How We Validated And Launched A Subscription Box Company
Hello! Who are you and what business did you start?
I’m Sam Davidson, a four-time entrepreneur and the co-founder and CEO of Batch (Now known as Connect Gifting). We are a regional gift and retail company specializing in offering Southern, handmade, small-batch gifts that are perfect for corporate events, meetings, weddings, and everyday use. We are based in Nashville, TN with our flagship retail store inside the historic Nashville Farmers Market.
To date, we have worked with over 300 small businesses to curate their products and sell to our customers in our store, online, and via our corporate gift program. We have shipped our gifts to all 50 states and a dozen countries, selling over 75,000 gift batches earning annual revenue now nearing $1,800,000.
What's your backstory and how did you come up with the idea?
During the summer of 2013, my co-founders (Rob Williams & Stephen Moseley) and I were discussing all the great things our hometown of Nashville had to offer, especially in the way of small-batch, handmade gifts and treats. But, there was no one-stop shop to get all of these items (you had to run around town or attend certain farmers markets or festivals).
Lo and behold, we actually hit the 200 mark our first month. The local media covered what we were doing and sales jumped to 600 for the second month and then 1,000 or month three (well beyond our original goal!).
Could we come up with a way to consolidate all of these local, small businesses making awesome products under one roof?
At the time, my co-founders and I all had other jobs. (I was traveling the US as a public speaker and brand consultant.) But, the three of this couldn’t shake the idea.
Deciding to take small steps, rather than sign a long-term lease for a retail store and invest in all the associated costs (inventory, staffing, etc.), we decided to test the waters with a subscription box concept. We’d call it Batch and offer four Nashville-made items each month as a way for natives and Nashville-lovers to discover the cool, new things being made in Nashville.
Our goal at launch was to get up to 200 monthly subscribers. We were planning to keep our day jobs and this way, we’d get together once a month, pack some boxes with stuff we loved, and repeat the process next month. If by month three we hit the 200 subscriber mark, we’d have a nice side hustle, a little bit of spending money, and a way to keep scratching our entrepreneurial itch.
Lo and behold, we actually hit the 200 mark our first month. And once the first subscription boxes arrived at homes, recipients began to share what they received online. The local media covered what we were doing and sales jumped to 600 for the second month and then 1,000 or month three (well beyond our original goal!).
Take us through the process of designing, prototyping, and manufacturing your first product.
We don’t make any of our own products; we buy goods from hundreds of small business owners and makers across the southern US. But, that means we’re constantly looking out for what’s new and fantastic when it comes to what others are making.
As an entrepreneur, the beginning can be really fun and sexy. Working long hours and doing hard work is a joy because you’re bootstrapping and chasing a big dream. But, even in the early days, that time is money and your sweat equity won’t scale long term.
For our first subscription shipment, we hit the pavement, attending local fairs and festivals and meeting makers who were selling at those events. We quickly found out that the maker community is highly networked and they helped us spread the word as well, giving us a bevy of options when it came to what to put in our first subscription shipments.
Originally being a subscription business meant we were able to keep costs low. We only needed to pay for inventory we’d already sold. This meant less “cash” sitting on shelves. Ditto for associated costs like boxes, packing fill, printed materials, etc.
Describe the process of launching the business.
Because my co-founders and I had a background in marketing and branding, we were able to build our website internally, keeping costs low. We did this over the summer of 2013, while also simply having a teaser page up to collect email addresses to notify when subscriptions were finally live to purchase.
On August 1, we notified friends, family and the friends of friends who were on our email list. By mid-August we had 200 paid subscribers for that first subscription mailing. People could subscribe to one or three months.
Of course, figuring out how and where to pack two boxes for mailing was a bit of a challenge that we played by ear. Luckily, one co-founder attended a church that allowed us to pack in their facility and then we each filled our cars with boxes to take to the post office. It was both inspiring and hilarious.
Since launch, what has worked to attract and retain customers?
As our concept caught on quickly, a few opportunities fell into our laps. One recipient of our subscription box worked for a local company that wanted to send Nashville-centric gifts. They contacted us asking for this and a light bulb went off. We could easily scale this business by launching a corporate gift option. The products and process would be the same; the frequency and quantity of packing would change. Rather than just packing once a month, we’d pack when we received this high-volume and better-margin orders.
Then, a few months in, early subscription customers emailed asking where they could get more of the products we’d sent. Another light bulb moment as we realized we could offer a la carte some of these items online for people to restock to send to friends.
