On today's episode of Subscription Box Answers, I welcome back Stefan Pretty, CEO of Subbly, as we delve into the current state of the subscription box industry in 2024. Stefan offers a unique perspective, given his bird's-eye view of the industry through Subbly. He discusses the state of churn, acquisition trends, and his insights into where the industry is headed this year.
We also address a recent development where some platforms have been effectively preventing their users from migrating to better-suited solutions for their businesses. We dissect the vital need for data portability, the alarming trend of platform lock-in, and share effective strategies to help you maintain control of your valuable customer data.
As you listen, you'll gain a tactical advantage in selecting payment gateways, avoiding being "held hostage" by a platform, and ensuring your business is poised for uninterrupted growth and autonomy. This situation is alarming for small businesses, and Stefan provides valuable advice on how to navigate it if you find yourself in such a predicament.
If you have any questions you'd like addressed on the show, be sure to visit www.SubscriptionBoxResources.com and join the free Facebook group to post them there.
On today's episode of Subscription Box Answers, I welcome back Stefan Pretty, CEO of Subbly, as we delve into the current state of the subscription box industry in 2024. Stefan offers a unique perspective, given his bird's-eye view of the industry through Subbly. He discusses the state of churn, acquisition trends, and his insights into where the industry is headed this year.
We also address a recent development where some platforms have been effectively preventing their users from migrating to better-suited solutions for their businesses. We dissect the vital need for data portability, the alarming trend of platform lock-in, and share effective strategies to help you maintain control of your valuable customer data.
As you listen, you'll gain a tactical advantage in selecting payment gateways, avoiding being "held hostage" by a platform, and ensuring your business is poised for uninterrupted growth and autonomy. This situation is alarming for small businesses, and Stefan provides valuable advice on how to navigate it if you find yourself in such a predicament.
If you have any questions you'd like addressed on the show, be sure to visit www.SubscriptionBoxResources.com and join the free Facebook group to post them there.
Welcome to Subscription Box Answers with your host, liam Brennan. You're no rubbish, no crap. Straight to the point podcast with real, actionable tips, real strategies and insights from the industry which will help you start and grow your own successful subscription box business. You ask the question, you ask the questions, liam gives the answers. It's as simple as that.
Speaker 2:Welcome back to another episode of Subscription Box Answers. I hope you're having a really good day and I hope business has gone well for you in 2024. On today's episode, we have Stefan Pretty back and we're talking about subscription box trends in 2024 and some other stuff that you definitely need to be aware of. So pleasure to have you back, stefan. How are you?
Speaker 3:Yeah, I'm great. Thanks very much for having me, liam. It's always a pleasure to be here. Yeah, I love your podcast and I actually just want to say thanks. I saw your recent episode about how you guys are using Subly and, yeah, it was really much appreciated that you guys were sharing that information, so thank you.
Speaker 2:Yeah, no problem at all. The reason we did that podcast was we seem to have a lot of new people in the industry in 2024, which is great. It's really good to see new people coming in and setting up businesses, and I've had so many different people reach out to me asking what platform do I recommend? So we just shared our experience with Subly. So if you're interested in listening to that and finding out why we actually use Subly, definitely check out that episode. So your last episode you came on last year and it was a bird's eye view of the subscription box industry and you shared some really really great information. What do you see going on in the subscription box industry in 2024?
Speaker 3:Yeah, that's a it's crazy to think that it's actually been a year, basically since the last time that we did this.
Speaker 3:Wow, first of all. Yeah, so wow, everything's changed. Actually, I think what we're seeing at the start of this year is a pretty, pretty big bounce back, actually, and an unexpectedly big one, because previously, you know, it was all about retention and cutting costs. The cost of living crisis was causing a lot of concerns, but now what we're seeing is people are actually opening up their wallets unexpectedly, actually, because I was surprised to see this anyway, personally and it's not just, you know, the consumers who are actually starting to spend again. It's also people are looking at, you know, starting new ventures and businesses, and we're seeing the metrics on both sides looking really strong at the moment. So looks like we're shaping up for a strong 2024. Any part of it is that people are just they've done their cost cutting exercises. Maybe they're feeling more confident in the, you know, in the market, in the direction, or maybe they're just sick of sitting on their hands. I'm not sure.
