retail news in context, analysis with attitude

The New York Times has a story about the growing interest in selling subscriptions as one way of generating recurring revenue - not exactly guaranteed, but about as close as you can come in the retail biz.

The model seems to be Amazon.com’s Subscribe-and-Save service, which allows shoppers to place standing orders to a wide range of categories, creating an automatic replenishment service that also generally offers significant discounts (often underwritten by manufacturers that are as interested in recurring revenue - even at lower margins - as Amazon).

One example: Petflow.com, which is totally based on selling subscriptions for pet food - especially attractive for those big 40 pound bags.

“In its first month, July 2010, the company shipped about 60 orders; by January of this year, that number had leapt to 27,000,” the Times writes. “In 2011, PetFlow exceeded $13 million in revenue — with 60 percent of its sales coming on a subscription basis — and it projects revenue will exceed $30 million this year.”

Alex Zhardanovsky, Petflow’s founder, says it is “the holy grail of business.”

Interestingly, the Los Angeles Times reports on a Santa Monica company that is taking the same approach. The Dollar Shave Club is described as “a new membership-only website that promises to ‘shave time, shave money’ by sending customers a shipment of razor blades automatically every month. The company estimates that it will save members as much as $292 per year on shaving ... The company offers three kinds of razors: the Humble Twin, a standard two-blade razor, for $3 a month; the 4x, a four-blade razor for men and women, for $6; and the Executive, a “state-of-the-art” six-blade razor for $9. Shipping is included.”

Sure, the blades are private label, not a national brand ... but the company thinks that it may have detected a consumer sweet spot - razors are are item that tend be be both costly and requiring constant replenishment.
KC's View:
Well, that may be a little bit of an overstatement ... but I’ve long been an enormous proponent of Amazon’s service. Not only does it guarantee Amazon sales, but it also takes customers who use it out of the market in various categories ... and the stores where they used to buy those items don;t even know they are gone.

I’ve checked out Petflow, and I may well give it a try. I want to double check the prices vs. where I buy those 40 pound bags of food now, but it sounds like a pretty good idea to me.

(This service seems like it might be really attractive to a certain friend of mine who tends to get a five o’clock shadow by 11 am...)

And while I don’t shave very much, the Dollar Shave Club also seems intriguing ... especially because the folks there seem to have a “sacred cows make the best hamburger” attitude toward business.

> You have to check out this slightly profane video describing the business.