Belly-Full To Belly Up: What Entrepreneurs Can Learn From Meal Kit Subscriptions

Monthly subscription models certainly aren’t new. You may remember your Mom subscribing to a “book of the month club” (which is still alive and well today) and a quick study of American history reveals Benjamin Franklin promoting a “subscription library” even back then.  Today, subscription-based businesses are cropping up everywhere, selling everything from razors and clothes to information and, of course, food.

Investors loved the meal kit subscription idea and jumped in with both feet to propel companies like Plated and Blue Apron to the top of the proverbial food chain. And why wouldn’t they?

Technology makes these companies increasingly easy to run and consumers seemed to leap at the chance to sign up.  Author and entrepreneur, Dan Kennedy, recently wrote, “America’s 118 million households are subscribed to more than 400 million subscription businesses.” By 2017, traffic to these subscription sites had seen an  800% increase over a 3-year period.

But it’s hardly been a cake walk for these subscription businesses. A recent article in the Economist magazine detailed the down side of many of these meal kit businesses so popular with Venture Capitalists. The cost to acquire new customers is “exorbitant,” and as far as customer loyalty? Only 11% of Hello Fresh customers were still with them after one year. Plus, there’s the aspect of competition which is showing up where these online companies least expected: in brick and mortar grocery stores.

One American supermarket bought Plated in 2017 and is making kits available in their stores. Walmart is planning its own meal kit roll out this year and I’m sure many more will quickly follow suit, eliminating both the cost of getting customers (due to existing foot traffic) and — perhaps most importantly — the hurdle of requiring  consumers to commit to a weekly, auto-charged expense.

Here are three lessons any business owner (determined to outsmart, outmaneuver and out-earn the competition) can learn from the still struggling meal-kit subscription industry:

First, any business without a unique voice can (and will) be commoditized. Your competitors can easily swipe your sales offers, your pricing, your packaging and even your employees. But your voice — defined by your passion, your message and your unique mannerisms —  cannot be as easily duplicated.  It is akin to your brand’s DNA, unique to you.

It is this voice, leveraged liberally with social media, that will build customer awareness and loyalty.To find your voice, dig deep to define what makes you uniquely suited to serve your chosen target market. Questions you may want to ask yourself include:

  • What is your brand’s tone? (Example: Is it sarcastic and irreverent or professional and polished?)
  • What is the focus of my expertise?  (Example: What information can my market count on me to bring them?)
  • What is your brand’s personality? (Fun and quirky? Wild and zany? Buttoned up and dependable?)

Second, pay attention to trends. What goes up, must also come down. So, the excitement and growing popularity of monthly based subscription models — while exciting — should  have also caused savvy business owners some concern.

Weekly or monthly charges on your credit card add up and when these charges (including your customer’s “non-competitive” subscriptions like Netflix, Apple music, and their local gym membership) hit a critical mass, consumers are slashing their subscriptions with a machete rather than a surgical blade. Consumers, once excited by monthly subscriptions have quickly grown wary of something that is charged automatically each and every month.

Pay attention to the popular trends in your industry.  Expect what is flying high to eventually hit a gravitational pull, and prepare for it.

Finally, specialize. Being a business that caters to “everyone” is a recipe for frustration, and failure. Sun Basket continues to gain ground in the crowded meal-kit space by focusing on the health-conscious consumer and offering a specialized menu with vegan options displayed alongside Paleo and “lean and clean” options.

The ways in which your business can specialize and differentiate is infinite, but consider the following to get your creative juices flowing:

  • What is different about the product or service you deliver?
  • Who is your product absolutely ideal for?
  • What is different about your sales process?  (Example: Rodan and Fields uses in-home sales representatives while ProActiv uses celebrity-endorsed infomercials.)  and also
  • How (or how much) you get paid.  (There is always going to be a market for both Walmart and Neiman Marcus.)

The meal kit subscription business is in the process of sorting itself out.  There will be some casualties as competition (and consumer preference) thins the industrial herd, but the concept is here to stay and has much to teach us as entrepreneurs.

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