Quarterly Co. is back from the brink thanks to its new CEO, Netflix co-founder Mitch Lowe

By Michael Carney , written on June 18, 2013

From The News Desk

When Quarterly Co. opened its (digital) doors in late 2011, the business model was simple: connect consumers with their favorite celebrities and influencers who will then deliver quarterly boxes of personal favorites to these fans based on their contributor’s tastes and interests. Early participants were author and life-hacker Tim Ferriss, Reddit co-founder Alexis, and Rhode Island School of Design President John Maeda, several of which later became backers or advisors to the company.

But shortly after launch the Los Angeles-based company ran into fulfillment and operational problems, and fans began complaining of uninspired merchandising. In short, things weren’t going well. Today, the company revealed the bold move that seems to have righted the ship. The company brought in Netflix co-founder and former Redbox executive Mitch Lowe, first as an advisor and then as its new CEO, replacing founder and former “GOOD” magazine editor Zach Frechette.

Lowe actually assumed the executive position with limited fanfare in September, but the company kept the news under wraps until today. His first big change was to move to third-party fulfillment, turning to the same company used by Redbox, and subsequently hire a VP of Operations, former Green Dot VP of Retail Production Tonya Michlin. The result is that Quarterly Co. now has more than 8,000 subscribers and counting which pay on the order of $25 to $100 four times per year for curated gift boxes from the company’s three dozen contributors.

Lowe describes Quarterly Co. as something that could get really big, saying, “Just about everyone in the world has someone they admire ... In this digital age we live in, where we can buy, stream or download practically anything online, Quarterly Co. stands out for its connection back to the physical world.”

The other thing missing from the Quarterly Co. experience early on was an authentic connection to the celebrity contributors. The reason consumers sign up is not simply to get interesting items in the mail, but to feel like they are a part of something intimate and exclusive. But without a proper system for managing box creation and storytelling, much of this was being lost between concept and execution.

To remedy this, Lowe began encouraging the contributors to stick to long-term themes – for example Pharrell Williams likes to encourage curiosity and creativity, while Ferris is a known health and fitness aficionado. He also assigned a Contributor Manager to each celebrity making it easier for them to execute more ambitious gift ideas. The company also made simple changes like featuring the enclosed letter more prominently. Today, Lowe is focused on expanding beyond mainstream celebrities to a wider range of tastemakers, including winemakers, chefs, and designers, as well as actors and directors. For many of these individuals, this will be their first and only channel for delivering a physical item to their large followings.

Quarterly Co. raised $1.25 million in a March 2012 Series A round led by True Ventures and Collaborative fund, with participation from SV Angel, Ohanian’s Initialized Capital, Scott Belsky, Brian Sugar, and Ryan Jacoby.

The company is competing for mind- and wallet-share with countless me-too subscription product discovery companies, each of which target a different vertical and demographic – Birchbox (beauty), NatureBox (healthy eating), and Barkbox (dogs), among others. Further, 12Society promised a similar influential curation model based around famous athletes, while OpenSky and others have run their own digital celebrity promotions. Put simply, there’s no shortage of choice and it’s in execution that the company can succeed or fail.

The jury is still out on the Quarterly Co.. On one hand, it’s easy to lump it into the “box of the month [err quarter]” club, meaning it is part of a passing fad. Add in the celebrity tie-in and it truly looks like a relic of the era it was founded. On the other, its business model actually a brilliant twist on the age old fan club and with hints of the trend toward celebrity curators first popularized by Oprah.

If the latter case is true, then Quarterly Co. has the potential to be a major success. The verdict will come down to its ability to attract desirable contributors, support them in creating compelling shipments, and iron out the operational challenges that threatened to derail the company before it ever got out of the station. The addition of Lowe at least puts Quarterly Co. in capable hands.