Ross Grads Are Learning How to Succeed in the Booming Subscription Box Business
Although the idea of subscription delivery of consumer goods has been around for decades, it’s gained new life in the e-commerce era and is one of the fastest growing categories of consumer consumption. Think Blue Apron for food and Dollar Shave Club for mens’ grooming. And some recent graduates of the Michigan Ross Executive MBA Program are learning first-hand how to stand out in the crowded field.
Carrie Thorpe, a 2016 graduate of the EMBA Program’s Ann Arbor cohort, has taken her love for the University of Michigan into the subscription box business and created Proudbox, which will send U-M swag to the fan or student of your choice.
Meanwhile, Steve Ezell, Ted Hamory, and Jordan Toplitzky — who met as students in the EMBA Program’s Los Angeles cohort — have a fresh take on the craft beer boom with their CraftX service (pictured above).
At their core, both concepts are rooted in the classic “fruit of the month”-type plan: For a set fee, boxes of goods will be delivered at deliberate intervals. But both Thorpe and Ezell are quick to point out that success in the space requires some careful thought: Exactly what goes into the boxes is critical.
“You have to be careful that you really deliver an authentic experience. Anyone can throw a bunch of stuff in a box and ship it out. You have to think of the person receiving it,” Thorpe says. And Ezell uses similar language, emphasizing that true curation of the products is what sets CraftX apart.
Both Proudbox and CraftX have their roots in their founders’ respective ExecMAP projects. The CraftX team did a feasibility study of whether a beer delivery service could both turn a profit and do some social good by helping small craft brewers. And Proudbox started when Thorpe researched the subscription box business for an Irish company looking to expand into the U.S.
“The research revealed incredible opportunity and potential,” Thorpe says of the expanding subscription box business. “It was staggering.”
She realized the concept works best when there’s an emotional connection to the subject matter. “So I’m sitting at Ross working up this final report, and I’m thinking you will not find a more passionate group of fans” than U-M fans. She recalls thinking, “I just can’t believe we don’t have this.”
“I simply looked at what was happening in the market and applied it in an area it was not being applied,” Thorpe says. Len Middleton, her ExecMAP mentor, and the Zell Lurie Institute helped provide guidance and tools to get started. “It almost felt like the idea developed itself. It just made such good sense,” she says.
“I fell in love with Ann Arbor and the University of Michigan when I came to get my MBA. I was absolutely blown away by the sense of community, the excitement, the innovation, everything that the University of Michigan stands for,” Thorpe says. “This business model really spoke to me personally.”
She learned that putting real thought into the specific products in the box is key. She says she treats the box like it’s going to a loved one. Packaging, color, feel, design, placement, notes, merchandise selection are all vital. “These things all have to speak with authenticity to the person who receives them,” she says.
And that care paid off. The U-M boxes met with immediate success, so she added Michigan State offerings as well and plans to add a third Big 10 school this fall, ultimately expanding to the entire league.
“If you don’t have a passionate connection to what you’re doing, you won’t succeed,” she says.
The CraftX team shares that passionate connection. That venture has its roots in a disappointing beer membership service Ezell experienced. “It was sub-par,” he recalls, clearly put together with no real thought or effort. “The more research I did, (I found) their model works because they’re buying overstock from distributors.”
As he and his teammates talked, they realized most small brewers start at home and don’t have a business background. So they wondered: “What kind of impact could we have? Where could we help them?”
They set up a model where they work directly with brewers, not distributors, and commit to buying a set amount of product, reducing the brewers’ risk. Each box features two specific brewers, but the customer has some choice of beer style.
“We want people who are dedicated to the craft,” he says of choosing partner breweries. “We want to go for the underdogs.”
“I think we’re in a good spot. I think it’s cool to see this come out of the EMBA program."