Speaker 2:Makes perfect sense. I think obviously 2023 was pretty challenging, but definitely towards the end of the year we could see things get better and different people in the industry were saying the same thing. So, yeah, that's really promising to hear. And what are you seeing in regards to churn or growth in general, as churn remain pretty much the same or companies back growing?
Speaker 3:I mean I haven't done a deep dive into the data. I mean just looking at the general seasonal trends, we see a spike in turn at the beginning of the year. Generally speaking, I wouldn't say it's higher than previous years because we probably would have noticed it and flagged it and dove into the data.
Speaker 3:But, we're seeing a stronger start to the year than previous years, which suggests and implies that turn is actually lower, because we had a strong Christmas, but it wasn't out of the ordinary either.
Speaker 3:So the holiday season was better than the previous two years, but it was on par with probably around about COVID actually or just before COVID, and then normally what we would see is a pretty high turn rate through January February as gifts come to an end or there's people who are not wanting to renew because they're taking advantage of these offers. But we're not seeing that. We're actually seeing this year a much stronger January February versus the previous year. So it's looking really promising and I think that also just from a kind of a merchant kind of business perspective, we're seeing more merchants getting smarter about how they're doing business. So one of the things that keeps coming up is increasing average order value, lifetime value, add-ons and upsells and all these things that we've been working on and building and suddenly support you at Busterbox as well. People are really starting to get savvier with that and they're realizing they're leaving money on the table, and I can see the same happening in all businesses.
Speaker 3:Actually, saas businesses obviously Subly's a SaaS business technically and it's great to see that the people are learning new sets of skills and just being a bit more savvy and smart about what they're prioritizing and, instead of being loose with their wallets, they're just being smarter and more focused.
Speaker 2:Yeah, I think hitting L on the head there. People are paying more attention to the features and stuff because obviously there are so many powerful features actually on the platform that people may not have been aware of or felt like they needed to use because everything was going so well off the back of COVID. But now they're actually doubling down on things which can actually make a difference and can actually help you make more money from your customers.
Speaker 3:It's quite interesting actually because ironically, as you said previously, people weren't really aware of we're thinking about anything beyond the basics and what we're seeing now is a reversal of that, where even the smaller businesses that are maybe not doing as much revenue are actually moving up to our higher plans to unlock the features, because they're starting to realize that there is actually a lot of value to be gained.
Speaker 3:I mean, if you can increase your average order value by 15%, it actually might make sense to be on the top plan, which is $159. But, by the way, just to highlight this, is very cheap compared to the alternatives. Like, for example, if you're using recharge, their top plan is $500 a month. Others is like $159. Even though it's called advanced and people are looking at that going, oh, I'll never need that. We actually saw a post on our Facebook community saying never thought we would need this plan and actually we were so wrong Because I think the framing of it is like oh, that's the top plan. It's probably not for me, but actually we're seeing more of the smaller businesses realizing that actually there's a lot of value in that.
Speaker 2:So it's quite interesting to see that shift. Yeah, definitely, definitely. So. You've been in this industry for a long time. You came in around the same time as us back in, I imagine, around 2015, off the top of my head. How have things changed since 2015 compared to 2024? That's scary. Think about it.
