“My business Yogi Surprise, the one I currently operate on the side, you know we do over $150,000 a month in gross revenue and it’s just me and two other people that are running it, right.” (Jameson Morris)

[Intro clip] Welcome to the 2X eCommerce podcast show where we interview founders of fast growing seven and eight figure eCommerce businesses and eCommerce experts. They’ll tell their stories, share how they 2X’d their businesses and inspire you to take action in your own online retail business today. And now, here he is, the man in the mix, Kunle Campbell.

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Kunle: Hi 2Xers, welcome to the 2X eCommerce Podcast Show, and I am your host Kunle Campbell. This is THE eCommerce Podcast Show dedicated to rapid growth in online retail geared to helping ambitious online retailers looking to scale their businesses by 2X, 3X, and even 10X. I hand-pick the guests that come on this show to share the expertise and help you grow metrics such as Conversions, Average Order Value, Repeat Customers, Traffic, and ultimately Sales.
On today’s show I have someone who is going to be talking about repeat customers in the context of subscription commerce. He goes by the name of Jameson Morris. Now I’ll give you a bit of background on him.
In 2011 when he was just 22, he co-founded ConsciousBox.com with a $10,000 student loan. Conscious Box, as most of our US listeners listening to the show now would know is one of the biggest players today in the subscription commerce space. Jameson unfortunately had to exit Conscious Box due to the complications of VC funding. And having learnt never to use outside funding to launch a subscription commerce business, he went on to found multiple bootstrapped lifestyle subscription box businesses. He sold one of the businesses for a tidy sum that enabled him to pretty much purchase a house. And then he founded another business around yoga with thousands of subscribers as we speak.
His subscription commerce wizardry landed him a job at Cratejoy. Cratejoy is a subscription commerce platform akin to a Shopify, this time dedicated to subscription box businesses. As a Director of Consumer Marketing, that’s what he does, he helps their subscription business clientele launch and grow their businesses. And today’s show he’s here to talk about pretty much how to grow, launch, or extend like a community or an existing e-commerce business to subscription commerce.
Without further ado, I’d like to welcome Jameson Morris to the show. Welcome to the show Jameson. Could you take 30 seconds or so to introduce yourself please?

Jameson: Yeah, definitely. Well, my name is Jameson. I love subscription businesses. I’ve started several of them since 2011 and now I’m the Director of Consumer Marketing at Cratejoy, a platform for subscription boxes. And I spend a lot of my time helping people build successful subscription businesses.

Kunle: Fantastic. Because every time I type out ‘subscription box businesses’, ‘subscription businesses help’, your name seems to pop up around the web. Let’s rewind to five years ago. You were aged 22, I suppose. You took out a $10,000 student loan to kickstart your first business. Could you shed some more light into your entrepreneurial journey at age 22 with 10K of debt?

Jameson: Yeah. So the very first thing that I did before I started getting into subscription boxes was I started a natural lifestyle online publication. I just wanted to write about natural and sustainable living. And I wanted to build a really good website and I wanted to execute it very well. So I took out some money and built this site. But then I quickly couldn’t figure out how to monetize it. You know I wanted to do something besides advertising; I wanted to do something unique. And so we started trying to do niche deals. We thought a niche version of Groupon would work really well. And it didn’t really. And then we were trying to figure out how to… it’s me and my partner Jesse doing all this together, we were trying to figure out a more creative way to monetize this publication that we built. And we talked to a lot of natural product businesses just trying to figure out what their needs were and how we could help. And one of their biggest problems was just getting exposure and wanting people to know how authentic they were. And around the same time we had saw Birchbox had launched their beta of Birchbox, they had just started. And we saw that concept and we thought it would apply really well to the natural product world. And at the time Birchbox was literally the only one doing this and we thought it was genius when we saw it and thought it would be a good application in natural products. And that’s how Conscious Box started. And we literally spent the last couple thousand dollars we had, built some nice custom packaging because we wanted the experience to look nice. We launched Conscious Box in probably less than a couple of weeks and first day we launched we got a couple hundred subscribers and we instantly knew that it was going to work, it was a good concept.

Kunle: Really, really good points there. I have a few things I want to talk about from what you just said. First things first, you kept an eye on the startup world so you knew what was going in the startup world. Were you like a TechCrunch reader at the time, at the same time quite keen on natural living, natural healthy living and publishing when you started this? What was the other website by the way, please?

Jameson: Oh, it was called Organic Soul.

Kunle: Organic Soul, okay. So prior to starting Organic Soul, did you kind of have one eye in the tech world, so to speak, and the other pretty much in the organic and healthy living space and then you tried to marry both, was that the case or?

Jameson: Not really. I didn’t even know. I lived in Southern California at the time, I didn’t know about a tech world, I didn’t know anything about Silicon Valley. I was just one of those kids that was entrepreneurial, been online since I was 12 and just liked trying to figure out how to make money on the Internet you know what I mean. So when we moved Conscious Box to Santa Monica in Southern California, we got little commercial space, it wasn’t actually till I moved to Santa Monica where I discovered this whole LA startup scene. And then once I got into that I started learning more about what was going on in Silicon Valley. So I was pretty blind to all of that. I was simply trying to find creative ways on how to make money online. So I don’t even think I had learned about TechCrunch until after starting Conscious Box. So I wasn’t in those communities, I was pretty siloed out of them. Later got into them, yeah.

Kunle: And what was it like, the environment in Santa Monica, was it quite vibrant with all the startups when you set up the initial website?

Jameson: It was, Conscious Box became pretty established before we started hanging out with the local groups that we felt pretty cool.

Kunle: Okay.

Jameson: It’s fun though, everyone’s got an idea, everyone’s doing something. Some people are doing things that are actually successful and there are a lot of people that just have ideas and trying to figure out how to monetize them and build them. So it’s a good community but you kind of have to be careful about getting caught up in all the hype.

Kunle: True, true. You just mentioned you started, well, you set up Conscious Box in a matter of weeks. I love the agility there. How rough a spec was it? Because this is really lean, from a lean startup standpoint. Yeah, so how quick and agile was it, and how fine-tuned was the product in order to attract… you said you worked really well on the packaging so we’re going to talk about packaging also. So how good was good enough to attract subscribers?

