Subscription Box Services Exploring Single-Brand Box Alternatives

Posted by Mark Seavy on July 28, 2016

The companies that run subscription box services — already well-established in offering a broad array of licensed toys and collectibles in multibrand assortments – are also adding a single-brand strategy.

Loot Crate, 1Up Box, Nerd Block and Funko have made their mark delivering all-encompassing pop culture boxes with a monthly or bi-monthly subscription fee, but some are trying to expand their reach by appealing more directly to those who are already fans of a particular property, brand or universe.

The boxes offered by those companies mix generally available licensed products with those sourced by the services themselves, and are delivered to consumers in packaging that reflects the service’s name. Co-branded boxes – those bearing the name of both the service and a property owner — will contain the 5-6 items, including typically a t-shirt and collectibles.

The single brand boxes are the latest development in a subscription box business – which has its roots in the beauty business — that is still relatively new to some entertainment and brand licensors who are quickly adopting strategies for the segment.

Loot Crate, fresh from raising $18.5 million in equity funding, recently struck
agreements with World Wrestling Entertainment and Sanrio for single-brand
boxes due later this year. It also has a Microsoft Halo Legendary Crate due in
August.

The WWE and Halo “crates” contain exclusive action figures, apparel, collectibles, and in the case of Halo, codes for downloadable content for the game. With the Halo box, the videogames brand will be front and center, with the Loot Crate banner and that of Microsoft’s 343 Industries located on the side. This is a departure from the standard “core” box that has only Loot Crate’s brand on the outside.

The Halo box will feature a mix of Loot Crate-sourced merchandise as well as products from Halo licensees, and will be priced at $34.95 for shipments (plus $5 shipping and handling), to be delivered every two months.

In the case of Sanrio, the crate will contain Hello Kitty products as well as those related to its other properties including Chococat and Keroppi.

Multibrand still dominates

But Loot Crate also continues to market multi-brand packages. For example, under a “Futuristic” theme for this month, Loot Crate’s apparel-focused LvlUp offering has Voltron, Futurama and Bioshock-related products.

Loot Crate has anime, gaming, pets, standard boxes that carry a $13.95 monthly fee (plus $5 shipping). There also is a deluxe subscription service that contains 4-6 premium apparel and exclusive collectible items for a $44.99 monthly fee. Loot Crate also recently paired with apparel supplier Her Universe for its first girl-oriented box. The limited edition Loot4fangirls will contain Marvel, Star Trek and DC Comics licensed products.

Meanwhile, Nerd Block charges $19 for its multi-brand boxes, which are grouped in categories such as classic, science fiction, arcade, comics, horror and a “junior” offering for younger customers, that is priced at $13.95.

The junior box service tends to be the toughest to manage for Nerd Block, says the company’s Russ Montague.

“Although you have a massive property like Teenage Mutant Ninja Turtles, you are selling to children, which means you also are selling to their parents, which can make things a little more volatile” than the regular service because “you also have to convince the parents.” In addition to the box service, Nerd Block also operates five stores in Canada. It plans to open 8-10 new locations there by year-end and potentially enter the U.S. in 2017, Montague tells us.

Toymaker Funko is playing both sides of the subscription box market, supplying its Pop! Vinyl figures and other goods to Loot Crate and Nerd Block, while also operating its own box subscription service.

Legion of Collectors

Earlier this year it introduced a Legion of Collectors single-brand service with DC Comics that began with collectibles tied to Batman vs. Superman: Dawn of Justice. It has since added a DC TV box in May featuring TV-themed products and is readying a Legion of Collectors “Women of DC” offering for September. The Legion of Collectors has a $25 recurring fee for the bi-monthly service or an upfront $150 payment for 12 months. Funko also operates Smugglers Bounty (Star Wars collectibles) and Marvel Corps (Marvel characters) services.

Disney has tested the waters with subscription services, but with mixed results thus far. Disney Stores’ e-commerce business introduced a program in November tied to its Tsum Tsum line that packages 3.5-inch and 7.5-inch figures in a box for a $24.95 monthly fee. The subscription automatically renews each month unless the auto-renewal function is disabled. The collections have Minnie Mouse, Dory and other Tsum Tsum characters. Disney limits the number of boxes available for shipment at given time, building interest among fans, says Disney Stores’ Ronald Johnson. “This allows them to express their affinity for the characters and the stories they love most,” says Johnson.

Licensors feeling their way

Many property owners are still feeling their way in this distribution channel, but see potential. “What consumers value in those platforms is something that is special for them so the more you can customize the goods, the more meaningful you become,” says Cartoon Network’s Peter Yoder, whose company has characters from “Rick and Morty,” “Adventure Time” and other series included in the Loot Crate boxes. “Most of the current boxes are unique and limited editions, but in the future the next layer of customization will strengthen that brand loyalty.”

The loyalty is something that could prove valuable as the services try to attract more subscribers. Loot Crate currently has about 650,000 subscribers, including 450,000 to its original Loot Crate box and smaller amounts to boxes tailored for enthusiasts of games (50,000 subscribers) and anime (60,000), says Loot Crate’s David Voss. The subscriptions are in one-, three-, six- and 12-month increments; the bulk are in the 3-6-month range, says Voss.

For its part, Nerd Block claims more than 100,000 subscribers, up from 30,000 in 2014, and offers three-, six and 12-month subscriptions, with six months proving to be the most popular. The box subscription services strive to offer exclusive products and Nerd Block expects to have 100% of the items being exclusive by year-end, up from the current 85%, says Montague.

For licensors, the services offer both another source of revenue and a chance to further develop a fan base.

“You may broaden your audience by giving them an experience that they wouldn’t get elsewhere and they may tell a friend,” says Hasbro’s Simon Waters, who met with Loot Crate at Licensing Expo to discuss potential deals. “But you will have to keep it interesting because at a certain point consumers may not want any more products shipped to their homes.”

Preaching to the converted?

For the time being, the box subscription services are preaching to the converted. They draw on fan bases already predisposed to buying the given products, says Fox Consumer Products’ Stacey Kerr.

But as consumers seek deeper ties with their favorite brands, the services could reach a “more mass type retail base,” says Kerr. Those stronger connections with consumers also help the box services reduce the rate at which customers end their subscriptions.

“Some of the partnership crates will turn into their own lines of business,” says Voss. “The more choices we give subscribers, the more interesting it is and the longer they will stay with the service.”

Yet some licensors are adopting a wait-and-see approach to the service, largely out of concern that sales potentially could cut into their online and brick and mortar retail business if products overlap. It’s also in the service providers’ interest to populate their boxes with as much exclusive or limited edition merchandise as possible.

“I think it is a little early yet,” says Activision’s Ashley Maidy. “You have to get the product right and make sure it doesn’t dilute what you already have in the market. I think it is a matter of being very strategic about product and making sure it is exclusive and stands apart from what is already available in the retail channel.”

As some licensors take a cautious approach, the services themselves are expanding into new categories. Nerd Block plans to increase the amount of housewares products it offers.

“Housewares are things that can be displayed with pride rather than a collectible that after a while just sits on the shelf,” says Montague. “There are always going to be action figures and collectibles, but we want to drive higher value to our subscribers. Everybody can use a mug, lunch bag or utensils.”

This article originally appeared in the July 5 edition of Inside Licensing – click here for more information on how you can receive this twice-monthly newsletter, packed with trend info, industry insight, news, deals and contacts.