Anyone who’s written a business plan can tell you that it’s exceedingly difficult to find information about the competition to make accurate projections about your own company. Even in the case of public companies, data that seems transparent turns out to be rather opaque. Small nuggets about a competitor’s operations might make its way into a press interview, but few people provide more than necessary. And they never gush about details the way that Chris Davis, the founder of Lootcrate, did on Tuesday night at Be Great Partners.
Lootcrate, a monthly “Geek and Gamer Subscription Box” is one of many new companies in Los Angeles tapping into a retail subscription-shipping model. Although the model has been around forever – Harry & David claims it’s Fruit of the Month Club dates back to 1936 – it’s enjoying a re-birth. Los Angeles-based monthly subscription offerings include Shoedazzle (monthly delivery of shoes), The Honest Company (monthly delivery of eco friendly diapers), Dollar Shave Club (monthly razor blades), Sent Her Way (monthly tampons) and ClubW (monthly wine delivery). I’m hardly the first to report on the trend and this list is not meant to be exhaustive.
For anyone with ambitions of creating their own monthly offering, Davis provided invaluable information. Lootcrate currently has about 80,000 monthly subscribers paying $20 a month. The company funds its own growth through operations. Shipping costs typically range $3-$6 per box. Boxes for “east coast” subscribers must be sent five days earlier to arrive at the same time. The company pays affiliates about five percent for new customers. The first 20,000 subscribers required less planning because, in the case of the products being offered by Lootcrate, quantities up to 20,000 can be acquired from existing distributors. Quantities in excess of that amount more often require direct contact with the factories (typically in China).
Davis speculated that the subscription model could work for smaller businesses and I think he’s probably right. A couple thousand subscribers would sustain a respectable small business in places with cheaper rent than Los Angeles. The web has taken narrowcasting to a new level and it would seem to me that in a country of 300 million people, there’s at least 4,000 or 5,000 people who share your obsession for [fill in the blank product].
After hearing the Davis interview, I bumped into Lanier Brown during the mixer portion of the event. Brown’s developing an App called Hoopstop which will allow its users to find public basketball courts and to set up or join pick up games. I love going to mixers and meeting people because I discover new markets. Except for a stray game of Horse here and there, I have not consistently played basketball since the 7th grade when I gloriously scored four points during the whole season. So, I would never have imagined this App in a million years. Nevertheless, Brown’s tapping into a different trend, which I have seen in DogLand (a social network for dog lovers, where, among other features you can find dog friendly parks and places) and ParkMe (helping users find a parking spot).
My only reticence about these specialized location-finding category of Apps is that I don’t think there’s a need for them in large parts of America. It makes sense in an urban jungle like Los Angeles – how can you possibly remember the dog friendly restaurants here when there are so many restaurants? But a user in the suburban Midwest probably knows all of the dog friendly restaurants on their side of town. To a lesser extent, I would raise a similar objection to the subscription-based models — or at least those based primarily on a convenience factor. In a lot of America, it’s just not that difficult to occasionally drop in at the drugstore. Only since moving here have I begun to see such a minor task through the prism of nasty traffic, inevitable lines and scarce parking. I still can imagine successful businesses with all the above companies – I only question the ultimate size of the market, not whether a market exists.
On Wednesday morning I braved that nasty traffic to get to the Beverly Hills Hotel by 8:30am for a breakfast panel sponsored by The Caucus for Producers, Writers and Directors. The panel was titled What’s Old is What’s New, which I think was selected to reassure its membership that certain fundamentals about The Industry remain intact, even in so-called “new media.”
In fairness, the panel did have insights that supported the title. Kate McCallum said that the use of the same story across different delivery platforms wasn’t really new at all since Walt Disney pioneered it using characters from the movies in his parks. Susan Johnston contextualized the current changes by comparing them to past changes, like during the onset of television when movie stars would refuse to be cast on a TV program. In essence, change is a constant and although there are changes in how Hollywood tells stories, it’s still primarily in the business of storytelling.
However, Luke Ryan best captured the sea change that is occurring because the studios can no longer dictate tastes through their marketing. Hollywood will continue to be in the business of telling stories, but the traditional gatekeepers have lost power because consumers are taking a more active role in discovering the content they want to see. Ryan’s comments made me recall Seth Godin’s Ted Talk where he references what he calls a “television industrial complex.” Marketers repeated ads to the mass market, which would buy the product and the marketer would invest in more ads.
There’s no question that the internet empowers consumers, but I would qualify this line of thinking. The notion that Hollywood ever dictated the content people would watch is hubris. Movies that were “sure bets” sometimes failed miserably. Moreover, television networks would frequently place a new show in a prime spot (say in the slot after Seinfeld) but sometimes even that lift could do nothing to save it. Thus, content has always been subject to a consumer discovery process. What has changed is that the traditional process – e.g. ordering eight episodes of a pilot series – may start to seem like a very expensive way of discovering consumers.
Finally on Wednesday night I engaged in some consumer discovery of my own. The Northwestern University Entertainment Alliance hosted Luck: A Story Telling Event at the Lillian Theater in Hollywood. Eleven personalities told autobiographical stories involving luck. I only stayed for six performances and because this blog post has gone on too long already I will omit a detailed review. However, I would definitely attend again, I would urge others to go as well and in particular I was incredibly impressed with the performance of Jennefer Ludwigsen who captivated the audience. All the of first six performers made the audience laugh but Ludwigsen made us laugh and brought us to the verge of tears. She held us in a firm grip of interest in the way that a great actor can make you forget anything else that’s happening in the room.
After a performance like that, I found my own reassurance. With the talent here, I have no doubt that Hollywood will survive substantially intact well into this next century. The old isn’t new, it’s just that certain things, like great fruit delivered on a monthly basis, never become old.
Los Angeles, California