Jameson: Okay, so the way that we launched Conscious Box is not how I would recommend launching a subscription these days. We didn’t do any kind of prelaunch phase, we didn’t start with collecting leads, really. We put up the website, it was a static site, it wasn’t like you know a Cratejoy website or a WordPress site. It was a static site. We connected with PayPal which I also do not recommend doing. And we spent a bunch of time thinking about product, which was one of the things that we did right. We knew that the experience had to be good, we wanted the packaging to look good. We knew that we didn’t want to just deliver up a box of products, we wanted to deliver an entire experience. So we were lucky that our instincts at the time on how important product was were right. So we spent most of the money we had on doing an order of some really nice custom-looking boxes. And then while the order was being processed, we were putting the site together, we didn’t have the boxes done yet. We had blank versions of the boxes so we do a little photo shoot in the office and then we Photoshopped the design onto the blank boxes so it was kind of all about timing.

Kunle: Wow.

Jameson: And then we got the site up. We had good pictures which is something a lot of people don’t actually do. And we launched this site and we had a little leads list from Organic Soul and we got it out there to bloggers and YouTubers which was easier at the time because there weren’t as many subscription boxes. So the concept being so new, Birchbox being the only one, you know, we had that going for us.

Kunle: Wow. So it was 100% bootstrapped at the time?

Jameson: Yes. And still, every subscription I’ve started since then has also been 100% bootstrapped.

Kunle: How many subscription businesses have you started since Conscious Box?

Jameson: I’ve directly started four. I’ve helped start other subscriptions, like Loot Crate which is huge now, that was started in the original Conscious Box office. We helped those guys do their first shipment. We’ve since then, you know I’ve help dozens of other subscriptions start. And it’s actually a lot of what I do Cratejoy, is I’m hoping merchants be successful. But yeah, I think directly about four, but I forget.

Kunle: Because I caught up on a blog, because you have a personal blog which I’m going to link to from the show notes and it is highly, highly, highly detailed. And you’re so open and you shed so much light on subscription e-commerce. It’s highly recommended. So I guess even readers of your blog, with your help, would have setup and launched their subscription commerce business in addition to these ones you mentioned also. Okay, let’s talk about… yeah I could actually… In 2011, I caught up on a press release in October the 11th on Conscious Box which was about when you started on the CSR wire in California, Santa Monica and

Jameson: Oh, wow.

Kunle: Yeah, I’ll link to it. And you also mentioned Organic Soul and Conscious Box. You also founded at the time a publishing business called SubscriptionBoxes.com. Was this strategic or for like more or less a better understanding of the industry, or? Yeah, was it for any other purpose?

Jameson: Well, so you know when we started realizing how popular the concept was getting, like soon after we started Conscious Box all of a sudden 20 new other subscriptions started up. So we bought a bunch of domains, SubscriptionBoxes.com being one of them. The reason that we built SubscriptionBoxes.com was because we thought it would be a way to do a lead gen for Conscious Box. And it actually worked, I mean we were driving hundreds of subscriptions from SubscriptionBoxes.com to Conscious Box. But then that website, it exploded, the amount of organic traffic that was coming to it was just ridiculous. Yeah, I don’t control that website anymore but it was definitely like a really exciting thing to see happen and because we ran subscription boxes at the time, we got to see like these kind of industry trends happening and it was really exciting.

Kunle: That’s quite novel and yeah it’s quite clever to latch onto such a domain and publish to it and get so much data coming in. I guess it helped you optimize the growth of Conscious Box at the time. Could you describe your journey you know from idea to conception, well, rather than from idea to conception… more or less your early successes and failures of setting up a bootstrapped subscription box business. What kind of early successes did you get? Obviously the first few subscribers probably gave you more motivation, but what early failures and other successes did you face in the early phases of Conscious Box?

Jameson: So Conscious Box, we had a lot going for us. We did the product right. We nailed the niche. It was a good community of people, people that buy natural products, want to know what their buying is authentic. And our service was marketed as a way to discover really high quality professionally curated natural products. And that worked really well. Conscious Box was pretty successful organically. We weren’t spending money on advertising, we were growing it through influencers, the concept was really new still. Raising venture capital funding eventually was kind of a mistake. To this day I now strongly think that subscription boxes are meant to be… they can be really good lifestyle businesses but I don’t think they’re necessarily businesses that should be scaled to crazy portions, unless you know in certain categories like Dollar Shave Club, you know maybe Birchbox, those guys have been able to get pretty big. But yeah, for the most part you can start these businesses with very little amounts of money upfront. You can lean-tests some really well by testing the concept with a specific niche community. What I’ve learned with subscription businesses is they work best when you create them for a very specific community of people are really passionate about a certain topic or they identify with that niche, whether it’s vegans or people who do yoga, those are really good categories for subscription businesses. So I would say go more niche whenever possible, do something you’re passionate about that you can be authentic about. But we learned… a lot of things that worked for Conscious Box though back then wouldn’t work today. For example, Conscious Box was a sample discovery service. It was a lower-priced subscription, it was about $19, and all the product we got, we got for free from vendors who gave the product to us in exchange for marketing benefit. That is much harder to do now because vendors are kind of overwhelmed with it. There’s so many people hitting up vendors for donations, it’s also hard to maintain product quality consistency, because you kind of just take what you can get, right. Some of my newer businesses like Yogi Surprise, I have a higher price point and I have built-in margin to buy products. So I usually get things for close to cost, right, I can still negotiate because I’m doing some nice-sized bulk orders but I can really pick and choose what I put in the box and I can really control the experience.

Kunle: Okay, so the supply chain you suggest now, if you’re doing subscription box businesses, should be acquired. Basically you should buy your stock and then curate it for your subscribers. Is that the case, or?

Jameson: Yeah, you really just can’t control the supply chain unless you have the money to pay for those orders, right. And you can get really good deals, but just don’t rely on free product because… like Conscious Box, one thing that happened was we had to dramatically scale our sales team. We had to keep onboarding people who were just trying to get free product donations like all the time. And it’s a scary thing, you don’t have complete control over it. But when you’re buying the product, you only need one buyer. Even if you have 20,000 – 50,000 subscribers, you still only need one buyer, but if you were trying to get free product, you’d need maybe sales team of 5-10 people.

