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Subscription boxes were all the craze when they first came out some eight years ago. People loved the idea of getting a box curated with items they might or might not have otherwise purchased on their own.

But today, some argue that the novelty of the subscription box is gone as the space has gotten more crowded and consumers are losing interest. So is the boom over, or is it just getting underway?

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If venture funding in the sector is any indication, then the sector鈥檚 naysayers just may be right.

In 2017, venture funding in subscription companies slid to its lowest total since 2010. Specifically, subscription startups raised a mere $39.7 million across 20 deals last year. That鈥檚 down 343 percent from the peak year of 2014, when 30 subscription companies brought in $175.8 million. It鈥檚 also down 254 percent compared with the $140.4 million raised in the space across 26 deals in 2016.

So what鈥檚 happened?

Opening Up

Founded in 2010, beauty sample subscription service Birchbox was the first of the e-commerce subscription service to launch. Other companies following similar models soon followed including,, and.

2014 was a hot year for the sector. During that 12-month period, raised a $60M round; raised $25 million; brought in $18 million. and each also raised $15 million in 2014.

The subscription space has seen a couple of high-profile exits with data-driven subscription clothing service Stitch Fix in the first tech IPO led by a woman last year, and Dollar Shave Club for $1 billion by Unilever in 2016.

But it鈥檚 clear that not every subscription company is destined for success. Fickle consumers who get bored easily make it a challenging space. And last year鈥檚 numbers were disappointing, to say the least.

鈥淭o stay the distance, brands using a subscription model need a very strong point of difference and superior customer service,鈥� Sarah Boumphrey, global lead of economies and consumers at Euromonitor International, was quoted by as saying.

VCs Speak

, managing director of, has invested in two subscription companies: New York-based and Culver City, Calif.-based.

In his opinion, only companies that created a strong brand with good product margins will succeed.

鈥淢any companies that failed had unattractive product margins and customer acquisition costs were too high,鈥� he told 附近上门 News via email.

Todd Breeden, a principal at New York-based KiwiVenture Partners, also invested in Bespoke Post.

In general, he said his firm is bullish on e-commerce as a whole but believes subscription 鈥渉as its place within e-commerce,鈥� proven by successful exits like Dollar Shave Club.

鈥淲hile subscriptions can offer great value for consumers and economic stability for businesses, ultimately they’re a feature of a great e-commerce business centered around talented management and a strong brand,鈥� Breeden said. 鈥淚’d say the reason a lot of subscription companies have struggled is not because the model is broken, but that they lacked either talent, margins, supply chain or a definitive brand that ultimately drives the success of an online business.鈥�

Keeping Subscriptions Fresh

, co-founder and co-CEO of Los Angeles-based, believes his company has continued to grow because of its emphasis on customization and personalization for each customer.

Founded in 2010 initially as a newsletter and blog focused on women鈥檚 lifestyle content, FabFitFun launched its subscription membership service in 2013. It raised $3.5 million in 2015 from investors such as,, and. The way it works is that members get a seasonal box four times a year with items valued at more than $200, according to the company. Customers pay $49 a quarter (or $180 a year) and also get access to specialized original online content and member-only exclusive sales, according to Broukhim.

The company works to find the 鈥渂est new鈥� beauty, wellness, fashion, and fitness products and include full-size versions of them in their boxes. An example of items found in a given box includes candles, an eye mask, earrings or a bracelet (customers can sometimes choose what they prefer), and a massage roller.

Revenue growth has been 鈥渟ubstantial鈥� for the 220-person company, Broukhim said. He wouldn鈥檛 disclose exact numbers but said the company has grown three times over the last few years both in terms of revenue and members with members numbering in the 鈥渉undreds of thousands.鈥� FabFitFun is not yet profitable, he added, but it has been cash flow positive for over two years.

Members range in age but Broukhim said the 鈥渟weet spot鈥� is women in their 30s.

To customize the products, FabFitFun conducts onboarding surveys for each customer and is starting to use a combination of machine learning and data science to pick out products. It also gives members the element of choice in some cases.

鈥淲e aim to be someone鈥檚 best friend curating their entire lifestyle,鈥� Broukhim said.

鈥淚t鈥檚 this really deep focus on the notion of membership that has driven things for us,鈥� he added, with a comparison to Netflix鈥檚 model. 鈥淎s we continue to add more things that benefit our members and also focus on customization and personalization, we find that customers love what we do and stick around for longer.鈥�

A Tailored Subscription

In October 2017, 聽鈥攁 New York-based startup delivering 鈥済oods and guidance for the modern man鈥濃�攔aised $8 million in a Series A round that included participation from Walden Venture Capital,, and Kiwi Venture Partners. The company has more than 100,000 paying subscribers, growing more than 50 percent year-over-year. It has also launched an ecommerce component to its site, outside of the boxes.

Bespoke Post Co-founder and CEO started the company in 2012 on the premise that the men鈥檚 market 鈥渨as underserved in a retail space.鈥�

The startup launches lifestyle boxes each month across a variety of categories with an emphasis on finding artisanal, not-found-everywhere brands. Each box contains products such as cocktail wares or a weekend bag at the cost of $45. Subscribers are notified of the options for the boxes and can opt out of any given month with no penalty, according to Prabhu.

鈥淲e have always thought that was important,鈥� he said. 鈥淎nd now you鈥檙e seeing more companies offering the opt-out option.鈥�

Bespoke Post has 40 employees and has made an effort to grow 鈥渨ithout taking a ton of funding.鈥�

鈥淲e鈥檝e consciously been very lean for the size of the company,鈥� Prabhu said. 鈥淥ne of our company values is to be scrappy.鈥�

Walton Venture Fund鈥檚 Berliner said his firm was drawn to investing in the startup mainly due to 鈥渁 great founding team who have successfully worked together, attractive customer demographic, and a strong business model.鈥�

Meanwhile, Breeden said KiwiVenture Partners doesn鈥檛 look at the subscription as being a defining characteristic of Bespoke Post鈥檚 business or the brand.

鈥淭he team’s ability to deliver a high-end brand experience through an affordable price-point and consumer-friendly offering via subscription have been tremendous drivers of growth to date and continue to create success going forward,鈥� he told 附近上门 News.

Prabhu attributes Bespoke Post鈥檚 success so far to the company鈥檚 鈥渕assive thirst for quality.鈥�

鈥淲e ask ourselves for any box we launch 鈥� 鈥榳ould I pay $45 for this?鈥欌�� Prabhu said. 鈥淲e study if is it up to par for our customers. If not, we鈥檒l nix the box or modify it. A lot of companies in the space have focused on not sending great stuff, or things that just pile up in a corner. That鈥檚 our biggest fear.鈥�

It鈥檚 probably safe to say that the number of subscription companies will continue to grow; however, how many will actually raise money and how many will still exist in five years? The space is turning into survival of the fittest, with only the startups with the most compelling models and strongest management teams coming out ahead.

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