dollar_shave_club_21

When Michael Carney and I wrote last year that subscription commerce was a smokescreen, not a revolutionary business model, we may have been a bit short-sighted. We tackled the topic from an investment perspective, i.e., is this style of commerce legit, or is subscription commerce about to become a graveyard of failed startups, similar to the once-hot daily deals industry?

Certainly the sheer volume of companies rushing into the category with ideas ranging from silly and fun (a grab-bag of startup swag!) to downright ridiculous (dildos) didn’t help its reputation. A wave of similar sub-comm-hating stories quickly followed.

And since then plenty of subscription commerce companies have failed. 12Society had to sell itself to Quarterly, which itself underwent a rigorous turnaround. Subscription food company Foodzie sold itself to an online video platform. Grooming subscription site GuyHaus didn’t exactly catch on and quickly shut down, and ShoeDazzle had a very rough fall from grace in 2012. Countless others have muddled along without making much noise.

But more notable, given our initial skepticism, is how many have survived and thrived. Earlier today I wrote about Birchbox, which now has 150 employees and, by my rough estimation, around $66 million in sales. Today Blue Apron, another New York sub-comm company, today announced it ships 100,000 meals a month, which translates to a $12 million revenue run rate. The company also announced it raised $5 million more in addition to the $3 million it raised in February. And yesterday, I wrote about Svbscription, the most improbable of subscription commerce success stories, an exclusive luxury men’s gift box that costs $300 a quarter and is bootstrapping itself through controlled, steady growth.

Jessica Alba’s subscription diaper company The Honest Company has around $50 million in revenue. Subscription shoe company JustFab has close to $200 million in revenue. Even Dollar Shave Club, novel as it is, has around $14.5 million in sales from razors alone, as Michael reported recently. (Incidentally, HelloFlo, a very early stage subscription commerce site for tampons, recently had a hit with a comparable viral video marketing strategy.)

In same number of months that have passed since our story, the daily deals industry had materialized out of thin air, (Groupon named the fastest growing company ever!), consolidated, IPO’ed and then completely fallen apart. It’s hard to forget the faint gloom cloud hovering over sad panels like “The Year of the Unsubscribe?” and “Too Fast, Too Furious?” at the 2011 Daily Deals Summit.

At this point, enough large, growing subscription commerce companies have proven that the category is not about to experience a daily deals-like flame out. Part of that is the reasonable speed at which they’ve grown. It’s taken JustFab three years to get to $200 million. Birchbox has taken around the same amount of time to hit its ~$60 million and The Honest Company has gotten to $50 million in a year and a half. Contrast that with Groupon, which hit $500 million in revenue in 17 months.

The problem with separating the winners from the losers in subscription commerce is that there is no common thread that unites either category. Some take replenishment models, offering convenience and competing on price and customer service. Others have a model of discovery and taste, offering delightfulness and acting as a branding and marketing vehicle for products. Others try to blend the two.

The one conclusion that can be drawn is that the winners have compelling merchandizing, strong branding and the serious marketing know-how. Which, if you think about it, can be said of any consumer-facing company, be it stuff-in-a-box, cute email discounts  or good old-fashioned brick-and-mortar retail.