Kunle: They’re overheads, yeah. And you can’t really give them really decent commissions to motivate them. Okay. Let’s track back to a few things you just said. One was you know you suggest in most cases subscription box businesses to be lifestyle businesses. Could you define lifestyle businesses from an operational standpoint and a revenue standpoint, please?

Jameson: Yeah, so when I use the word lifestyle business I think what I’m talking about is a leaner business, you know. Usually maybe it’s you and a couple friends, or just a couple people. The cool thing about subscription businesses: a lot of elements about them can be automated. From the way fulfillment is happening to your marketing and your email marketing and your drip campaigns. And customer service can be done really easily with a contractor. So I really mean businesses where like the teams are small, you don’t need an office, you can work at a coffee shop with your friends. They can be more flexible businesses. You know like my business Yogi Surprise, the one I currently operate on the side, you know we do over $150,000 a month in gross revenue and it’s just me and two other people that are running it, right.

Kunle: That’s not bad at all. Yep.

Jameson: Yeah, and that’s totally doable with subscription businesses: they’re more predictable because of the recurring revenue portion and it just makes operating the business so much easier, so yeah.

Kunle: Okay. Then you mentioned something about a lean test. Could you shed a bit more light on how you lean test concepts in subscription commerce? Because I suppose it would be slightly different to a SaaS business, just because there are products involved. And yeah, their subscribers would be slightly different.

Jameson: Yeah, you can lean test them without actually even getting to your minimum viable product, well the minimum viable product is pretty minimal. [laughs] But with the subscription business you know, get your concept down, find the community you’re going to target, put together a concept of your product. You know, maybe you’re Photoshopping a blank box and you’re putting a little picture together. The idea is to get a teaser page up and test your content, test your product with a niche community, right. So Yogi Surprise launched with a teaser page and we wanted to see how many people we could get an email opt in for. We actually ended up getting 10,000 people that opted in with their email to learn more about the concept before we’d even procured any product, before we start getting custom packaging made. Then when we launched, we did a prelaunch where we then started taking subscriptions. Then with the revenue from those subscriptions, we used that to build the business.

Kunle: Okay. For our listeners not very familiar with your current subscription commerce businesses, Yogi Surprise and Furball Box, could you shed some more light on the niches they cover? Just explaining what the business is, real quickly please, both businesses.

Jameson: Well Furball Box only lasted for about a month. We wanted to see how fast we could launch a subscription business and we wanted to do a cat subscription because there wasn’t one at the time. So we literally launched this business within 24 hours. We got it up, I think we got like 100 subscribers in a couple of days and then we started getting…

Kunle: How? Sorry, how? Was it by Facebook, was it by Google? How did you get 100 people to subscribe? That’s a challenge to some of our listeners.

Jameson: Yeah, well we had a big list of bloggers in the space that we’d put together and when I mean big I mean like 2,000 people that we asked for help spreading the world, right.

Kunle: Wow, okay.

Jameson: Yeah, so we launched that business, we got about a hundred subscribers from it and then we started getting the customer service emails and they were like these cat ladies that would send this four-paragraph long emails on like a specific need. And we know how crazy customer service can get from Conscious Box and we were like, we just like don’t want to deal with this, and we literally shut the business down because of that. We’re like, okay we’re not… And we also weren’t really super passionate about cats and we realized this is not going to last long. So we shut it down.

Kunle: All right. Really picky customers and follow your passion, really. Those are your takeaways, really.

Jameson: Exactly.

Kunle: Okay. So easy to manage, I guess. You’re looking at the future, looking at customer service, looking at the overheads in terms of time and cost commitment from customer service and you’re like, ‘no’.

Jameson: It’s so hard to deal with it too if you just don’t really care about it that much, you know what I mean.

Kunle: Okay. What about Yogi Surprise? You definitely were onto something with Yogi Surprise. Is it about yoga, or?

Jameson: We like to call it ‘a yoga retreat in a box’. It’s been really great niche. Yoga’s not just a form of fitness; it’s an entire lifestyle and culture. And that’s a really good sign for subscription box, a niche, right. These people are very active online, they’re super active on Instagram, it’s literally the perfect community. And Yogi Surprise has done really well. We grow the business with spending little to no money on marketing. We’re passionate about it; we all do yoga, that makes everything about the business so much easier to run. It’s really the ultimate lifestyle business.

Kunle: Absolutely. Okay. And how much are monthly subscriptions for Yogi Surprise at the minute?

Jameson: It’s about $44.95

Kunle: That’s a high price point.

Jameson: Yep. We made it a little bit higher so that we could offer people 10% and 20% off for life-discounts, so we kind of built-in a little room there for promotions. And then there’s another product, a yoga jewelry box which we launched after the lifestyle boxes, which is the $44 one, we have a jewelry box that’s about $24 a month. So we’ve got good margin in there to really control the product experience and put really good quality stuff in the box, which is so important for retention.

Kunle: Okay, okay. I’m just going to throw a curve ball here. A couple of episodes back, I had the founder of Love With Food and she also runs subscription e-commerce. Well, obviously it’s a subscription e-commerce business but she views the business in two ways. One is, she does the samples by the way, so one is from a standpoint of it being a subscription business you know as it is. And the second is a research business for the companies they get the samples from. So they get customer feedback and feed it back to the suppliers and they then decide a go-to-market strategy for those products. Would this community, would it work? Could you sort of split the business in half from your standpoint from subscription business? Or would you want to keep it plainly a subscription commerce business where you understand your audience, you curate what is best for them, get feedback and keep on improving what you send to them on a monthly basis? Or…They are more or less playing two games here, you know having two customers: one is a front-end customer and one is a back-end customer. What’s your thought on that, you know, using the data you get as market research?

