Startups, leveraging subscription commerce model, will it work in India?

23 Nov, 2012

Recently, we did a story on Wal-Mart launching Goodies Co., a site that follows the subscription commerce model, in exclusive beta. We had also mentioned the subscription model is fairly common in the US and a number of Indian e-commerce firms can take a cue from it and introduce 'product trial' at a small cost (you can read about it here).

Now,  there are already a few companies that are following the model in India including (beauty products) and (t-shirts). In subscription commerce model, users subscribe to the company (from the sites), and in return, it sends them a curated box that is filled with sample of products that have been selected by the company (so it's basically a surprise for the subscribers).

If the user likes those products after a trial, they can then visit the site and purchase bigger versions of the samples. For example, if you like a 5 millilitre (ml) perfume that came in the box, you can then purchase a standard 100 ml  or 200 ml bottle from the site. Let's now have a look at the companies.

Mumbai-based Vellvette Lifestyle Pvt Ltd was founded by two IIM-Ahmedabad alumni Vineeta Singh and Kaushik Mukherjee in June this year. The site went live the next month and the company started shipping the products from September. Vineeta holds a B.Tech degree in electrical engineering from IIT, Madras, and has earlier worked at Quetzal Verify Pvt Ltd, Deutsche Bank and ITC Ltd. Mukherjee has worked at McKinsey & Company, BigSlick Infotech (which he founded), Goldman Sachs and Oracle Corporation, prior to Vellvette.

As far as the business model is concerned, for a subscription charge of Rs 399 a month, the company ships a curated Vellvette Box (that includes three samples of beauty products of high-end brands) of products to the subscribers on a monthly basis. If the subscribers opt for longer subscriptions (half-yearly, yearly), this price is reduced even further.

The products are individually selected by a team that includes Rima J Pundir, the company's beauty editor (the company also has an online magazine on the site called The Vellvette Magazine), who was formerly the beauty editor of Cosmopolitan and Good Housekeeping magazines, and Geraldine Jain, a cosmetic dermatologist.

The products cover various beauty elements like hair care, makeup, skincare, bath and body and fragrance. Since these are beauty products, the company also sends information on how and when to use them. As of now, the site has a total of 2,000 products from 80 brands that include Shiseido, Clarins, The Body Shop, Chanel, Bvlgari, H2O, Victoria's Secret, Nuetrogena, LUSH, Lancome, Clinique and Yves St. Laurent, etc.

Once a user likes a certain product, he/she can then purchase them from the site. Basically, the site also doubles up as an e-commerce site.

According to Vineeta, the company's customers lie in the 20-40 age group and are residing in metros. As of now, the company is offering a limited number of Vellvette Box subscriptions (500 a month), which is usually sold out in the first few days after the subscription opens. The company has around 2,000 people, who have already signed up for the box. It is looking to scale up its shipping capacity to 2,000 by next month.

The team size of the company is ten as of now (including writers for the company's magazine), and it is planning to open up an office in Delhi.

The Chennai-based startup was founded in September this year by Hari Gopinath and an unnamed founder (name not shared since he is still working at a company which he will leave next month to join Tee20 full time). Gopinath holds a B.Sc. degree in visual communication from Madras University and has worked at companies including, Maktoob Inc. (acquired by Yahoo) and Adkit Advertising.

The startup also follows the subscription commerce model. People can visit the site and order up to four T-shirts from the catalogue, which are then delivered to them every Thursday, so that they can wear a new t-shirt to office the next day (Friday). To start with, the company has targeted office goers with its product since it believes that they have trouble finding the right mix every Friday, a casual day, in most of the offices.

Also, in contrast to many curated subscription boxes, subscribers of can choose their own colour and design from a preselected range, instead of getting a surprise every week (which is usually the norm with subscription commerce).

But why would anyone wait for a t-shirt that he/she has already selected. Isn't it better to just buy all four in one go and get it over with? "A lot of people have asked me the same question, the reason behind providing one t-shirt a week is psychological. Normally, if someone purchases clothes, they don't actually wait a whole week to wear them, instead they finish them off in one go. By providing a T-shirt a week, we offer them the mental satisfaction of wearing a new T-shirt (that they have themselves chosen) every week," said Gopinath.

"Also, the reason we make the users select the T-shirts beforehand is mainly because otherwise, in a country like India, the return rates of the T-shirts will be very high," he added.

As of now, the company is still running in the stealth mode so you will have to wait till mid-December (when the site is officially launched) to get your hands on the T-shirts. We are still a little doubtful of the model, but its success will depend on the quality of the T-shirts offered by the company and the price at which it will be offered.

(Edited by Prem Udayabhanu)