Subscription Commerce - The New Daily Deal

Last year it seemed like I heard about a new daily deal site everyday. Daily deals for suburban moms, daily deals for hipsters, daily deals for dogs, daily deals for Jews. Every single vertical and niche was getting its own daily deal.

Nowadays I’m seeing far fewer daily deal sites- subscription commerce has replaced it as the model du jour.

That’s not to say that subscription commerce is a bad model. Birchbox sells customers a monthly box of cosmetics samples that Birchbox itself doesn’t pay for. It’s direct marketing in a box that the consumer pays for. Because they buy it themselves, consumers will value the products more than typical free giveaways.

One big hurdle will be the ability of entrepreneurs to scale their operations. Unlike a daily deal, subscription commerce involves shipping physical goods. Many of my friends starting subscription commerce businesses have absolutely no background in anything but software. In the beginning, founders can pack each box by hand, but when you have fifty thousand subscribers that won’t work.

Many subscription commerce startups are either bootstrapped or seeded with low six figure rounds. New York-based Memberly even created a white label software system for subscription commerce after originally building it for their subscription tea service Steepster. Scaling the infrastructure to physically fulfill orders is expensive and difficult though.

But with such low barriers to entry, much like the daily deal space, competition will be fierce. Will there be room for both GuyHaus and Manpacks in the dude essentials subscription commerce vertical? Will Birchbox aim for the fellas after conquering the women’s beauty vertical?

It’s natural that companies like Steepster and subscription coffee service Craft Coffee will eventually start to compete directly. And Starbucks and Peet's will eventually start heavily promoting their own subscription offerings should Craft Coffee be successful. The low cost of entry in the subscription commerce space will bring about a highly competitive landscape of lean startups going after a small pool of venture capital while competing with large established players.

Most will end up in the deadpool or become lifestyle businesses. Some successes like Shoedazzle, Beachmint and Birchbox will be able to raise significant rounds as they look to build huge businesses. But how many billion-dollar subscription commerce businesses can there be?

I think it’s going to play out like the daily deal space. There are going to be a few huge successes and a sprinkling of also-rans. Whoever brings me a great affordable subscription scotch service will at least own a special place in my heart.--JB