Jameson: Sure. Well I’ll tell you that a lot of the businesses that started in 2011 – 2012: Conscious Box, Love With Food, the ones that have the sample discovery model, all kind of went down that route. That’s kind of the route that Conscious Box eventually went because we realized, ‘Okay, if we’re going to have to continue to procure product for tens of thousands of subscriptions going every month, we’ve got a figure out how to provide more value back to the vendors, right?’ Because the last thing you want in the sample discovery business is getting a bunch of free product but then that vendor not being happy and then never sampling with you again. So Love With Food got in that position where they’re like, ‘Okay we’re getting bigger, we really need to maintain product quality. We’ve gotta keep retention high, we’ve got to find a way to just justify to our vendors to continue to give us more free product.’ So they had to go down that market research/market data route. And, because what we found out with Conscious Box was that we could not directly influence full-size product sales. We just couldn’t do it. It couldn’t work. That was the downfall of Conscious Box. The only other option for Conscious Box was to raise the price, right. But Love With Food has kind of stayed at the same price point. The only problem is, when you’re using market research and data to justify getting free product from those vendors, you’re stuck with the big multinational vendors.

Kunle: That’s true, that’s true.

Jameson: You’re stuck with, like you can’t with work with those cool, small home-based companies, you can’t work with those brand-new cool companies you see on the shelves of Wholefoods. You got to work with the big brands and unfortunately with the big brands it’s really hard to maintain a cool-looking box every month, you know. The products all tend to be like supplements and stuff that can only be produced in mass volumes. So that’s the only problem I see.

Kunle: Absolutely. I’m one with you on that. I’m on the same page with you on that. Okay. Let’s track back to Love With Food [meaning Conscious Box], you guys managed to raise $1.5 million is that correct, in your second year?

Jameson: Yeah, somewhere… I’m not sure what it ended up being, I think it was somewhere between $1.5 – 2 million.

Kunle: Okay, okay. What led to you throwing up the towels and doing it on your own from Conscious Box, your exit from there?

Jameson: Well, I was 22-23 and I had just moved our business to Santa Monica and everyone was talking about raising venture capital and we’re like, ‘All right, we’re going to build a big company, this is what we need to do.’ So there wasn’t much intelligent thought that went into raising that money. But we got good at learning how to raise money. We actually ended up doing it, which was very hard to do. It was a great experience but I’d never recommend raising venture capital for these types of businesses anymore. Just because I know you can build a multi-million dollar subscription business by bootstrapping it with little money. If you need venture capital for your subscription business, you’re doing something wrong, in my opinion.

Kunle: And then, what did you do after? What was like your first project after Conscious Box?

Jameson: Escape Monthly.

Kunle: Okay, and what was that?

Jameson: Escape Monthly was, we called it a ‘vacation in a box’. You got products from different places in the world each month. And that was a higher priced subscription, it was about $44. And we grew that one to a pretty good size, I think a couple thousand subscribers over a year, spent little or no money on marketing. Me and two friends and we sold it a year and a half later and bought a house.

Kunle: [laughs] Not bad. So you just grow businesses, sell them, and buy houses, okay, fair enough. [laughs] Okay, okay. And then after that I suppose Furball Box and Yogi Surprise came shortly after that?

Jameson: Actually Furball Box was before Escape Monthly, right after Conscious Box. And that was really more of an experiment.

Kunle: Yep. Okay, absolutely. Okay, let’s talk about the specifics of subscription commerce in general. And I want to ask something quite fundamental. What’s, in your opinion if there’s a difference between a subscription e-commerce business and a subscription box e-commerce business?

Jameson: A subscription e-commerce and a subscription box… So I like to describe consumer subscription businesses as subscription boxes. I think the main difference is whether it’s a replenishment subscription, like Dollar Shape Club versus more of a curated collection of products. But I like to use the word subscription box for all of them. I call Dollar Shave a subscription box. I think a subscription box is really a consumer subscription that is delivered on a recurring basis to the customer’s residence. I like to use the word subscription box to cover all of that.

Kunle: For everything. Okay, right. So what elements in your opinion form the DNA of a subscription commerce business?

Jameson: I would say, so I think sometimes, I don’t know, it’s difficult you know. Subscription commerce I think it sort of is all-encompassing for like B2B and consumer stuff. I think of subscription commerce for consumers as simply getting either a need met on a recurring basis or, I think even something like Yogi Surprise, I don’t think replenishment subscriptions are the only ones that are need-based. I think the people who get my yoga subscription, Yogi Surprise, see that as a need because it’s so close to what they identify with. So if you can create a subscription business where the niche, where you’re creating a consumer product where your customers perceive that as a recurring need, that’s kind of what you want to aim for.

Kunle: Okay, so I suppose we should take a step into how to deconstruct a need that’s not obviously there as with the case of replenishment. And to figure out how to test or convince people who are passionate about something that they need a subscription box for the purpose of discovery. So do you have a formula for our listeners thinking going into subscription, or pivoting into subscription box business, for as to how they could figure niches out to get into or setup and test subscription commerce models? Sorry that’s a long question.

Jameson: Cool, so basically you’re asking how do to identify a good niche, is that…?

Kunle: Yes. [laughs] In plain English, okay.

Jameson: Yeah, well, I guess, I always…I say this a lot. I always say the first place you should start is think about what you care about. Okay? And then from there, you’re looking for, you’re not just looking for…

Kunle: Okay, let’s take me for example. I like going for mud runs. And okay, so I feel like it’d be something I like to do on a regular basis to build a business around mud running. How would you approach it, how would you sort of build a subscription box business around mud racing? A typical mud racer, a real keen mud racer would run at least four races in a year. Does that even qualify for a subscription commerce business or?

Jameson: It may not, I think if it’s purely a hobby you know and it’s not something that you…

Kunle: A lifestyle.

Jameson: Yeah, it depends on how obsessed the people are you know. It’s like you’re looking for not just a category, you’re looking for a culture. Things that define people’s way of lives. You want to find categories that people actually identify themselves with. Phrases you want to look for, like you know with yoga… you’ll hear people calling themselves, they’ll say, ‘I am a yogi’. Or someone that’s vegan, it’s not only a diet but people define who they are with it, ‘I am vegan’. You know, you want to look for people that are using phrases like that, you know what I mean.

Kunle: It’s an identity, a tribe, an existing tribe of people. Okay, make sense.

Jameson: Yeah, the more that someone defines themselves by a certain community or a lifestyle, they’ll be really receptive to a product that you create that acknowledges who they are. You know, those are the things you want to look for.

Kunle: Okay, that makes a lot of sense, that makes sense. I came across a concept on your blog which was like ‘complete customer lifecycle in the context of commerce’ and you mentioned stuff like ‘subscribe, try, and buy’. Could use shed some more light on that please?

