For D2C Snack Boxes, SKU Count Is the Difference Between Flopping and Thriving

During the early months of the pandemic, direct-to-consumer (D2C) businesses saw their delivery-only model grow in popularity, as contagion concerns kept consumers out of brick-and-mortar shops. However, as people have returned to their lives away from home, D2C subscription services now have to work hard to retain the gains they have made since March 2020.

David Asikin, the chief technology officer and co-founder of ICHIGO Inc., the company behind TokyoTreat, a D2C subscription service that sends Japanese snacks to consumers in more than 120 countries, spoke with PYMNTS about how providing a constant stream of novelty can help businesses maintain subscriber loyalty in the competitive D2C snack box space.

“In the healthy or guilty snack spaces, brands used to be able to captivate their audience just through their packaging or creative marketing methods,” Asikin explained. “But in 2021 … consumers often use the diversity of SKUs on offer as the metric to determine if a service can keep their interest for a long time, and ultimately this can influence a service’s LTV and overall user experience.”

He noted that by having access to a great number of SKUs and by being careful to avoid sending consumers the same snacks multiple times, TokyoTreat has been able to drive long-term value that is “more than twice as long compared to other D2C snack subscription services.”

PYMNTS research from a census-balanced survey of more than 2,100 U.S. adults published in the September edition of the Subscription Commerce Conversion Index, created in collaboration with sticky.io, found that the average consumer holds 3.7 subscriptions, and the number of Americans who subscribe to at least one subscription service has increased 13% since February 2020. However, 19% of consumers with retail subscriptions say they plan to pull back to save money or buy the same products at their local retailers.

The study also found that 21% of consumers cited growing bored with a subscription’s offerings as a reason for wanting to reduce the number of subscriptions they use, suggesting that subscription services can prevent a significant share of churn if they provide more variety and excitement.

See also: 61M US Consumers Have at Least One Retail Subscription

“Japanese snack manufacturers have been proven to excel in this strategy, and I believe that this will become the norm globally,” said Asikin.

A Play for the Japanophiles

Asikin explained that international consumers have been made more aware of the unique assortment of snack foods Japan has to offer, due in large part to globally distributed media.

“Cool and innovative modern popular Japanese sweets and snacks that many people overseas might recognize from anime or movies have been consistently popular since 2014,” he said.

Additionally, this global awareness of Japanese culture has also prompted a demand not only for novel, limited-time snack food releases, but also for the more traditional sweets and snacks that are more deeply embedded in Japan’s food culture. To capture this demand, Ichigo Inc. launched Sakuraco, which offers wagashi (traditional Japanese confections) and other more longstanding snacks and teas.

Plus, to further drive value for consumers who are interested in Japanese foods and in the country’s culture, Asikin said, the company includes booklets in its subscription boxes that offer “an opportunity to learn about local trends in Japan.”

Cutting Out the Middleman

“Typically, the three most common mistakes I see businesses making in the D2C subscription space are outsourcing everything, overspending on marketing and ignoring unit economics,” said Asikin.

He noted that TokyoTreat is able to reduce its costs by running its own warehouses and trading directly with manufacturers, getting preferential rates and greater access to products. Additionally, by limiting reliance on third-party logistics companies, the subscription service reduces the fees it pays on each order packed.

He explained that the company picks and packs in-house, and it partners directly with various delivery services — Japan Post in Japan, DHL in the United States and Japan, and others in other countries. “We have been continuing to strengthen our partnership with DHL for the last year and a half now, and we ranked in 2020 to be one of the top three companies in Japan in terms of B2C cargo volume,” he said.

Boots on the Ground

TokyoTreat has competitors around the world, though Asikin points out that the company has the home-field advantage.

“Many of our competitors operating in the Japanese snack subscription space are American companies operating from the U.S.,” he said. “They are not able to work directly with the snack manufacturers or select the snacks themselves firsthand.”

Differentiating TokyoTreat’s offerings with this curation element justifies the boxes’ relatively high prices. Subscription plans include $35 per month for a single box or $31.50 per month for a year’s subscription, with 17 snacks, candies and/or soft drinks in each month’s box. Between this pricing model, the company’s in-house picking and packing, and the partnerships with delivery services, TokyoTreat is able to navigate the challenging economics of global D2C shipments.

“The strong demand for Japanese sweets has been a strong trend for a long time, even before the pandemic, and will continue long after the pandemic is over, and it is one of the strengths of our company to be able to satisfy these demands by delivering the products while being in Japan and close to the products themselves,” Asikin said.