At a mostly empty, metal-sided warehouse near the Boise Airport, Rachael and Joe Bunt are organizing hand-made craft kits into a small assembly line. They're putting together September's Crafters Crate that will be mailed to subscribers this week.
“This is like Pinterest in real life," Joe Bunt says. "I’m always wanting to create something new.”
Joe and his wife Rachael started Crafters Crate in March. It’s a subscription-based business; no brick-and-mortar storefront is required. That’s partly what drew the couple to jumping on the subscription-box trend.
Each month the pair, along with help from family and friends, bundle five do-it-yourself children’s craft kits into brown cardboard boxes. Each bundle is wrapped in tissue and tied with a bright pink ribbon. The box is stamped with the company’s logo – a bright pink elephant.
There are more than 100 Internet-based niche-subscription businesses vying for customers. Brand names you may have heard of include Birch Box, Dollar Shave Club, or Bark Box. Those are some of the big players in an industry that might not be considered mainstream.
But the subscription box industry is also a place where entrepreneurs like the Bunts can inexpensively experiment with owning a business.
So far, less than 200 people have signed up to pay $20 per month to receive a Crafters Crate in the mail. Even though the business is based here in Idaho, the majority of their subscribers live on the coasts. Rachael Bunt says each week more people are added to their mailing list.
“The only things that limit us are time and bodies," says Rachael. "You know, I don’t think the customer is the limitation at this point.”
The Bunts started their business with $500 of their own money. They’re able to pay for supplies with their existing customer cash flow, which is a reversal from traditional retail.
“You don’t have to have 500 units ready to go on the shelf," says Joe. "You’re probably going to get 5, 10, 15 customers at a time each month. And we realized really quick that people were going to pay us before we actually created the product.”
The couple is trying to stamp out a niche on the subscription box market. While some services focus on cosmetic samples, vegan beauty products, natural snacks or high-end coffee samples, the Bunts are targeting 5-to-12-year-old girls who like to make stuff. Like these other companies, Joe and Rachael are finding their customers through Facebook, Twitter, and bloggers.
Forrester Research e-commerce analyst Sucharita Mulpuru says that’s exactly how these businesses will need to survive.
“These businesses are tough businesses because you have to constantly be looking for new customers, and you have to be alert for customers churning out of a business like this," says Mulpuru."On the other hand, it’s an incredibly rewarding business if you can pull it off.”
Subscription-based businesses definitely aren’t reinventing the wheel. Look at magazines and newspapers. Netflix is probably the current success story.
Mulpuru says there was a time when analysts thought the subscription box model would be the next big thing in e-commerce. Now, she believes the fad peaked 18 months ago and market saturation could start to shakeout some of the smaller players.
“The challenge is the scale these businesses and grow to be, you know, millions and millions of dollars because there are probably only a few that have managed to get to that scale.”
For Joe and Rachael Bunt, they see big promise with their start up. But neither have any illusions about it being an easy road.
“We didn’t want this to be a small business per say. We wanted it to be big," Joe says. "So said ‘we’re going to invest as much as we can of our own money, and then anything we make we’re putting right back in’.”
The Bunt’s aren’t paying themselves, or their volunteers – yet. Both hope that’s right around the corner.
For now, they’re focused on socking away enough of their profits to invest in someone who can better market their product. They’re also trying to get the attention of a big-box craft store that would give Crafters Crate a place to reach customers offline.