Jameson: That was a concept that we we’re going for with Conscious Box.

Kunle: Ah, okay.

Jameson: We thought that we could, we thought that the discovery sample element of the box you got, we thought we could turn that sampling experience into full-sized product sales. Which is essentially what Birchbox does, right. They send you a small box for 10 bucks of samples and then they try to get you to purchase the full-size versions on their site. Love With Food does that in a way. And so that was what everyone was thought was like the big concept.

Kunle: Gotcha. The up-sale. Okay, okay in terms of the buy, okay, right. I read a blog post of yours about the do’s and don’ts of subscription e-commerce and you had one about building a sustainable… let’s go through, I have a list here. One’s build a sustainable pricing model and profit margin. How do you do that?

Jameson: Well, the first thing is don’t copy your competitors. You know you want to create a price that actually works for your business. There are a lot of subscription businesses that went out of business in 2012 – 2013 because they were copying like Conscious Box’s 19 bucks a month or and they’re just thinking. ‘Oh, my competitor’s priced at that so, if they can make it work then I can make it work.’ Well, Conscious Box wasn’t actually working, our price needed to be raised, right. But so many people were not paying attention to what their actual cost of goods and they were pricing incorrectly so, do the work yourself. Price it fairly and acknowledge your competition but don’t just copy their price point and run with it, it’s probably not going to work, it’s likely your competitors are doing it wrong too.

Kunle: Okay, what…let’s talk about, speaking about profit margins, what kind of margins should people build out when they’re think thinking about their subscription business? What is it they should have at the back of their mind as a formula, so to speak, so they don’t get into trouble?

Jameson: Yeah I mean, even with a lean business it’s crazy how much just surprise overhead expenses can eat up your gross profit. So I always say at least build in 40 – 50% profit margin, that’s after your budget for the products, that’s after packaging, shipping, you know all those costs of goods, make sure you’ve got at least 40 – 50% left there because trust me, that will get eat up quickly and before you know it you won’t be making any money. A lot of people try to keep their price really low so they’re trying to make it work with just like a 20 – 30% margin. That’s just not sustainable.

Kunle: In today, in 2015, could you kindly describe the price tiers? Because you mentioned the fact that a $44 subscription is on the high side. With tiers are established now, in US dollars, in subscription commerce now, especially in the consumer side?

Jameson: Ah man, you know it really depends on the niche. I will say at Cratejoy, across all of our subscription businesses using the Cratejoy platform, the average price point is $35. And I think that’s a really good price point. It’s not so high that I think it really hurts conversions that bad. My Yogi Surprise ends up being about $35 after the main lifetime discount promotion that we run. But that seems to be a price point that a lot of consumers are comfortable with. You know, I think from $35. I mean I’ve A/B tested this a lot, you know dropping it down to $25 doesn’t really affect conversions that much.

Kunle: Wow, okay.

Jameson: I think it’s not till you get really over $40 that it starts to hurt conversions, but again it really depends on your margins and the niche that you’re in.

Kunle: Okay, okay. That makes a lot of sense. What about product quality? You said, ‘product quality matters, don’t skimp on the details.’ Could you shed some light on that, please?

Jameson: So when I use the word ‘product’ in the context of a subscription business, I’m talking about the whole experience. From the packaging to the print materials in your box, to the products. I see a lot of people rushing to launch and get their product going and they order ugly-looking blank boxes from Uline and they don’t really pay attention to the details. And those details are what are going to keep your customers sticking around month after month so, spend the time on nice packaging. Think about are you going to use tissue paper, are you can use crinkle cuts? Just what is that whole experience going to be? And then ask yourself the question, is this something that you personally would buy? And a lot of people don’t actually ask themselves that question. Or they do and they lie to themselves, so [laughs].

Kunle: True, true. Is Cratejoy, just speaking of Cratejoy, is it US only or is it US and Canada only or are you global?

Jameson: No, Cratejoy’s totally global; anyone can start a subscription business on Cratejoy.

Kunle: Ah, okay. So for our UK business, you could start out a British pound driven subscription e-commerce business on Cratejoy?

Jameson: Yep, you can. The only restrictions are on the merchant processor that you use but for people in the UK, our default merchant processor’s Stripe, it’s totally compatible, so.

Kunle: That’s brilliant. Brilliant. Okay. Then another, going back to the do’s and don’ts of subscription commerce, another point you made in the article was ‘the most successful subscriptions fulfil real needs – gimmicks aren’t sustainable’. Could you just shed some more light, although we’ve talked about this a bit, brushed on this a bit?

Jameson: Yeah, well you know the definition of a need I think is pretty subjective. So like I said, if it seems like a frivolous consumer product to one person, you know in the context of a specific niche, that person could very well to see your product as a need, right. Like gimmicks, I mean I see people just starting a surprise box. It’s like, it’s no specific niche. It’s just like, get a box of random crap every month. Like, that’s the gimmick. If it’s not like a real niche, if it’s not a community of people that are passionate about the product, like you know, people are not just going to buy your subscription surprise box. Actually I think what I mean by that is just create quality. These are not cash machines, easy businesses to start. You still have to create a quality product for a specific niche audience or it’s just not going to work.

Kunle: I absolutely agree with you. Okay. The other one which you talked about is ‘don’t rely on free samples, it’s not sustainable at scale and it’s hard to pivot your pricing model without serious churn’. That pretty much says it all.

Jameson: Yes.

Kunle: What about customer satisfaction? You said, ‘customer satisfaction is the best indicator of your business health – be obsessive about it.’ How do you measure customer satisfaction from your standpoint?

Jameson: Well, in a subscription business it’s kind of easy to measure on your churn or your retention rate. If you’re losing more than 15% of your customers every month then there’s an issue with your product, or. You know Conscious Box had an issue with customer service, it just got so overwhelming and ticket response times were taking days. You know with Yogi Surprise, a customer always gets their ticket responded to within an hour. And that really… it’s funny how customer service really can change the perception of their business. If you’re having long response times and you’re not polite, one bad ticket can spread around like wildfire and destroy your business.

Kunle: Absolutely. Bad news travels faster than good. What about things like the Net Promoter Score? Would you recommend a Net Promoter Score to measure customer satisfaction or do you think that’s an overkill and you just look at the hard-core metrics?

