Recently, I was looking at buying a business that sold subscription boxes.
If you don’t know what subscription box is… Take a look at http://birchbox.com
In order to understand the market and opportunity I looked at this business and a couple others just like it that were for sale. I wanted to understand the difference, what the seller was doing well and what they needed to work on.
Overall, the concept was sound and the business was starting to pick up steam. But there was one thing that really stood out to me as very valuable that the seller didn’t even realize.
The seller controlled the where.
Let’s back up a step. In business, the consumer has most of the power.
- What they buy
- When they buy it
- How they buy it
- Why they buy it
The seller used to be solely in charge of where the buyer could get it.
That has changed. With the advent of aggregate sales channels (Amazon, Ebay, etc.) along with what I call rented real estate (Facebook being the largest example), the seller doesn’t always control the where. In fact, many business are so quick to give this advantage up without realizing the impact.
So, what I found out while researching is that a lot of the subscription box services rent the where as well. In order to get up and running quickly many business owners turned to a service that managed the subscription payments, refunds, checkout processes, etc.
This means that while it was easy to setup, the business owner doesn’t control the customer data and if they want to move off a lot of these platforms, they must make all the customers re-sign up to the subscription.
Obviously in a subscription model, forcing customers to re-sign up will inevitably introduce churn and lost revenue.
By having the foresight to invest in their own platform and control the entire process, this seller owned the data and ultimately controlled the where.
At the end of the day, there are very few things that you can control as a business owner. Make sure those that you can aren’t outsourced just because it’s easy or cheap.