The Death of the Subscription Box & The Rise of Membership

Hello, and welcome. This is Rick Watson. I am here with John Romain, the CEO of Battlebox. Thanks for coming to the program. Thanks for having me, Rick. You have, I think, a particularly unique view on a number of subjects. You produce a lot of great content. You also have the name of your company suggests something, and almost like the era that it was founded in. Because the box business, meaning the subscription box business, had a moment, like a cultural moment that was sort of like a submoment within the D to C, you know, legend. Can you talk about your founding story? Like, where did Battlebox come from? And I think that's a good place to kick us off. So yeah, so let's go back to 2015, which as you said, was like this moment where subscription boxes were just the coolest thing, and everyone had two of them or three of them, it seemed. And obviously that's changed a lot in the last decade, right? That this little subnation is gotten absolutely destroyed. And there's not a lot of survivors left, and the big ones, the golden child children, right, the birch boxes of the world that are long gone, or an empty shell of what they used to be. So yeah, so my ex-business partner, he hasn't been involved in the business in quite some time now, five years. His fiance at the time was getting a birch box, ironically, which was this billion dollar. They were the gold standard. And he'd see her get it every month, and the genuine excitement on her face, opening up, unboxing, seeing these new beauty and health products, and she enjoyed it. And people wanted that feeling for himself. Avid Outdoors, Ben, went online, was like, well, there's all these subscription boxes. Surely there's one for me. And he couldn't find one. It was as simple as that. He said, well, maybe there's an opportunity here. And yeah, the rest is history, right? We were on, you know, they're technically, I guess they are still around. They haven't gone under. They're probably nowhere near where they used to be. But we launched with the not-on-shopify. We launched on a very niche platform called Crajjoy. That was, I know Crajjoy. Okay. Yeah. I mean, they were, hey, without any web development. Yeah, it's a marketplace. Yeah. We launched a website, nowhere near what ours is today. But we launched a website through a template, and we're off to the races fairly quickly. And the subscription box world is, you're selling for a month before you even have to fulfill. So you're like, you're getting this cash in, this almost even validating product market fit with very little risk. And that was it. We were, you know, his desire for replicating his fiancee's feeling for himself, it turned out he wasn't alone. And it was, it was probably, you know, if we launched today, I think the beard entries much different, much, much different. And, you know, it was, it was, it was timing. It was timing with a few other variables. But 2015 was the time to do it. Yeah. No, I, it's a fascinating story as well as the, as the rest of your story in today. But I think it, it definitely pinpoints a time. Funny. I actually, Crajjoy was a consulting client of mine like early on in the business, maybe in the 2020 time frame. I even went to Austin to their HQ. Yeah. It was a lot of fun. And so it was, it's definitely a cool business that was actually doing quite well at the time. Because they were, they were out of YC. Like, they had this. It's huge momentum. Yeah. Yeah. It's so interesting. But I didn't even know that you guys launched on Crajjoy before just a few minutes ago. So that's hilarious. Yeah. Yeah. We were, that was it. Talk to me about the subscription box. And what is that like battle box? Okay. So it, it had, like subscription boxes in your name. So what do you think about the subscription box now? I hate the terms in the description box. And it's just to your point, it's in our name. You can't say it, right? It's battle box. At the end of the day, we're just outdoor survival storefront gear, place community for people to, people to come to big emphasis on the community piece. But the reality is our core business. It'll probably still be about 70, 75% of our revenue in 2026 is the membership. That's great. Which is another word for the subscription box. Well, we buy design, call it a membership because, man, the subscription box industry and the model, it has a couple of black eyes. It's been a rough couple of years for most. Everyone I've seen, particularly in fashion where you have configuration, a size color, especially fit. Those things are a disaster and normal retail. Never mind a subscription box business. And so those guys never had a prayer, but they didn't know it. But the rest of it, when you say the model has some black eyes, talk to me about the inventory component of it and how you manage that. So it is such a challenge because, so let's go back February 2015, March 2015, the first month I think we had, I think 300 people signed up for the subscription box. So we had an idea, we had already gotten pricing, ordering 300 from these six, seven different vendors, or maybe we'll get lucky and one vendor is four things. It's easy, right? It's on the shelf. We haven't had a couple of days. We already got the money for it. So it's easy to pay. Very, very, very easy process. When we crossed that, somewhere probably in the 8,000 to 10,000 membership levels, the dynamics completely changed because no vendor has, because you know, these aren't samples, these aren't little, you know, atomizers of perfume. These are actual pieces of gear. So no one has things, heavy, bulky things sometimes. Right. And no one has them sitting on a shelf. At that, at that scale, it's a production run. Whether, whether they're doing a dedicated production run, whether you're piggybacking on their next production run, what we do now, at times we give them smaller businesses their first production run. We take their product to scale, because you have the audience. We have the audience. And you know, it's the only way to get the quantity. That's actually like a really testament, I think, to your your platform, which is what I would call it, to launch, to launch brands. I mean, much way, much the same