Jameson: You know, I do measure Net Promoter Score every two months just because I think it’s fun. I don’t take a ton of value from it; it’s not super actionable number. The thing that I find valuable is literally the raw feedback that you get. People actually leave a comment, you know like that’s actionable data. But it’s fun to do it you know if you’re using something like Zen Desk, it’s really easy to measure Net Promoter Score.

Kunle: Okay. And with regards to churn, because I was going to ask you about churn but that just skipped. With $35 product, what kind of churn is manageable and indicates a healthy business? ‘Churn rate’, listeners, being the percentage of drop-offs from a subscription business.

Jameson: Yeah, I think for a consumer subscription business, 10 – 15% churn is pretty much expected, even if you are doing everything right. It’s different from a SaaS business where you want negative churn but if you’re only churning five to… anything over 15% I think could be a red flag, I think some niches inherently have higher churn.

Kunle: Niches like what, from your perspective, from what you’ve seen in Cratejoy, will have above 15%?

Jameson: Things like, we have a lot of food and candy subscriptions. I mean you kind of get sick of getting candy to your house after three months or so, right. So I think some of those kind of more fun, gimmicky subscriptions tend to have a little bit higher churn.

Kunle: Have you got any beard brands? Guys who are growing, this fad of beard growing, or have one. Do you have any subscriptions on Cratejoy that are based on mustaches and beards and stuff like that?

Jameson: I do, I think we have a couple. We do have a couple for sure, it’s definitely not the biggest category. I mean Cratejoy’s got a ton of food subscriptions, that’s probably the biggest category on there.

Kunle: Okay, okay. That’s interesting. Okay. Right. What about the final point, we’re going to go back to that blog post, is ‘most subscription businesses can thrive at extremely low overheads – don’t raise venture capital’. So you rethink that, you know. So what kind of capital outlay, basically that’s going to lead on to this question, are subscription businesses running on Cratejoy starting off with, in US dollars?

Jameson: Oh well, you know you can start them with zero dollars if you have the right, if you’ve got a group of friends right, where one of you guys knows how to design really well, can do a logo. You know, I think that’s really the main thing, right. If you structure your business launch correctly, you really can launch them with no money out of pocket. I think for most people the main thing is just getting a nice logo done and getting a design for your site done. If you have a friend or someone you can bring on to your team that can do that kind of stuff, then you’d never have to be out of pocket. I would say a max you know, it’s not really necessary to spend more than a few thousand dollars.

Kunle: Okay, okay. Makes sense, makes a lot of sense. Okay let’s talk about Cratejoy. Okay no, let’s now go back to, I have a final question. Do you think the subscription box business is saturated at the moment? You did talk about lots of failed startups in 2012 and 2013 trying to replicate the success of Birchbox. Which typically happens you know, when people see gold, there is a gold rush. But what are your thoughts on the state of subscription commerce, especially on the consumer end?

Jameson: Well I certainly don’t think it’s saturated at all. There’s a lot of them, and the amount of them has been growing pretty dramatically over the past few years. But I think really it’s, I think it’s a superior form of e-commerce, both for business owners and consumers. And Amazon did a lot in paving the way for consumers to be more receptive to the concept of a subscription. But the element of recurring revenue makes them more sustainable, predictable businesses for business owners. You know when someone is creating a niche product for a certain, a specific community, consumers are really receptive to that. I mean, I think consumers are getting used to getting exactly what they want and getting their needs perfectly catered to. And I think subscriptions address a lot of these evolving consumer needs. So I just simply think that this is the direction that e-commerce is going. And if you compare the amount of e-commerce businesses to subscription businesses, it’s a pretty dramatic difference. I mean obviously there’s millions of e-commerce businesses, I think maybe can say there are you know 1,500 subscription box businesses. So I think it’s still really great opportunity to get involved in as an entrepreneur, for sure.

Kunle: Okay. So for the average US household, does every US household have a subscription to some subscription commerce business of sorts?

Jameson: Well I mean, I see no reason why eventually people aren’t subscribing to have most of their needs met on a recurring basis, for sure. I mean whether that’s like things like razor blades and toilet paper, or whether that’s for your certain interests and hobbies. I mean I don’t think that there’s really any end to how many subscriptions are normal.

Kunle: Okay, I was just trying to gauge the health, well, the penetration of subscription commerce in North America.

Jameson: Oh. I think the penetration of it’s very, very low still. I personally only subscribe to a couple of subscriptions right now, but I know many people that still haven’t really taken hold of concept yet. So I think there’s still tons of room to grow. It’s very early stages.

Kunle: Absolutely. Because Dollar Shave Club is the poster child of subscription e-commerce.

Jameson: Yeah and I’ve recently read that they’re selling more razor blades Gillette.

Kunle: Yes, indeed. Okay. Let’s talk about Cratejoy, let’s lead this on to Cratejoy. Do you think existing e-commerce businesses can seize the opportunity of subscription commerce? Let’s say a pharmacist is selling men’s grooming products and they see a trend that guys come to buy facial creams or whatever, or shaving sticks from them on a regular basis. Can they kind of latch on a subscription commerce model into their existing e-commerce business as a growth lever?

Jameson: Oh yeah. I think people with existing e-commerce businesses or existing communities, subscription is the perfect way to either monetize the community that hasn’t been monetized yet, or to build a more predictable revenue stream for your existing e-commerce business. I mean if I’ve been selling one-off products with my e-commerce businesses for years, adding a recurring revenue component to what I’m already doing would totally change my life, you know what I mean.

Kunle: Okay. And Cratejoy, you guys are like the Shopify for subscription e-commerce. Is that analogy correct, in your opinion?

Jameson: Sure, yeah, I mean Cratejoy is an e-commerce platform built specifically for subscription businesses and everything that we built from the ground up is 100% tailored to consumer subscription businesses.

Kunle: And you being the Director of Consumer Marketing at Cratejoy, what does a day look like? What does your role look like at Cratejoy?

