Subscription boxes and their surprise deals catch on

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Posted: Thursday, March 6, 2014 12:00 am

Huntington Beach, Calif., resident Rachel Murphree never thought she’d spend $25 on a tube of mascara, no matter how well it could curl and lift her lashes.

After sampling products through Birchbox — a $10-a-month subscription for assorted makeup — she “could never go back to cheap mascara,” said the 32-year-old lifestyle blogger and adjunct English professor at California State University-Fullerton.

For deal-seekers like Murphree, subscription boxes are a relatively cheap way to try popular goods with little commitment. Businesses with featured products in turn garner exposure and potential clients, with a fairly low entry barrier.

These modern-day parcels are reminiscent of care packages sent to summer camp or college dorms. Curated boxes, a fairly new business model, typically contain a mix of items tailored to a theme or demographic. The containers are mailed out on a recurring basis and feature some element of surprise.

Boxes, with monthly to quarterly subscriptions, range from practical to zany. There are dog treats and goodies from BarkBox; the cooking-challenged can get weekly shipments from Plated, which packages food based on “chef-designed” recipes of the buyer’s choice. Those who want to add some spice to their love lives have BlushBox with its lingerie and massage lotion.

Subscription boxes have served as a new entry point into retail for smaller firms and independent artists who before relied heavily on the crafts marketplace Etsy to sell their wares.

Heather Myers, a Mission Viejo, Calif., graphic designer who runs an Etsy shop, saw her chance to dive into the subscription business less than a year ago. Through her freelance business River & Bridge, she began to offer “bridgeboxes,” monthly deliveries of personalized stationary and extras.

Recipients in January got a shipment of eight personalized cards with envelopes, a notepad and two Valentine’s Day cards, for $17, including shipping. All the cards are designed, cut and packaged by Myers, who works full time as a pre-press supervisor at Lester Lithograph in Anaheim, Calif.

Her subscriptions make up 15 percent to 20 percent of her freelance income with the balance generated mostly through contract work and Etsy sales.

What excites many subscribers is the prospect of finding a higher-priced item that far exceeds the price paid, said Liz Cadman, who runs My Subscription Addiction, a free review-based website. One example is San Francisco-based celeb site PopSugar, which charges $39.95 a month for its subscription. Cadman says it’s not uncommon to see a box feature $100 worth of items.

“You end up feeling like, ‘I hit the jackpot,’ ” Cadman said.

Curated bags of clothing from Los Angeles-based Golden Tote cost $49 or $149, but their values are pegged at $250 and $600, respectively, said company co-founders Sarah Becker and Sarah Sweeney. They’re best known for clothing line Puella, which is sold at Anthropologie and has been worn by celebs including Kate Hudson and Jennifer Garner.

At the start of every month, the fashion duo launch an online offering — akin to what’s become a flash sale — that features mostly shirts, dresses and skirts. Customers can go one of two ways: Pick one item and get surprised with an extra item or two for $49. Or for $149, pick two items and get a mix of up to five items.

So how is it possible for companies to offer such good deals and still turn a profit?

Companies like Birchbox, in addition to subscription services, also run online shops. Customers who were happy with their samples can buy the more expensive, full-sized versions as they please, said Cadman of My Subscription Addiction.

Companies like Golden Tote tap into wholesalers. Others get free samples from startups that want publicity. Some, like monthly snack provider NatureBox, make their own products, which can cut out the middleman and control supply, Cadman said.

It’s unclear exactly how many subscription services exist and how much they make. But there are some metrics.

Investors have infused $388million into the subscription e-commerce business during the past two years, venture-capital tracker CB Insights reported in October, the most recent data available.

Deals and funding levels, however, have cooled overall since the fourth quarter of 2012, when subscription-box funding hit a high of more than $103million, CB Insight data show.

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