way that great joy was for you. No, and it's a good point. And it's one of those things some boxes are checked with just feeling good about a situation with some of these where like, it's a knife maker. And you know, he can he can pop out 100 knives in a month. And it's that's pretty cool. But like now we need thousands and thousands and thousands. So like we're showing him our supply chain and allowing him to then take his business to the next level, which is, which is kind of cool to showcase. Yeah. So case the smaller businesses. So to answer your questions tonight, Mayor, because it's production runs. And you know, the challenges of it's tough to really build too many relationships on the manufacturing brand side, because we can't feature the same brand too many times. We can't ever feature the same product. So like, as soon as we're done with one month, it's the next. But we're having to forecast out, you know, typically, I would say a minimum typically six months. And there's a lot of variables from the obvious ones like Turner retention, but customer acquisition. What if meta ads stop working and we can't acquire a certain number, the inventory piece can be very challenging because with certainty in this model, you have to send everyone the upcoming box, the active members. You can't not order enough. So you always have to side on caution, which means over ordering. So it can be very, very problematic. It's probably one of the number one deaths of the subscription boxes or just they other caches in sitting inventory that they don't have a path for. Yeah, that's, I mean, inventory is always the big challenge. And I notice you're sort of pivoting the conversation from subscription box to memberships. Walk me through that and sort of your implication as a business owner with that term subscription and the perception of subscription on the consumer side. Yeah. So it's multi-pronged, multi-faceted. There's in over simplifying it, subscription just has a negative connotation general, right? People don't like even if they're signing up for it. They don't like the end result of the money coming out of the bank account or credit card or whatever every month. But also, you know, we saw the writing on the wall that especially, you know, there was a little bit of temporary increase during during the pandemic where if you were selling anything online, you saw this, this op-tick. And then when reality came in and the normalization happened and everyone's number has dropped, if you still look at a chart, but they were still higher than 2019, right? They were We're still hiring them before all that, but everybody got used to these higher ones around that time, even prior to the growth, we started focusing, we felt the writing was on the role with subscription boxes long term, so the change in membership, but also providing additional value to our members, to our customers outside of just the box, which is not a unique novel concept, but it's one that customers appreciate, and I'm sticking this is there. Yeah, I think that is a good segue to our next topic where we're going to talk a little bit about content, and so I'll just ask, kind of flat out, I mean, you have a big content production business, you know, your huge on YouTube, your videos generate so much like engagement, comments, you have a lot of interesting people on the show. What percentage of your members are really signing up for the content? Not for the box. So we talked to our members a lot, so we're constantly asking questions, we have some some automations and some some automation surveys when customers have certain criteria that are above, above average LTV above average lifetime duration, and one of the one of the questions is there's several, but they're pointed and they dig into the content piece to better understand. So all of our to 80% of our better than average LTV or lifespan customers, 80% of them regularly watch our YouTube channel, which is a big wild, wild number. Yeah, and it's definitely it's tough with content and that the amount of resources we put in it because it's not like a you run a Facebook ad and you can see the result and it's black and white and it's profitable or not. It's tough to attribution wise to like, you know, someone watches a YouTube video, it's not like they have a pixel on their you know, when they when they go to our site directly. So it is it's it's a challenge, but we have enough confidence just by talking to enough of our customers that the content piece is both through retention tool. It's also top of funnel for us and it's it's wild for a small business are sized to have two full-time creators, four full-time video editors. It's a lot. But I just describe I think like 15% of our staff have that much focus and then obviously we have graphic artists and a social media coordinator and a content coordinator and a bunch of other marketing roles that touch the content a great deal. It's it's an interesting approach to put so much value in it, but it's in my humble opinion, it's not a gamble, it's we're confident. We know that the consumer behavior, I've talked about this before, how consumer behavior has continued changing and moving in this direction. It's this is happening for over a decade where when you buy you'll get the need want scale and you know I could argue that you need battle walks to be prepared. But the reality is this probably close to one one side. So when you're making those those additional purchases as a as a consumer, you want to feel some kind of connection to the brands you're buying from and the easiest way to accomplish that is is content. You're hitting us so many points that I want to ask you about because I've said for the last few years that brands should become media companies. So that's kind of like one point. The other one is I'm out there on LinkedIn as well and you know people come to me it's like hey I'm thinking about starting a neocommerce business and I'm like don't start a neocommerce business. Why do you say that? I want to start a neocommerce. Don't start a neocommerce business. First attract the following. Then start a neocommerce business. Like it feels like you're saying the same thing. Can you explain a little bit like what are people