Subscription Models - Blacksocks

07 March 2019

About

The Netcomm Suisse Observatory was recently commissioned by a major Swiss consumer brand to provide insights on eCommerce subscription models including market size and trends such as exploring and uncovering the latest data on payment options and habits of the Swiss online shoppers. We also conducted a series of in-depth interviews with swiss merchants who have successfully launched subscription platforms, three of which will be featured on our platform in the upcoming weeks.

 

Subscription Models - Blacksocks Interview

Insights on e-commerce subscription models by B2C Swiss e-tailers.

In the USA, subscription models have seen their revenue increase by over 100% in recent years. Based on figures produced by McKinsey& Company (link to research) revenues have grown from $57million to over $2.6billion in 2016. This growth is being fuelled mainly by VC's investing vast sums into start-ups cross categories.

THE TREND

The UK and USA are developed markets for subscription-based models, having already surpassed a threshold of 10% of the monthly household income. Consumers now have the ability to subscribe to literally anything; razors, music, films, food and even cars. The Dollar Shave club launched in April 2011, after a discussion between the two founders about the cost of razors. The website launched using a viral video, after which the company received 12,000 orders in just two days. Their model worked because it was simple. The cost of a razor was $1 with a $2 handling fee for razors delivered to your home, meaning the consumer immediately perceived value for money in the short-term.  

Popular subscription model Spotify launched in 2008 and was the first to pioneer the freemium model, meaning the basic services are free but they are supplemented by advertising placements from third parties. Clearly hugely successful- In Q4 of 2018, there were 96million subscribers up 26% from Q4 2017.

Even high-cost goods are jumping on the subscription bandwagon. Car subscription services, for example, are becoming increasingly popular. They offer a hassle-free motoring experience for drivers with no need to worry about the usual expenses such as maintenance, insurance, licensing and taxes. The market is projected across the US and Europe to reach xxx

THE INTERVIEW

Here at Netcomm, we wanted to hear from the subscription connoisseurs themselves. This week we spoke to Samy Liechti, the founder of Blacksocks.com and the creator of sockscription, launched in June 1999. By the end of 1999, blacksocks.com had over 1000 customers. Eighteen months later the company had over 5000 customers and by 2008 the company had sold their millionth sock. The following year saw blacksocks.com launch in the USA. As they enter their 20th-year Blacksocks is now available in 120 countries and the range offered has grown.

The idea first came to Samy in 1994 when he remembers having to cover a meeting with a Japanese client and being invited to a tea ceremony. Samy explains that this was one of the most embarrassing situations he had ever encountered.

"Sockscription came about because of the embarrassment that I had at unexpectedly having to take my shoes off and finding I was wearing non-matching socks and one with a hole in the toe. How could I prevent this from arising in the future?"

We opened our conversation by discussing what goods would be appealing for a subscription service. Samy explains “There are different types of services, each having their characteristics. Every customer needs the service, or the offering delights them, but the merchant needs to focus on the customer needs not their individual needs. Merchants, who create a service not concentrated on the customer will fail- the key is, what will serve the customer best? The customers will not be enticed to subscribe if the service is not convenient or comes with a higher price associated. Therefore, cheap products or products with a low margin are out, e.g. toothbrushes or toilet paper. Toilet paper has high usage, but it would be very inconvenient to collect from the post office, it’s more convenient to buy from the supermarket. Besides, delivery costs would be high because of the large packaging required. Naturally, products of a particular value, regular use and easy ship are the winning formulae.” 

Samy continues “The subscription services market in the US and UK is a very developed, some would say it’s ‘en vogue’. The hot topic for online merchants is the cost for customer acquisition, and the first order usually has a higher value. These costs must be recovered, and one, seemingly very appealing way is via a subscription offering.”

In closing, Samy expressed his views on the maturity of the Swiss Subscription market “There are only a few swiss merchants offering subscriptions, many copycat services are using the existing models from aboard. Prominent Merchants that find their way and stay on track are rare. The market is not yet fully developed, so I see real potential for Swiss merchants. “

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