Speaker 3:Yeah, it is. Yeah, so it's been a decade. It was 2014 when we actually launched the first version of Subly and, yeah, wow, I think back then, you know, I think there was a lot of skepticism actually about subscription boxes and a lot of people were saying is this a fad? Is this a trend? It's just going to disappear? I think we've got a clear answer that that's a no. It's not just a fad, but in terms of the use cases, the complexity, the level of knowledge that's been developed over time, in terms of expertise on these models, there's, first of all, there's more models, there's more flavors of subscription than there were back then, or they've just been better defined. So I think that there's more expertise, there's more understanding of how these models work, the economics of them, the metrics, and it's just more mature. So I think what we've seen through post COVID is this kind of like consolidation, a leveling up, if you will, but not just of the businesses that are out there, but also the knowledge that's like being dialed in. So, overall, I'm still extremely bullish on subscription. We call them subscription first business models, but that obviously includes subscription boxes, which is like curation that's how we describe it and that's probably the main, still one of the main categories within subscription first businesses. So, yeah, I mean it's crazy to think it's been 10 years, but I'm more excited than ever and in terms of the competitive landscape from my perspective, as the different solutions out there, we're seeing a really interesting consolidation and shift there as well.
Speaker 3:I mean there's some concerns that are surfacing that I've noticed, and we've just been really determined and stuck with our mission to create what our mission is to create a suitable home for subscription first businesses, in other words, a place that just makes sense for these business models. And we stayed true to that mission all along and it's obviously evolved and matured as well. But it's been a real test because there's been moments where we've been thinking are we right? Are we doing the right thing here? And people were chasing down, building plugins for Shopify or people were choosing to build marketplaces and kind of just changing the kind of direction they're going generally. And we stayed true to this idea of building a platform for subscription first businesses and that's been really hard but it's starting to seemingly pay off.
Speaker 3:I think that we're seeing, you know, this market consolidation taking place and people are now asking the question like is Shopify, which is not a subscription first platform. It's a transactional commerce operating system, so to speak, where you need all these plugins. They're now asking the question is this the right one? For me, actually, because they ate the market real quick. You know, they just soaked it all up during COVID, publicly traded company, and now we're seeing like these bigger businesses that are going hang on a minute, this is actually really cumbersome and not working for me and this use case in this model. I think Shopify is great for getting off the ground and I do think it's a fantastic product and they have a lot of amazing features. But when you really are serious about subscription businesses, you're, there are trade offs and they're significant and I think you don't realize that until it's too late. So, yeah, that's, that's what I'm seeing.
Speaker 2:From my perspective, back in 2015, 16, the level of content out there was very, very basic. It was pretty much very minimal. Here's a box, you put things in the box, people buy it every month. Well, obviously it's evolved since then and people have actually discovered there's actually a lot more. Just put things in the box and sending it out every month and obviously the revenue.
Speaker 2:And here we are on a broadcast, here we have a test, there's a testament to that and in regards to what you were saying about sticking to the course, I think that definitely is paying off for you, because I see it a lot, so many different people are asking about somebody and they want them to go over pretty much, and I think you're saying to me a lot of bigger businesses are now actually more great and so we and that would segue on to our next point table but go ahead.
Speaker 3:Yeah, we are seeing I mean we that was a, you know, a decision we made a while back that we wanted to become a little bit more appealing to the middle of the market, not necessarily the top, and I think that was a really hard transition for us, especially in terms of the timing of post COVID.
Speaker 3:But yeah, we're kind of pointing up market a little bit towards these more sophisticated businesses and I think our positioning is actually starting to come into its own, whereby our cost is really favorable versus the operational efficiency that we actually give to these businesses as well. So, rather than having to have multiple tools to achieve one thing, they're able to consolidate that into one platform. They can work closely with our team, they get access to your leadership team if they're on the enterprise plan. Our enterprise plan is like a third of not, let me think it's actually a quarter now the cost of Shopify plus, for example, and they get the same level of service, if not more, and we're just purpose built for their type of business as well. So it just makes sense from beginning to end and we're not stopping. I mean, we're on this mission. It's a mission after all, so that's just going to get better and better and those cost savings are going to be coming, or not even necessarily the cost savings, but the value per pound or dollar spent will be increased over time as well.