missing about the value of content? No, I think I think you nailed it. So it's crazy to say that with this I'll bring it together at the end. We went from you know what is this direct consumer brand doing or what is this description box doing the leader the birch boxes of the world trying to get best practices from them. And then we made this pivot where we said to the marketing team instead of you know doing research on that like watch some Mr. Beast videos. Watch some no-boy videos because they did the reverse right they created the audience they got the engagement they had them and then they dropped a product on and you know replicating Mr. Beast sure that's probably impossible. Maybe it's possible right. Right but because of what he was able to accomplish with content he then drops a chocolate brand and day one of launch they're in every single Walmart nationwide because yeah which brands would kill for the opportunity to do that. But he just had the opportunity because of the content because he created the community. I completely agree with you if I were to start from scratch it would be solely focused on content and not not sold on what the product even exactly is. Yeah. Build the audience and then create the product that they need and want. No it's such a good point and I think it's one that so many people miss. Everyone's focused on Rhoads and their fucking attribution metrics and all these things that it's just like stop thinking about your damn website. Yeah I think I think I think you're spot on it's music to my ears because I think we're quickly realizing you and I are on the same exact page. Yeah I mean it's crazy. I mean clearly there are a lot of people out there that value e-commerce businesses. You know during the heyday say 2019 you know even before 2010s especially during the pandemic multiple of revenue post pandemic multiple of EBITDA content where is content on your EBITDA. It's top right. I mean like how do you how do you put how do you put evaluation on on the small media firm that we have instilled instilled in our team. It's tough you know when we when we sold in 2021 I think it helped with the multiplier but there wasn't a firm land and we couldn't line item the good will or the value of our social reach but it's a but you show that you show that reach to people and they get it. It makes our job easier on the procurement side because we're going to show this to millions of people that are in your in your ICP there they're they're your ideal customer. These people they don't understand what why people buy things and I think most people who start e-commerce businesses frankly don't either it's the trust factor. 100 percent you know the funniest thing is if you if you just start ingesting some of our content the uber majority of it we're not selling anything at all. There's no hard sell now don't give me wrong midfinal we'll throw an ad up there'll be a intro offer we're we're trying to get you on board and we'll do the same you know in certain cadence as a email. That's a math but for the most part most of our content yeah 80 percent probably I'm guessing yeah at least is is not is not selling at all we're just we're just living living the the lifestyle of of the product just being right outdoor enthusiasts prepared people. So talk to me about that that credibility factor because I think that's what sometimes brands are missing. First of all they don't spend any time on copy their imagery is poor there's no romance this is kind of the typical sure you know fashion brand luxury kind of thing and then you're in the space where you're selling the lifestyle. So talk to me about like how do you establish the credibility there. Great question you know I'll tell you how we started I think you can replicate us because of what we did and how we did it so when we when we launched our go-to market strategy and it wasn't it wasn't there was no rocket science or tough math in there it was pretty simple one of the things we did besides launch meta ads was we sent I think 30 25 or 30 boxes to youtubers right now this is standard practice it everywhere right but like that was a little okay that's a big big thing to do and then we tracked them and we watched the videos and we we wanted that organic video presence and we had you know a spreadsheet were tracking it all and we saw and also it is 2015 it's people would flip out if if you did this now we had a pre purchased survey so stop don't buy from us yet tell us how you heard about us and we know your usual suspects and there was a there was the other a button and you could type something in and in the first couple months we saw the second month we started to see it a bunch of putting up current 1776 in there and we're like okay we don't know who this is we went to youtube we did a google search found him on youtube has a youtube channel he has a he's doing a review for us each month okay he's one of the 30 people we sent it to went there he's not there figured out his row name looked him up he's a paying customer okay with great screen personality yeah pretty rare yeah super talented individual you're just a paying customer putting out content himself and we we saw that as an opportunity because clearly people like this guy he was giving you know unbiased yeah views of the product he clearly liked it and it was genuine you could tell and we quickly reached out to him and was like hey Brandon nice to meet you - Keep doing what you're doing, right? And we don't want to screw this up. - Yeah, you don't have to pay for your box anymore. Box is free, just keep doing what you're doing. And then I think three months went by and we said, okay, hey, Brandon, box is still free. Keep doing what you're doing. We're gonna give you $500 a month, just because we love you. - We love you. - Yeah, we love you. And then a little bit after a year, it was April 2016, we said, hey, Brandon, we know you have a full-time career job. He was greater than 20 years. I use a Chiller mechanic, like HVAC stuff, but I'm like bigger units. Like he went into like a nuclear facility and like, making great money, has a great job, has a career during the day, and this is all just fun for him at nighttime. And we said, hey, man, like what's he gonna