be a giant business.

So why isn’t someone tackling this for girls? Or other verticals? Off the top of my head I see a ton of subscription businesses that could be built and branded (key is branding, otherwise amazon eats your lunch): razors, feminine hygiene, adult diapers, kids diapers, vitamins/supplements, the list goes on. More importantly why aren’t local retailers taking a look at this?

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