There can be no doubt that Dollar Shave Club’s phenomenal success can be attributed to many factors—its irreverent and hilarious viral ads, its exemplary customer service, efficient manufacturing and distribution, and its incredible ability to scale, and (perhaps most importantly) its business model. Yes, there were many things that led to Dollar Shave Club (DSC) being bought for a cool $1 billion recently by Unilever. And their innovative and disruptive subscription business model was definitely one of them.
The incredible sale price DSC was able to command is that much more remarkable when you consider that their lowest priced plan is $1. Not just a name, the Dollar Shave Club truly is a club that you can join for one dollar.
Through the subscription model, DSC delivers razors (and other personal care products) to men every month. The razors are good quality but not necessarily cheaper than the leading brand (Gillette). But DSC offers something the other leading store brands do not: convenience. DSC doesn’t just sell razors, it sells convenience through a subscription model that delivers razors to the customer’s door every month.
Other factors in DSC’s success include maintaining a very strong repeat purchase rate (81%). A high repeat purchase rate is more common in businesses of low order sizes, and this is borne out by DSC, whose average order is only $10.
DSC’s strong value proposition and low per month commitment epitomize the subscription model based on replenishment, where consumers receive an ongoing delivery of a product they use all the time. This model can often overcome consumers’ natural reluctance to commit to a recurring payment because it offers a convenient way to obtain something they know they need. It also works well for products with relatively consistent consumption rates because customers can be more comfortable ‘setting it and forgetting it.’
The other categories for subscription boxes are sampling—one of the most popular models, which provides samples of things like beauty products, healthy snacks, candy, and more. Another model is the curation model where items are chosen based on a theme, such as computer gaming, jewelry, art supplies, food, and other interests. Some boxes are a combination—replenishing the supply of something you use or buy regularly, but also offering variety and unique finds in the category. Both of these models offer a different experience and value proposition from the replenishment model, as they are driven by customers wanting to fulfill different needs, such as the joy of discovering something new and different.
The most successful subscription box companies:
Focus on a niche market
Leverage a competitive advantage
Create unique marketing that sets them apart
Build strong customer loyalty to minimize churn
And of course, you’ll need a tool to help you manage and optimize your subscription business! To learn more about Recurly, talk to a Recurly expert at (844) 732-8759. Or sign up for a demo below.