And then, about six months in, customers began asking if we had a place they could some shop in person as they needed items and gifts more quickly than us shipping them. A third light bulb moment. In November of 2014, we opened our flagship retail store.
Each step of the way, we’ve let customers lead us as we’ve grown the business, offering a deeper proof of concept for what we’re doing.
The beauty of what we do is that nearly 90% of our purchases are gifts, meaning Batch has the chance to touch at least two people with each sale. Someone who receives a batch today may come back next month to buy something for a friend or client. Because of this, we’ve built a loyal customer base that shows up as constant repeat business.
We leverage our internal email list and social media profiles to promote what we’re doing. Our emails are a combination of newsletters, product promotion, and deals. We recently started the “Weekly What” newsletter that is a mix of commentary about Nashville, maker stories, and event listings. It’s our effort at sharing a point of view on our hometown and information that people can use. To grow our list, we have been successful partnering with our purveyors for giveaways.
For social media, we focus on Instagram and Facebook. Again, we try to offer a mix of Nashville photos and facts that followers like plus product photos and store photos. We even ask store staff to join in the content creation by posting to our Instagram stories while they are working.
To date, we’ve spent less than $5,000 on advertising but that will increase going forward as we’re ready to scale.
How are you doing today and what does the future look like?
For the last three years, Batch has been profitable (for the first three we were not). We continue to hone our operating model and reach for better gross and operating margins.
We’re focusing on internal systems this year so we can really scale in 2020 and beyond. We have believed for some time that Batch can work in other cities - each city has a local pride in what’s made there and the story behind it. And we know that locals and visitors to any place are looking for goods and gifts that tell the story of that place. So one day we’d love to replicate the model (brick and mortar retail, ecommerce, corporate gifts) in dozens of cities.
But the first step in that is to perfect the model and gain efficiencies of scale in Nashville.
Through starting the business, have you learned anything particularly helpful or advantageous?
A few lessons we’ve learned:
Calculate ALL of your costs, including what you’re time is worth.
As an entrepreneur, the beginning can be really fun and sexy. Working long hours and doing hard work is a joy because you’re bootstrapping and chasing a big dream. But, even in the early days, that time is money and your sweat equity won’t scale long term.
Batch made no money - $0 - on our first few thousand subscriptions because we didn’t know the full costs of that growth. Postage was underestimated, inbound delivery costs, taxes - you name it. Just because the three of us could pack all the boxes didn’t make the business any more profitable. And if we were going to grow, we couldn’t be on a packing line - we needed to make other use of our time to strategically grow the company.
Build your network before you need it.
When it came time to build out physical storefront, we saved costs and didn’t have to sacrifice talent because we had in our personal network an architect, general contractor and a future retail director. When it came time to scale our corporate sales program, we already knew someone who’d be perfect to help us sell, sell, sell.
So many people wait until it’s too late to connect on LinkedIn or build their network. Always be connecting; you never know when you’ll need the perfect person.
Outsource the stuff that can’t fail.
It’s one thing to try and fail a few times when it comes to packing a box. It’s another to mess up on your taxes or legal documents. Since my founding team didn’t have expertise in those areas, we chose to outsource from the start to experts.
Having someone better than us keep an eye on the books, taxes, trademarks and contracts lets us focus on what we’re great at while not worrying that something major could bring us down.
What platform/tools do you use for your business?
We sell via Shopify and use a host of related apps and connections (ShipStation, Klaviyo).
NetSuite is our ERP and CRM of choice.
We’re active most on Instagram and a bit on Facebook and Twitter.
What have been the most influential books, podcasts, or other resources?
Each year our leadership team reads a book or two together. We’ve read Good to Great in the past and this year read Giftology and This Is Marketing. I choose the books based on company-wide goals we have.
Each week at our staff meeting, we have a dedicated time where anyone can bring a lesson they’ve learned that week from something they’ve read or heard. This is a great time and space to glean knowledge from lots of sources like podcasts, articles, etc.
Personally, I listen to Masters of Scale, How I Built This, TED talks, Akimbo, AMRAP Mentality, when it comes to podcasts that offer business lessons.
Are you looking to hire for certain positions right now?
We’re always looking for passionate people who love helping people find the perfect gift. Right now, we’re targeting an operations guru who can help us oversee the logistics of getting our high volume corporate gifts out the door.
And, we’re hiring for a full-time gift concierge who can help our online and phone customers put together the perfect gift in their budget. Both positions are full time and based in Nashville.
Where can we go to learn more?
Check us out online at Batch(Now known as Connect Gifting) and on Insta and FB at @ConnectGifting.
If you have any questions or comments, drop a comment below!
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