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How the owner of a fashion subscription business went from making $50,000 to $500,000 in revenue in just one year


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Xenia Chen founded direct-to-consumer subscription hosiery startup Threads in late 2018 after having left her job in investment banking and private equity with a $230,000 yearly salary.

The company, which employs two full-time and two part-time staffers, made $50,000 in its first year in business, Chen told Insider. But when COVID-19 hit, she integrated some new strategies that led Threads to close out last year with $500,000 in revenue. About a third of the company’s total revenue is from subscription sales, while the rest is from one-time purchases, Chen said.

She estimated that the subscription side of her business tripled in 2020, as the number of subscribers ballooned from 665 at the start of the pandemic in March to 1,840 at the end of January 2021.

Team salaries make up around 20% of revenue, with the rest going back into the business.

“As an early-stage startup (that’s also bootstrapped!), we’re trying to grow as much as possible while also being profitable and mindful of cash flow,” Chen said. “I didn’t start paying myself a salary until the middle of 2020, and I still pay myself what I consider a ‘minimum’ so I can invest everything back into the business.” 

Chen shared with Insider how others can follow in her footsteps in growing their own subscription business.

Avoid tricking customers into subscribing

Many potential customers are turned off from the subscription model because too often, they’ve been the victim of the trap of getting billed without their knowledge or having a service that’s tough to unsubscribe from.

“This just makes customers more frustrated and leaves them with a bad taste in their mouth, and discourages them from coming back to your company in the future,” Chen said.

To that end, she explained that it’s important to build trust with customers before they subscribe, such as letting them try out the product first.

“The majority of our subscribers become subscribers after trying out our tights and purchasing one time to start,” Chen said. “It seems obvious, but you’d be surprised at the number of subscription businesses that are subscription-only,” she added.

Threads also sends customers an email giving them a heads up a few days before their monthly subscription/charge date, giving them the choice to skip that month’s shipment, change styles, or even cancel their subscription. 

“The most common reason why people unsubscribe (by far) is that they end up having too many pairs of tights stocked up and need to take a break, but they state they will come back when they’re in need again,” Chen said. “This is a totally valid reason, but if you make it hard for them to unsubscribe, it’ll make them frustrated and not want to come back because now their last experience with your company is a negative one.” 

“Customers really appreciate this (as this is often cited as something they love about us in their reviews) and we have a low churn rate as a result,” she added.

Take the time to understand what content resonates with your audience

“Data and analytics is everything,” Chen said. …read more

Source:: Business Insider

      

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