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Betting on the "Subscription Economy"
Jonathan Shokrian is picky about his underwear, so when he was out of town and found that he hadn’t packed enough, he went on a frustrating shopping trip, failing to find quality underwear at a decent price.
“I ended up buying workout underwear, and it was really expensive,” Shokrian said. Luckily, his undergarment irritation ended up being the wedge that inspired MeUndies.com, a Los Angeles-based e-commerce brand founded by Shokrian and Barak Diskin, childhood friends who are both 27.
The site comes out of beta mode today. Its model: Offer a line of high-end comfortable underwear for men and women, for which customers pay a monthly fee for replenished supplies. Next up will be socks and leggings.
“We wanted to start a replacement service for something that people don’t really enjoy buying,” says Shokrian. “Something that offers true convenience…. And we thought people like to join websites where they feel like they have products curated for them.”
MeUndies isn’t the only startup getting into the subscription retail game. Other recent startups include Shoe Dazzle, the Kim Kardashian operation that drew $40 million in funding recently—perhaps helped by Kardashian’s influence; BeachMint (which includes StyleMint and JewelMint); beauty-product site Birchbox, which grabbed $10.5 million last summer; and Little Black Bag, with its Japanese shopping concept in which users receive a “lucky bag” of fashion products. It tucked away $2.75 million from investors recently.
Phil Cotty, director of technology at Alexander Interactive in New York, which specializes in Web design and transactional intelligence, says there is still a lot of exploration in the subscription retail space. While it has existed in various product categories for years—think fruit- or wine-of-the-month clubs, and even Netflix—it is especially advantageous for startups, and it is starting to grow.
“Subscription models are relatively low risk,” Cotty says, adding that subscribers who sign up are practically guaranteed dollars in the bank. “Everyone is is trying to figure out how to take that predictability and low risk and extend it to everything that people will buy more than once, particularly items that they offer at a lower cost…. You can predict how much your business is going to grow.”
For those in the fashion sector, it allows entrepreneurs to avoid being “at the mercy of the buyers” that might either not want their product at all or want a lot of merchandise all at once at levels that are difficult for a new company to supply.
To entice subscribers, MeUndies offers a style test on the site to help ascertain what the customer likes and which types of underwear they would like. The underwear is made from Modal, a soft, smooth fabric made of reconstituted cellulose from the beech tree, which, unlike cotton, is designed not to shrink.
“It’s a great-feeling fabric,” says Shokrian. “We searched for the best factories and the best fabric."
While a good pair of Modal underwear costs about $30, MeUndies, which uses manufacturers in Los Angeles and Turkey, offers them for $15 a pair, including free shipping. It has reduced costs by being an online-only operation and by offering its own brand, according to Shokrian, which differentiates it from existing rival, Manpacks, which sells branded goods.
Subscribers have the option to pause their subscription or skip a month’s supply.
Shokrian said he could not reveal how much seed funding the venture received to get off the ground, but he did say that it was from Science Inc., a platform that helps digital businesses scale up, and whose leadership includes Mike Jones, an investor and entrepreneur who is the former chief executive officer of MySpace. The funding deal was sealed at the end of 2011.
Shokrian is the creative force behind the business. He worked as a fashion blogger and has also taken all of the photography on the website, which includes male and female hotties in various public settings—on bikes in the middle of the street, in front of a Chinatown accessories market—wearing shirts on top and just their undies on the bottom. Diskin is more the business mastermind, coming from a background in real estate.
The brand has prompted comparisons to American Apparel, but Shokrian says its prices and quality are better. Plus, the operation is digital—and apparently plans to stay that way.
“We also have a better business model, we’re staying online, [and] we don’t plan to blow money on stores,” Diskin says in a press release about the launch.
Teresa Novellino writes for Portfolio.com
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