Speaker 2:That's a great segue into the next point about data trapping and people actually migrate over the sub-lead. Now, I'm definitely not an expert on this, because we actually use sub-lead from the start and we've never migrated anywhere around and we're happy with the platform. But we're seeing more and more. I'm seeing it in my subscription box, resources group. People are actually very concerned about what's going on with their data. They want to move platform and they can't. What's going on with us?
Speaker 3:Yeah, this is a topic I'm very passionate about. Obviously, I'm biased, because when people want to switch to sub-lead, we want to have an easy time doing that, and it's pretty frustrating from that perspective. But, my own biases aside, from a principal level, it's very upsetting and from an ethical, moral perspective. So what we're seeing is that there's various platforms out there that are making it increasingly harder to leave them. Now, just to acknowledge by the way, I saw the same post as you two on your group there's a lot of really concerned people that are quite nervous and from recent announcements, for example, with Shopify's Q4 earnings I think it was, or was it, yeah, it was Q4. And I think they were announcing essentially that they're moving more and more towards being an Amazon right, essentially, and people are reading between the lines and they're actually starting to see it Now. We've known that this was going to happen for years now, but it's becoming a reality and therefore it brings up the question well, do I want my brand to be on this platform?
Speaker 3:The things that made Shopify appealing to these businesses is now like kind of going away the control over the brand experience, the cannibalization of ad inventory and marketing in general. They're losing control over time. The people who are switched on to this are asking that question already, like is this the right place for me to be? Because I'm not sure I agree with the direction of this publicly traded company that just wants to please its investors and keep growing, and fair enough. That's how economics work. That's just the way the system of it goes. But yeah, what we're seeing is some concerns, and then you know, there's other companies as well, some other solutions, where people are concerned about the health of them, for example, and the question comes up well, what do I do next and how? And, as I said, this is a topic I'm very passionate about, because what we're seeing is that these platforms are making it almost impossible to leave them, and the merchants and the small businesses that are using them aren't even aware of this until it's too late.
Speaker 3:So, for example, if you are encouraged to use like a white label payment gateway, you may not know that, although there's benefits to it, there's also these consequences and they're buried in the terms and conditions, which, for example, if you're using a consumer facing, you know, white labeled wallet essentially or if you're using a white label gateway, these businesses have more control over your data and their policies are aligned with that too. They're basically saying, if you leave, you're going to have to start from scratch with the customer, payment cards or the payment sources, and that's like the worst case scenario for a subscription business. Especially E-commerce is a little bit different. Obviously there's repeat customers like sorry, transactional e-commerce, but when it comes to subscription, you're stuck. You've got those renewals and you need to make sure that they keep coming every month or every week or every quarter.
Speaker 3:So this is a really bad practice and I believe that this is breaking anti-competition laws and there are shifts happening in the world right now that hopefully will offset that, but it's not going to happen this year. It might not even happen next year. It could take years for this to really truly take a hold. So in the EU there's a new law that's just been passed that basically says platforms have to have big tech companies essentially have to have interoperability, which means that portability of your data between these different platforms. They have to be able to play with each other.
Speaker 3:Similarly, there's something going through in the UK right now that is demanding the same thing. So, between the UK and EU, the US actually dismissed a bill that they tried to pass for the same, but that's probably going to be revisited now that the EU and the UK are making it difficult for US companies to basically operate there similar with the GDPR situation. So there are things happening that are fighting for the consumer and the small businesses to allow them mobility and interoperability between these massive big platforms that have tried to silo themselves. So, basically, to summarize, these platforms are making it hard to leave. They're holding your data hostage, essentially and in ways that you wouldn't expect, and you probably not even aware of it, and there are ways around it, though.
Speaker 3:We have come up with some solutions, but yeah, that's kind of like the lay of the land.