Jameson: So I do a lot of different things, because I’m one of the only people on the team that’s started multiple subscription businesses. So I do everything from just talking to merchants and helping them set up subscription businesses that are going to be successful. A lot of what I do is on the marketplace. If you go to Cratejoy.com you’ll notice that it looks like a consumer shopping destination. So we’re kind of, you know, we’re kind of growing towards an Etsy for subscription boxes and we’re trying to make consumers more aware of subscriptions. We’re trying to help, you know one thing we’re doing that other platforms don’t do is we’re actually trying to directly help our merchants with customer acquisition. So me having grown multiple subscription businesses, I’m now in charge of growing all Cratejoy subscription businesses. So, yeah.

Kunle: That’s interesting and I can actually see a review, like a store review, which is quite good. So people can quickly assess due to social proof, businesses such as Wet Shave Club here, there’s Faithbox, Bocandy… It’s pretty interesting, very, very interesting stuff.

Jameson: Yeah, there’s a lot of interesting subscriptions that I never thought would pop up, but it’s crazy.

Kunle: Okay, right. So how many stores are powered by Cratejoy at the moment?

Jameson: A lot, I think the number is over thousand for sure now. You know the amount of… the success levels are pretty spread out. We’ve got some pretty massive merchants, you know. A lot of people that are still gearing up as well. So it’s become…it’s really fun to see. And people are coming up with more and more unique concepts, and I think that’s the key, is you know the more niche and the more custom tailored you can get, the better. Yeah.

Kunle: When you talk about massive, are these existing e-commerce businesses that’ve decided to go into subscription commerce or are these as you alluded to earlier platforms of huge communities that have latched on subscription commerce to their models? How do they grow to be massive?

Jameson: Well I think you know actually some of the bigger ones, having an existing community in place. We have someone that previously had an Etsy business, and she had grown her business for a couple of years. And then she decided to transition her Etsy business into a Cratejoy subscription and she just blew up.

Kunle: That’s clever.

Jameson: Like her audience totally loved the concept. This is what they really wanted, they’re getting her cool creations every month on a recurring basis and like, it changed her life, this lady’s doing hundreds of thousands of dollars a month in revenue.

Kunle: That’s absolutely clever, yeah.

Jameson: Yeah, a lot of the big ones had existing communities, you know a lot of the traits are the same. They’re people who are doing things that feel authentic, they’re doing things that they’re actually passionate about. We have a lot of first-time entrepreneurs that are creating successful businesses for the first time. So there’s a lot of exciting stuff like that happening. And then you’ve got people that had existing businesses and are either transitioning them to a subscription or adding a subscription component to their business, so lots of different backgrounds at Cratejoy.

Kunle: Okay so what does customer on-boarding look like? Obviously it might be daunting for a newbie, or even someone who is used to e-commerce a traditional way, to move into subscription commerce business and I could see you on this, I made some notes here that you have a subscription commerce school. How does that look like and how has that helped launch and grow subscription e-commerce businesses on Cratejoy?

Jameson: Yeah, we created Subscription School because there are a lot of best practices that are a little bit different with subscription businesses. And there really weren’t many resources before us, so that’s one of the reasons we created Subscription School. I think you’ve mentioned how to grow in these businesses, getting your first customers in the door. My biggest thing is try to build anticipation and build interest before you actually launch. It’s way easier to get an email than it is to get a sale, right. So if you come up with a cool concept and then you introduce it to this unique niche community that you’re catering to, and get them to just put their email in just because they’re interested, you know your prelaunch this is going to convert closer to 10%. Whereas after you launch, your website may convert at 2%. So I always suggest trying to build up that anticipation before you actually launch. And then that way you’ll launch with 100 – 200 recurring subscribers, and then you got that revenue and your business is instantly profitable. You know, if you immediately launch with no prelaunch or no teaser process, you could launch with crickets and you could be losing money for the first two months. And I actually on my blog, I actually outlined, I have an article, ‘The Right Way to Start a Subscription Business’, and I outline these steps that will take you through the right way to time everything.

Kunle: All right, I’m going to link to that in the show notes. So talking about anticipation and interest… From the hundreds, possibly of subscription businesses you’ve seen launch at Cratejoy, how did they do it? What recurring theme did they observe together to actually execute a perfect launch that had conversions in the double digits?

Jameson: I don’t think that there is a specific answer to this one. And honestly, I think a lot of these people aren’t even following sort of these best practices I laid out in that post I just told you about. I think there’s a lot of people that are getting lucky, there’s a lot of people that just had the existing active communities that are latching onto the concept really quickly. You know there’s people that are big that grew slowly over time. It’s a pretty diverse mix of experiences. I by no means say that my way is the most perfect way but it definitely is a clear path to success.

Kunle: Would you success blogging initially or, yeah, blogging around a topic and building out community around the blog and giving value and then eventually talking about the launch for the brand new start-ups? And then on the other hand for more existing e-commerce brands you know, since you already have community, you just drop the bullets on points?

Jameson: Actually, that’s how we launched, that’s how Conscious Box was able to… one of the reasons we did so well out of the gate is because we blogged and built a community in the natural lifestyle world for a year and we had an email list of leads. It was small it was like 5,000 people that we acquired through the blog over a year and just having that existing community in place and using that as a launchpad worked really well.

Kunle: Yeah. And I suppose keeping the momentum with the community with great content and still having the subscription business on the side would help on-board new customers. Because most people who blog that want to monetize it beyond advertising will think about digital monetization which will be more or less changing to a page subscription, creating a gated content, a gated subscription publishing platform which can put people off when you think about it, but I guess you could still maintain the free content and then have this subscription business on the side. Is anybody doing that, or?

Jameson: Yeah, having a blog with the community is just such a great platform to launch the subscription business. It’s really… the subscription box becomes an extension of your blog you know. And we use Yogi Surprise, we have a blog, it’s pretty decent, I mean we’ve got 200 original articles, there’s a section on the site called The Yogi’s Journal and we try to convert the organic traffic from those blog posts into customers. We’ve got gotten better at it, it is hard to do and the content…it’s a long-term strategy as well to get that content to a point where it actually becomes a good driver of traffic that’s going to convert. But man, if you’ve got an existing blog, a subscription box is a way better way to monetize than a ad revenue.

Kunle: Okay, okay. Makes sense, make sense. I was just going to ask about apps. You know like in Shopigy and other Saas based e-commerce platforms there’s kind of like an app store or an app economy around these platforms. Do you guys have an app marketplace?