take for any of his three kids? Like for you to move you, your kids, your wife, down to us, and just do what you're doing at nighttime full-time. And he said, he said, yeah. And we figured out a deal and he came down, and then we were able to really just lean in on the content. We've now done it, we have two full-time creators now. Joey, you came on, only a few, came in at the second half of last year. He was a customer, we did some part-time content work 'cause he wanted to do it. And we quickly realized the same thing. Like people are connecting with this individual. He knows what he's talking about. He understands the product. He genuinely likes it. People genuinely like it, so you can tell. And when you can tell, it's infectious. You want to be a part of it. And so we brought him on full-time as well. When I describe it's not easy, but everyone branched up to a certain-- - Possibly there, right? - Right, people do a certain, if you're at any scale at all, you have people you're regularly sending the box out to, or the product, or the item, whatever. And people are doing, whether it's TikToks, YouTube shorts, or whatever sort of content. And you can see genuine. And you've seen some larger brands have even done that. They've said, hey, we're gonna give some equity to this big creator sponsor to be a part of your team. - Right, yeah. So I try and, whatever it is, right? - Yeah, so it's there. Yeah, I think, you know, it's just opening your eyes and looking at what's around you. A number of times in the discussion you've mentioned metrics. And you mentioned when we were having conversations before that you guys are sort of self-professed data nerds. I guess how did you come to that and talk to me about the importance of data and what do you look at every day? - So I mean, I'm just a data nerd in general. So this is my third career. My second career was in B2B sales. So software is a service and infrastructure is a service. My first career was poker, you know, to the extreme excitement of my parents after university and getting my degree, I said, this is what I wanna do. - Yeah. - And I did it for four and a half years, but I'm gonna follow Phil Helmuth. - Well, that, and it was the time period where Chris Moneymaker, this is early 2000s, and just it was the cool thing to do, you know, TLDR wasn't good enough. I was a B player, B plus on a good day, but if you're not A, like, you look at people that were still playing poker that are my age now, and it was not something that I wanted to be a part of. But there was a lot of math in that. Most of my success was online because you could play more tables, you could get rid of mathematical variance. So I'm a big data nerd. I would literally do exports of all my hands and run it through to see models, super, super nerdy with data. Back to your question, though. Yeah, we look at a lot of metrics. There's none in any that you would know how moment of, oh, you look at that. It's the standard stuff you would think. We obsess over churn and retention rates. We obsess over our TV. We don't obsess over conversion rate as much as some. Don't get me wrong. Yeah. Right now we're running an AB test on the site. We're definitely trying to improve. And it's a constant, we're constantly working on, conversion rate optimization. It's on the same category of the obsession, right? I'm not looking at our conversion rate every single day, but I am looking at our active members, how many churned off that day, how many we brought on. I've found, I mean, frankly, and I think the CRO industry probably doesn't want to hear this. Most people's conversion rate doesn't change. It's because of the freaking offer. So much. You're, it's the offer. Yeah. Just strong offer our conversion rate triples. It's not our site didn't improve. I think it's a correct. Right. I still remember that company that Amazon bought back in the day. What is it? 10, 15 years of called Woot? Do you remember Woot.com? Speaking about the box business, they sold literally boxes of crap. Yeah. On a single page website and crushed it. And they got bought for like a, like a, like a bought, yeah. It's like a noxious number. The offer is, is the same. Well, I mean, don't get me wrong. If you have a broken site, but it's, it's very hard to make a broken site in 2020. Yeah. In today's day and age, it's hard. You have to, you have to purposely almost do it to have a, a little. That didn't used to be true. Even 10, 15 years ago, you could really screw up a magento site pretty fast. Sure. With Shopify, with big commerce, with Woot commerce even. I think any of these guys, you can't screw it up. No. They've locked down a lot of parts to you. Yeah. Yeah. They don't trust the merchant to be able to access the checkout fully. The good reason for that because for most people, it's not going to matter. That's hilarious. I mean, this has, this has been a great conversation, John. I feel like we could keep talking for like, I could keep going this, you know, hours and hours. This has been a lot of fun. If you're at a larger business, like, I think there's something you can teach a lot of a larger business is about the value of brand trust and brand authority. What do you think the big guys, like the department stores, people who sell into department stores can learn from you? I would say truly, truly engaging with their community, in turn consumers, customers, I think the bigger brands get content wrong most of the times. They're following trends because it's going to get the views. It's a much harder thing to execute. I think there are some that do execute it that are able to have a unique voice and connect with their consumers. Most of the big brands, like, they're just not doing it. They're just trying to hit some trends and get some views. But there's not any like, it's not a top of funnel true connection. It's, oh, they made me laugh. So really trying to engage your community, I find a lot of these brands treat a content production as a cost center and they're just trying to make it as small as possible. No, I don't think you're wrong at all. But it's been a lot of fun having you on here, John, and look forward to potentially having you back in the future. Yeah, I'd love to. Rick, thank you so much.