Exposing the MRR subscription Ecom industry ($1m a month)

Just made it back to Miami, one of the trashiest and most interesting cities around, but when business calls, I go. Put the customer first and your life will become a lot easier. I don't think Miami is a very good representation of people who do that. Now, it seems recently subscriptions have become the new sexy thing and everybody is talking about it. They want to have MRR and this subscription revenue that's passive and makes it like Okay, like it's great. There's pros and cons to everything. Today I want to talk about subscriptions and how that can impact your business. My name is Hayden. I've been doing e-commerce for almost 10 years. We started with a lot of drop shipping, built some brands with people, had a large chunk of it and then now I'm building a supplement brand on my own for over 2 years. We went to a million a month like that because we have the skills for it and about 25 to 30% of our revenue is from subscriptions, the magical thing that everyone wants to talk about. Now, it's true. I'll tell you right up front. We absolutely make more money when a customer takes a subscription, especially for supplements, right? Now, I can lose money to do that. You got to be able to afford to do that, but it's because they come back again and again. But, this is where the whole subscriptions being sexy is a catch-22 because people don't realize in most industries when you have a subscription for something, it is very expensive to get that purchase. Now, some stuff, normal price. Supplements, that industry for example, is very expensive when you're doing paid ads specifically on platforms like Meta. Now, I'm going to do what most people won't. I'm going to show you numbers. This is Recharge, the primary subscription app that we use for my supplement brand. And as you can see, over the following 30 days, this is exactly what is scheduled to bill in monthly subscriptions. The vast majority of this will bill, some people will leave, whatever, new people will join. That is $203,000 over the following month. That's 4,400 orders worth, 7,800 units, you get the idea. Now, that is not the only subscriptions we have. There's two additional points. There is Kachingle Bundles, which is the app on Shopify we use for one specific offer. I'm going to talk about that. We separated that and did a unique portal integration, but I have it separated for data reasons, okay? Now, we also have a third that some people don't consider because this is all through D2C on our website, but there's also Amazon. You ever been on Amazon where it's subscribe and save, save 5%, 10% and get it monthly depending on your offer and what the product is, many people do take that. And just like over on our website, we absolutely make more money. Even though they get a discount and we make less on that first month, we absolutely make more money, no questions asked. So, we're trying to get more people there. That is 40,000 a month, give or take 40, 50, I don't even know, but it's right in that range. So, Kachingle has 45,000. Let's actually refresh cuz I opened this up yesterday. See if we get any changes. Oh, up $300. Cool. Uh so, 1,200 active subscribers over there. Uh over here, active subscribers in Recharge, 6,600. I'll just refresh here. We've got 6,800. Uh but, we have a couple different products that we run subscriptions for, but there's only like one and a half main products that we actually run ads for. Like we have one that leads the charge. So, what I want to talk about here is subscriptions for different offers. So, you can run subscriptions normally for your product, but we also like to do stuff at certain times of the year and different campaigns specifically to acquire new customers where we're offering different deals. What does that mean? Okay, that can mean buy X, get Y. This is very common. Buy this and get that for free or you'll see it all the time with subscriptions, buy this and you get these free gifts. I'll show you a random example of that from a very successful supplement brand. You go down here to the bottom of their long funnel and there's two options to purchase. You can't even buy this product one time, which means they're going to have a higher cost per purchase on their advertising. Some people will not want to take a subscription and some people will just then cancel right after, no problem. But, they're willing to pay more because they know they make more in subscriptions. You can get a 1-month auto ship and save, right? And you just get one for 44 bucks or they have it set up as a buy two, get one free and it bills every 3 months. So, for double the price, you get three of them and you get all these additional free things. Free shipping, free mystery gift, free, free. The big difference here is just the free bag, but you can see normally they used to have a one-time option that included no free gifts, but free shipping, free mystery gift is probably 20 cents, a pill case is 20 cents, a bamboo glass jar, 50 cents. Like it's cheap stuff that's positioned as value and that is how people get people to take subscriptions, okay? Now, we do different offers. We have a BOGO offer that has been pretty successful, buy one, get one free. In supplements, this can work if your gross margin is good. I would say beyond 75% this offer can make sense. In fact, what we've done, I'll just be transparent with you, our main product was always sold for $29. 99, but we had it marked down from $39. 99. So, it's technically 40 bucks retail price. So, what we did is we actually do a buy one, get one free at the full retail price. So, we're actually charging more, more than making up for our, you know, unit cost difference by having two things that they get. Pretty cool. Now, that leads to an issue with pricing and pairing this with the correct timeline. So, everything you see here on Kachingle, a lot of these subscribers