Speaker 2:That's crazy, completely crazy. I never remembered maybe I just never knew, but I never really remembered it being like that before. If you wanted to leave a platform because I've heard of loads of people migrating off different platforms over the years and it was never they may have had to wait a period of time for the platform to actually get around to it and they could essentially migrate if they wanted to. But it seems to just be coming more and more common now that people essentially can't leave a platform if they want to. So what advice do you have for somebody if they want off their platform, not only solely, but say like they're on any platform and they want to migrate it might be to solely, it might be to a different platform. What advice do you have for somebody?
Speaker 3:Yeah. So I think first of all is get aware of your situation Right.
Speaker 3:So, even if you're not thinking about switching now, like, take inventory, take a look at what your current status is for data continuity and migratability. I'm calling it that and, just to be clear, I know you've mentioned Subly in that we do not have this practice With Subly. You use your own payment gateway, similar to like the way as you said they used to do it back in the day. You use your own payment gateway, you connect it with your Subly account. You can take that with you.
Speaker 1:We're not gonna hold you hostage.
Speaker 3:So just want to make that very clear right now, because this is something I deeply don't agree with. I strongly don't agree with. So, yeah, what would I recommend? I would say take a Madrid step one. Have a look and see what payment gateways you're using, document them. I would find out how do you take those gateways with you and if you can connect them to other platforms. And if not, then what's the process? Do they even allow an export of the payment tokens, do they not? And then you'll have an idea of where you're at In terms of your migratability and your data continuity and portability.
Speaker 3:So that's the step one. Step two is then coming up with a continuity plan, right? So it's like, okay, once you understand where you're at, how many of your customers are over here, how many of your customers are using that gateway, it's like, okay, well, do I want to keep that risk? Or, even though I'm not thinking about switching today, maybe I want to consolidate into one gateway that I know I've got more portability with. Now there's obviously that fear of, well, if I get rid of PayPal? There's, 20% of my customers aren't using PayPal, by the way, paypal's notoriously difficult to move.
Speaker 2:But, like people, Like in PayPal, like it's terrible. It's terrible. Sorry, but it's true. It's absolutely. The stories I've heard about PayPal freeze money on people. I use PayPal for something, not for a BusterBox. We'd never use it on BusterBox because of them stories. Essentially, you can be put out of business by using PayPal where a large amount of money has been frozen. Well, even trying to get reports out of PayPal so it can still go back in 1998, if you want to do your account and then send them out of your account and so it can be nightmare, worse payment process or whatever.
Speaker 3:Yeah, it's just an old company, isn't it? There's a lot of legacy software there and I think that there's different APIs and, from our perspective, we're trying to balance their guidance with what the best practices are in the industry. So they've got like three different products and not all of them are easy to move from one platform to another in terms of subscriptions. So, yeah, it's a really challenging one and overall, they do have a lot of legacy tech and I think that's where that problem comes from. And it's just an older, older dot-com company, isn't it? But the thing is, we see this interesting bias. It's like the survivor bias where people will enable PayPal and they'll be like look at all of my customers that I've got through PayPal and they assume that that means they've got more customers than if they didn't have PayPal. And it's just because it's survivor bias, because people are choosing PayPal, because it's just there. But you might find that the difference is like such a small percentage it does. I'll caveat that and say it does depend on your audience. So if your target audience are more likely to only shop if PayPal exists, then that doesn't apply to you. Obviously. It just depends, as I said, on your audience.
Speaker 3:But, yeah. So taking the imagery of your payment processors and then figuring out how you would move them and if you can, and then after that it's like you've got to decide am I going to consolidate them? Am I going to get rid of some of these and try and churn them out over time from these gateways so that down the line I am more portable? Because no platform is perfect, not a no tech solution is perfect. I mean, the fact that we get inquiries all the time and that we're handling migrations all the time is a testament of that. And we're talking small businesses and big businesses. So don't just assume well, I'm never going to switch. That's not true, and the market does change and it shifts. So if you can try and plan for the future where you're considering, oh, I might switch later, then definitely try and consolidate your payment gateways whilst balancing conversion rate, et cetera, et cetera, and those benefits that you get with some of them. So, but there is another solution with regards to what we've come up with.