Jameson: Cratejoy, yes Cratejoy has an app marketplace, a lot of different integrations.

Kunle: Okay, okay. And what about Cratejoy’s pricing? It appears to be flat, which is interesting. $39 a month which there’s a 1.25% plus a $0.10 fee per transaction. Is that the case or do you have other tiers which I simply cannot see?

Jameson: No, that’s the pricing for everyone, we try to keep it pretty simple.

Kunle: Pretty good.

Jameson: I mean I wish I had this when I started Conscious Box because we spent, we must have spent $200,000 trying to build our own platform and we still were never able to get as good to where Cratejoy is today.

Kunle: Wow. Wow. Okay and you obviously support the entire world which is good, so UK listeners, people in the EU, Australia, and New Zealand, everywhere the world yeah, Cratejoy is global which is really, really good. Could you tell us any success stories, if they’ll let you, from your customer base out at Cratejoy?

Jameson: Yeah definitely. The one I was talking about earlier, the woman who started on Etsy and transitioned to Cratejoy store, that is Fandom of the Month Club. And they’re doing a lot of revenue, it’s her and her family, it’s a great family lifestyle business that they’ve built. We’ve got Faithbox which has become a pretty good-sized subscription run by a small team. We’ve got Russell Crate, it’s a father-son team, that’s doing this full-time. So we’ve actually got a lot of really cool success stories like that. And most of these people are either first-time entrepreneurs or they’re family businesses. There’s been more than a few occasions of Cratejoy merchants buying homes and their lives completely changing from the recurring revenue that they’re generating so that’s one of the most exciting things about working for Cratejoy.

Kunle: Could stuff, good stuff. Okay. I was also going to ask you prior, you know when we talked about churn and we talked about the 10 – 15% churn… So what kind of numbers should you be doing from an acquisition standpoint to keep a healthy subscription commerce business? If I’m seeing a 10% drop-off in subscribers, say I have a healthy 1,000 subscribers to my business and 100 of them are dropping off, how many do I need to acquire, what’s the rate of customer acquisition or new subscribers good, decent subscription businesses are getting to keep healthy?

Jameson: Well as long as you can outgrow churn every month, it’s great. I mean you’ve got 1,000 subscribers and you’re churning at 10%, I mean if you can add 150 to 200 subscribers every month, that’s great.

Kunle: Okay. Yes, absolutely, and are these kind of companies doing that? Are they able to beat the churn, beat the churn every single month?

Jameson: Yes. Yeah, I mean they have to. Or else they wouldn’t keep growing, right. I think some of our most successful merchants are certainly, I mean we’ve got merchants that are adding thousands every month, right and outgrowing churn. But I mean if you start not being able to outgrow churn, you’re business goes downhill pretty quickly.

Kunle: Okay, okay. Right. Is there anything about subscription commerce we haven’t talked about? Or you’d like to talk about?

Jameson: Well I urge people to create quality. These businesses can make a lot of money and they can become great businesses. I make a lot of money doing it on the side while working full-time at Cratejoy. But they’re by no means easy cash machine businesses. And I think some people get that impression but they do require a lot of hard work, you know they do require that you create a quality product month after month, you’re doing great customer service, you know it is serious work but if you’re up for it, these can be absolutely amazing businesses to run.

Kunle: Okay. So as much as they’re lifestyle businesses, it’s still quality and you still need to put the work in. Okay, good stuff. Right. Let’s go to the evergreen questions, just really, really quick answers. So let’s start off with what has been your best mistake to date, that is, a setback that’s given you your biggest feedback?

Jameson: Let’s see, probably Conscious Box, raising venture capital, I learned more about business than most of my friends that have MBAs.

Kunle: [laughs] Okay, what parting piece of advice do you have for people considering adopting subscription e-commerce ventures?

Jameson: My parting advice would be I think, I get a lot of people who don’t know where to start. If you don’t know where to start and just take a step in any direction, even if you’re not sure if it’s the right direction… Just take steps to do things. And as you take those steps, the right steps will become more clear.

Kunle: Okay. What about existing subscription commerce businesses? What tips do you have for them?

Jameson: Don’t do fulfillment in your house.

Kunle: [laughs] Okay, what books or resources would you recommend to listeners from an e-commerce standpoint?

Jameson: Well, I would recommend SubscriptionSchool.com. It is literally, that and my blog are literally some of the only resources available that go into deep, specific details on best practices for starting subscription businesses.

Kunle: Excellent. I shall link to it for the show notes. Okay. Finally could you let our audience know how to find and reach out to you?

Jameson: Oh, the best place to reach me is that my blog, JamesonMorris.com. Besides that I don’t spend much time on social media, I don’t do Twitter, I don’t do Facebook, I’m pretty much always running my subscription business. [laughs]

Kunle: You’re a productive man at it, please, it shows. Okay. It’s been an absolute, absolute pleasure having you on the show, Jameson. I wish you the very best and thank you for sharing your wisdom in subscription commerce.

Jameson: Yeah. Definitely, I’m glad we could catch up.

Kunle: All right. Cheers.

Thank you for sticking to the very end of today’s episode, 2Xers, and hope you found Jameson story about Conscious Box, Yogi Surprise, and Cratejoy inspiring. And I hope this has also been a good primer on subscription box e-commerce if you’re thinking about going into it. To download the show notes and read the full transcript, head over to 2XeCommerce.com. Now if you listen to this pretty early, you may not see it up on 2X eCommerce.com, but just pop in a few days later, or better still, subscribe to our list, or our email newsletter, and you’ll get an email alert as soon as it comes up. The reason why it takes a bit of time is most of the show notes, apart from the transcripts you get word for word, most of the show notes are three to four thousand word blogposts. Really, really, really detailed, I break everything down to the last detail, so if you prefer to read you could just get everything in chunks. And nothing is actually missed in the show notes and that’s why we take a bit more detail on 2X eCommerce with regards to reproducing the content and converting this, whatever you listen to. You might be in your car or you might be in the gym or you might be taking a walk, just be rest assured that when you get to 2XeCommerce.com, whatever you listen, any interview you listen on audio, will be really detailed and outlined on our website. So until the next show, do have a fantastic one and see you later 2Xers. Bye.

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