are actually getting billed every 2 months. It's not every month and there's a lot of different things you can do, okay? And I'll give you an example. Groom's, that just sold the other day for 1. 2 billion to Unilever, uh did a very good job of this. They kind of pioneered this. Uh well, not really, but they did a great job where they had a 28-day billing cycle. So, a lot of people think of subscriptions as monthly, but what does that mean? Well, there's 12 months in a year. But, what if you bill people every 4 weeks, which is pretty much monthly? They kind of think the same. It's not you say monthly, say re you know, renews every 4 weeks. Well, that actually gives you an entirely additional billing cycle because there's 52 weeks in a year. So, now you get 13 rebills instead of 12. That alone can add over 8% straight to your margin. Huge. I mean, 8% additional revenue, high margin at subscriptions, that's massive. It's also billing quicker in the beginning, which is it's very helpful to have that like technically a little bit sooner billing throughout the process if people stay for 4 or 5 months on average. So, pairing it with the correct timeline. We had a very high churn rate on our subscription when we were selling people, "Hey, get a three-pack of our product. " But, it was still only triggering a 1-month subscription. We didn't have it paired with the amount of quantity that they were buying. And that's something I would recommend doing if you want people to stay around, you don't want them to have an oversupply of your product. Now, I'm going to give you an internal metric here too actually relating to AOV and then I'm also going to tell you a light metric on LTV. This is the sort of stuff that I share every single week in my coaching group. They see all of our KPIs, they see inside my ad account, they watch me build this brand from zero and stuff. So, you can always check that out or our free group link down below. My average order value, we have one-time purchase and then we have subscription, okay? On here right now as of yesterday cuz we just did our metrics for our coaching group, it's $70. 89. And then for subscription, it's right around $49. So, the difference is about $20 in cash collected up front. Now, I'm pretty much going to pay the same cost on Meta. So, if I'm paying $40 for a purchase, I'm doing pretty good here, right? I'm upselling people on a two-pack, a three-packs, I bump the average order value, but when I do that, not a lot of people are taking subscriptions. The further you try to push your average order value, typically the lower your take rate is going to go on the subscription. So, instead of 30 people taking 30% of people taking your subscription, it might only be 15 or 20. And it's just a trade-off because that helps a lot when you're scaling. When we went from 190 to 400,000 a month to 450, 800, 1. 4 million a month, you're talking about 5 months of chaos where we're profitable every month, but that doesn't mean we have money. And so, if you are losing a little bit of money as well on ads, that's a problem. So, over time once you get into a better cash position, I feel like you can focus more on subscribers, which is the direction we're leaning now because of this metric, okay? While it's a $20 difference, which is huge on Meta, the LTV difference, okay? This is just in the first 4 months, okay? So, 4 months for a one-time purchase on average, we make $93. 4-month average, for a subscription, we make 180, 485 dollars roughly is the current metric. And that number's slowly increasing. That is only in the first 4 months. So, if you actually do the math on what your average cost of goods is going to be for this amount of orders versus this, right? You can then back that math out and figure out how much you need to pay on Meta to be profitable overall. And then you just make the decision, okay, do I need to break even in the first month? If you do, it's just going to be harder. Supplements are very expensive and if you want to get your cost on Meta down, the best way to do that is to be going viral organically. Have a strong TikTok program. TikTok affiliates, making your own content, maybe working with influencers on YouTube and Instagram. We do a lot of that. That will absolutely bring down your CPMs on Meta. It will make your ad dollars go further and that's the piece that people miss. I talk to a lot of supplement people. I have people who do a million a month with supplements and they come into our group and they're like, "Wait a minute. Like my Meta is difficult. This is a problem. " And they come to me for help and I'm like, "Look, we can do stuff in your Meta ads, for sure. I can show you what I do. However, there are other elements that impact that. Sure, price point, offer, landing page, a thousand different things, right? But, it's also the external. It's how many eyeballs you get in on your product. And so, having a strong organic program is actually going to help you a ton. We can kind of back this out to be like, "Okay, maybe" and this is just our personal company metrics right now, we are okay with losing money, losing money in the first month. Which means when I go spend, you know, I think we spent 200 grand last month just on Meta, another 60 on uh on Google. We spend money on TikTok, on influencers. We spend hundreds of thousands a month, sometimes up to 600k. And we're trying to spend more. But, the thing is, we are willing to lose money now on the front end and break even in the second month. Ideally having a little bit of profit that comes through in that second month. And that's where we know that we're in a really, really good position. Most big brands today, they are what's called third-order profitable. So, they make money on their customers on that third month, roughly, is the industry standard. You talk to multiple brokers that buy and sell businesses, it's the same kind of thing you'll hear on the larger brands at scale cuz costs rise. So, again, a good way you can control that is having a strong like organic and

