Subscriptions and memberships have been around for a long time. We are experiencing a renaissance in physical subscriptions (boxes delivered to a household) – several thousand companies have been formed in the last 3 years and many like Dollar Shave Club are very successful. As opposed to old models, this time the customer is in total control. To facilitate complex offers, truly customized shipments, to be able to effectively deal with fraud and credit extensions, run with tight inventory, and provide truly superior customer service a sophisticated software platform is needed – that is what our company OceanX provides.
Is The New Membership Economy just a fad?
There may be cycles but I believe it is here to stay. There are 2 key drivers to this phenomenon and they are actually getting more important over time.
For Businesses: because of Amazon’s increased strength and their aim to collect more and more data about customers (which they don’t share with product owners) brands need to sell direct (and know who their customers are) to establish and keep a relationship with their consumers. That trend is certainly not going away.
For Consumers: there are many psychological factors – many of them supported by social media which also seem unlikely to go away. These are; the need to belong, the need to be known, the excitement of anticipation when receiving a package, the warm feeling of getting a surprise, the proudness of getting exclusive product, the inspiration provided from curation, the effective way to discover new products and sample them, the guiding way of portioning, the rewards of complying to product use through the cadence of a subscription and not to forget the value of the products received as well as the convenience of replenishment.
What is next in this market?
Like all booming markets there is, at some point in time, an oversupply of offerings in the market. We might have reached a peak, which will lead to consolidation of box companies – only the strong ones will survive. A big factor for the ability to survive is long term economic viability. In the first phase of this boom, growth was more important than profit. As soon growth slows and losses are mount, CEOs of these companies need to focus on ‘cost’, which can be found in the ‘backend’. OceanX focuses not exclusively, but mostly on the backend where these efficiencies can found. All combined, services which OceanX offers will secure significant savings – in the neighborhood of 15%. It is exactly this 15% which make the difference between profit and loss.
How big of a channel will selling direct represent?
The current trend is continued double digit growth but even with that we are still only at about 8% of total sales being e-commerce sales and even a smaller % of that is brands selling direct so there is lots o of room for growth. It is hard to predict the future, but there are a ‘safe predictions’:
Amazon will continue to grow
Traditional brick and mortar and big box retail will continue to lose market share
It will be increasingly important for brands to know who their customer is.
No brand will rely on one channel only. Omni-channel marketing and sales is the future. Selling direct will be part of almost all industries. Who would have thought that clothes, cars and mattresses will be sold direct? There is more to come.
What is OceanX?
During my 5-year Presidency of Guthy-Renker, the Premier Direct to Consumer company, I was forced to invest into completely re-architecting and re-writing the supporting systems to be able to compete in today’s complex environment. At the beginning of 2016 I formed a new company named OceanX. It is a systems platform company which supports all aspects of direct selling and now supports 23 brands, including Proactiv and IT Cosmetics. Currently we run about $1.2 Billion through this platform.
What does OceanX do?
We handle all systems, subscription e-commerce, credit card processing, customer service, distribution and inventory in one cloud based solution. We help brands to sell more, collect more, have a tight grip on inventory, deliver their products and support highly sophisticated customer service.
Why the name OceanX?
We are on beautiful Silicon Beach, have the sweeping views of Pacific Ocean view from our offices and enable our customers to experience exponential growth that can come in waves.
How are you different than Amazon?
Amazon is a great logistics company focused on efficient delivery and collecting data about customers, which they don’t share with manufacturers. Also Amazon does not help brands with their customer service. We’re helping manufacturers, brands and passionate product owners to sell more, collect more actionable data, deliver efficiently, minimize their inventory positions while providing great customer service. In our case, the ownership of the data about customers belongs to the manufacturers.
How do you differentiate yourself to your competition?
There are lots of great service providers in the market. However, there is no large scale, truly integrated service provider competing with OceanX. Our specific history (we grew out of Guthy-Renker) and the fact that we have been optimizing this specific channel for decades makes us truly unique. You’ll find lots of e-commerce companies stating that they are servicing physical subscriptions or recurring revenue as add-one or plugins. OceanX does nothing else, we are only dealing with physical subscriptions.
What keeps companies from contracting with several best of breed service providers to support subscriptions and memberships?
Nothing really. However, contracting with at least 5 service providers and managing them requires overhead and creates friction and mistakes. Only a fully integrated platform can provide frictionless data and workflow. That is what OceanX specializes in.
How much does your service cost?
In the end the price will be determined by the depth of services we provide and what you’re selling to your customers. For example, the number of items in a shipment, frequency as well as desired hours of customer service will play a role in pricing. As a guideline, all of our services – soup to nuts – might cost 10 – 20% of your gross sales. Our models range from fixed price per box to % of sales to cost plus arrangements. The gain from using OceanX is certainly far greater than the cost incurred.
What makes you different than a 3PL or logistics company?
We are an end to end fully integrated and connected platform. Fulfillment is only part of what we do whereas a 3PL that is all they really do. A 3PL receives instructions and executes accordingly. Let’s take shipping as an example – we assemble packages on the fly (last minute), weigh them for accuracy, check for fraud, assure that the addresses are correct and optimize the postage out cost through location and postal optimization software.
Who needs OceanX?
Anybody who wants or needs to (most companies will need to) sell direct to consumers.
We allow companies to create a new channel (direct to consumer) to participate in today’s Omni-Channel environment.
Amazon’s increasing dominance will force CPG’s and manufacturers to sell direct – which is the only way to establish and keep the relationship with their customers. Elimination of the ‘middle man’ furthermore allows for better margins for brands.