Subscription providers guess on the curation of on a regular basis articles
- August 3, 2022
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Companies deliver bread, eggs and meat; Recurring revenue is a model advantage, says expert
Subscription delivery services that emerged or grew during the period of social isolation now seek, with physical stores open, to retain and attract new customers by betting on curation, lower prices and practicality.
In 2020, with the suspension of events because of the pandemic, the mother of Victor Campos, 32, who is a florist, had her studio stopped. It was then that he and his friend Felipe Oliveira, 31, founded Flower Club, a bouquet delivery company in São Paulo.
“The idea is to bring flowers into people’s daily lives, and not just for special occasions,” says Campos. The company delivers around 1,800 bouquets a month and plans to soon reach 1,000 subscribers.
In the cheapest plan, the customer pays R$ 99 per month and receives an arrangement, chosen by the company, during the period.
As the company sets up the arrangements, variables such as availability and cost of raw materials, seasonal, are taken into account in the process to keep the business healthy and the price charged to the end customer intact.
Sociedade da Carne, a subscription butcher shop founded in 2013 in São Paulo by Leonardo Leocádio, 43, and three partners, also curates what it sends monthly to its subscribers.
They receive a selection of cuts every 30 days, and the cheapest option, which entitles them to between 2 kg and 2.5 kg of prime meat in the period, costs R$ 229. The company grew 30% in the pandemic. Today, it has about 1,000 subscribers.
To keep them and attract new customers, partners focus on price. Even with high inflation and a devalued exchange rate, which affects costs. The last adjustment, of 14%, was in the second half of 2021.
To do this, they pay attention to the cost of each of the cuts when setting up deliveries.
The company also sells directly online, but 90% of its revenue, a figure that Leocádio does not reveal, comes from subscriptions.
Daniel Peron, 37, sells just one product, free-range eggs. His company, ovovo, has existed since 2018, when he invested R$60,000 in the business, but took off in the pandemic.
It reached 300 subscribers and sold more than 500 dozen a week. Monthly prices vary according to delivery location, frequency and quantity of eggs ordered.
According to him, the absence of intermediaries in his business — the entrepreneur buys directly from small poultry farmers — allows the price paid to producers to be higher and the price charged to final consumers, lower.
With the reopening of physical stores, the number of registered people dropped to 230, but Peron wants to expand the business.
“We want to be in all cities with more than 100 thousand inhabitants between São Paulo and São João del Rey [cidade na Grande Belo Horizonte] in the near future”, says Peron, without projecting a date for the expansion. Today, ovovo only operates in Belo Horizonte and earns BRL 25,000 per month.
Companies with physical stores that decide to work with subscriptions must seek new customers, and not just a migration of their usual consumers to the new business model.
That’s the goal of Cláudia, 63, and Sérgio Rezende, 61, owners of Zestzing, an artisanal bakery in Jardins, São Paulo.
The service, which is in the process of being launched, will offer breads on a subscription basis (for a minimum of four weeks) at a price 5% lower than what the high street store is practicing.
Physical sales generate 85% of the company’s revenue today, with delivery accounting for the rest. The idea is that the new service will account for 5% of the figure in the future.
As it is a recurring system, the subscription business model brings sales predictability, say experts.
“Having recurring revenue is every company’s dream. It’s much easier to work with the budget knowing how much will come in the following month,” says Tales Andreassi, professor and vice-director at FGV-Eaesp (São Paulo School of Business Administration at Fundação Getulio Vargas).
He states, however, that it is necessary to make sure that the demand for a certain commodity is not a fashion. The more necessary the item sold, the better.
Subscription clubs aren’t for all customers, says Ricardo Pastore, professor and coordinator of ESPM’s retail hub. “You must have a credit card, which restricts who can sign up for the service,” he says.