affiliate program. That's really helpful. And I just wanted to show you this. This is our back end on Shopify. This is last month in March. And I'm doing like a full I do monthly update videos. If you want to see like March's breakdown, you can always find that on my channel. But as you can see down here in the bottom left, so online store. This is not necessarily just new customers. This is also people coming back that are have not are not on a subscription. That also includes customers who are coming back from like email marketing or even people that hadn't bought before but come back through emails cuz they abandoned cart. That's 322,000. So, everything on the front end. Subscription rebills was 160k through Recharge and 23 on Kachava. That offer is growing with the BOGO that I showed you. And again, those people are typically billing every 2 months. Um this kind of the cadence that we have on there. And so, that's $184,000 uh just billed last month in subscriptions. And as you can see, the returning customer rate, 62%. Now, while that's really cool, it's really high, that's nuts. I've been in the commerce space for a long time. Um my goal is actually in theory to get that lower because the lower that number is, it means we're bringing in more new customers. And that is a metric that I'm focusing on because we want new people coming in. If you have a good product, which is the ultimate retention hack, a lot of people talk about how do I retain subscribers, you need a good product. You can do all the, you know, churn and cancellation flow tactics where like, "Oh, you're going to cancel? How about 50% off the next 2 months? " You can do those things. But that does not fix a bad product. And I see a lot of people that rush to market with something. I see the same thing in my coaching group and I call it out. Some people don't listen to me, that's fine. Um but like they pay the price for it later. And I will tell you right now, with supplements and any custom product, yeah, it's slow to manufacture, but it's also slow to get the brand going. I've never really seen someone blow something up super fast. There's probation periods on TikTok. Meta is difficult right now with supplements and it's definitely expensive. You need a lot of content and ideally having some organic flow. You need to get on Amazon. Like it's a 3-6 month slow roll once you launch. Right? And so, you've just wasted a lot of time. So, be careful what you bring to market. Do your research there. We help a lot of people with that. But also just slow and steady marketing efforts. Slow and steady. Even if you have a lot of money, do not just dump money on it losing money trying to force it to work. You got to get something going. And that's why we are on TikTok. We are on Amazon and we are on Shopify. That flywheel works really well together. I spent the last day here in Miami with about 20 guys in a room, over $2 billion a year in CPG sales in there. Guys, I mean, founder of Bloom, founder of Run Nutrition, all these other brands do hundreds and hundreds of millions a year. Where I'm like, "Hey, what's your split between retail and DTC? " "Oh, we do about 7 million a month online and about 25 million a month in retail. " Got it. And again, one of those big things is obviously focusing on the customer. There's all sorts of things you focus on. But they talk about the same thing where it's like heavy organic presence, a lot of content, a lot of influencers having a big program there really, really helps you scale. And they do focus on subscriptions for sure on the online side. Those guys are very heavy in retail a lot of them. But it was cool to see and be around that space because the same flywheel that I've been preaching for years is literally the exact thing that they were all saying, both together and individually when I'm talking to different people. That flywheel is super important because I can lose money on Facebook and make sense of it. Not only we're acquiring customers, we're building the email list, we're getting the subscribers. Overflow goes to Amazon. Not only does that make us money, there's also subscribers on Amazon and we get increased ranking on Amazon, which is a long-term play. There's so many different things. And so, my point of this video is I give you two fat thumbs up, as fat as they can be, when it comes to subscriptions. Do it right, make it clear to the customer, and understand that your churn rate is and all these metrics that people say, "Oh, my customer stay for 6 months. " "My customer stay for 2 months. " And somebody says that's bad. But it all depends. How are you getting them in? What's the education? What's the offer? If you're hiding the subscription button and it's like, you know, you can't really see it. So, 80% of people are taking your subscription, you're going to have a high churn rate. Again, so like all these things that you need context. But on average in supplements, 3-6 months is kind of your average stick rate. Uh and then there's other stuff you can do, but it kind of depends on your take rate and other stuff. So, I give you fat thumbs up on subscriptions. I think everyone should do it. I'm not certain that I would ever build another brand again that doesn't have subscriptions. And that's not just because I like the model, but it's because 10 years in this industry building a lot of stuff. I've spent tens of millions of dollars on Facebook, just on Facebook ads. And I've seen it where the cost is just going up and up. So, it's not even like a business model play, it's a you have to if you want to have profitable ads because the cost is only going up. Unless you're selling saunas for five grand, like the price is just going up. So, you've got to have LTV there and enough dollars to make sense of it. So, that's what I've got for you. Subscriptions are really cool. Do it the right way. There is a wrong way to do it. A lot of people doing illegal subscriptions and rebills and like that is prevalent. That's everywhere. Some people brag about it online. Have fun when the FTC comes a knocking on the door. Hope that jail cell is more comfortable than the Lambo. I bet it will be. Um but just be careful with what you do. Build for the long term. Put the customer first. That will make your life easier in every single way

although it won't be quick. So. That's what I've got for you. Hope you enjoyed the video. Have a great day.