Speaker 2:anyway, yeah, was that the reactivate campaign? Is that the name fit to move people over what? Or is that even the right name for it?
Speaker 3:you guys probably resubscription campaign.
Speaker 3:Basically, what we've done is we productized a way to Migrate subscribers over in least friction, like the most frictionless way possible, so that essentially, the Experience for your customers and your subscribers is really frictionless as well. They're logging into an account that's already provisioned on on Subly and they we basically have like a sequence, you know, the prompts them to update their payment information and you would run the two platforms at the same time. But the goal is to obviously move as many of them as possible as quickly as possible, and we've seen, actually, a Case where a business had a hundred percent resubscription, which has been fantastic. Obviously, you need to like factor that you probably will lose, you know, a small percentage of your, of your subscriber base in the process. You can keep your legacy platform running, if you're really concerned about that, for as long as you want, but at the same time, I think that it just depends on how loyal your customers are and what your turn rate is as well. That's usually like a leading indicator of how successful a resubscription campaign would be.
Speaker 2:Yeah, I saw I will. I know some people who might write it over like this and they basically kept their old platform running right and on their login screen it basically said if you signed up before this date, you click here and it will redirect them to the old platform login and then, if you go, if you signed up after this date, you go here. I actually know a lot of people who did that, who were never really Bothered to go through a full migration. They're like look, I'll pay the fee for the old platform. They're in there, let's get it, let's get this open running. So potentially that could be another way to I don't know what your thoughts and that would be.
Speaker 3:Yeah, it's an option, for sure, and it's probably becoming less common over time. I mean it's a suboptimal option, but it is an option and I think that what we would do is if a resubscription campaign say, let's just for talking sake, it achieved 80% resubscription and 80% of the subscribers are inside of Subly, the option is there to like keep that legacy platform Once that campaign has ended and you just go okay, the remaining 20% are just going to stay there and let them turn out over time. Then you can maybe change your navigation to say if you signed up, that's the best way to do it.
Speaker 2:That is the best way. This was before the re-subscribed campaign was an option. Yeah, that actually sounds the best way to do it.
Speaker 3:Boy far, you get the best of all worlds, and until until you get to a point where the cost benefit is that your operational time and costs, and your the cost for the technology itself as well, are Greater than the profit that you're earning off of the remaining subscribers. So it really does depend on the size of your business and the margins as well. So just make sure you're doing your maths on that, if you're gonna go that path.
Speaker 2:Well, look, that was really good information you shared there and I know people are going to find the very valuable, because there seems to be so much Discussion about this recently and especially over the last few weeks, and that was actually the main reason why I wanted to bring you back on and talk about this. Thanks very much. We'll have to bring you on again in the future and we'll get another bird's eye view of the subscription box industry. If anybody listening wants to move to Subly or their new subscription box on or they want to check out, so be. What can they do?
Speaker 3:Yeah, so you know, actually, right now we're running an offer for people who want to switch to Subly. We're giving six months for free. You just go on to sublyco, forward, slash, switch to Subly. Or if you go on the website, you'll find that page and, yeah, gives you the monthly fees for free for the first six months. Any of the plans and and we, you know, can help with that resubscription campaign. But, yeah, regardless, like, if you want advice about resubscription or Even just talking about the different payment gateways and the options and or venting about the frustration about this Data hostage situation that's taking place and this anti-competition kind of posture that these, these businesses are having, go on, leames Group, vent away and I'll be sure to you know, participate and help you and give you advice, because it's a topic that's close to my heart. So, yeah, we're here to help.
Speaker 2:That's great. Yeah, thanks very much. So we will be back next week at the exact same time. If you have a question you want to answer them, the show, as always, head over to subscriptionboxresourcescom. Join the free Facebook group and post it there. Thanks very much, and see you next week, bye, bye.