The business model leading the way
We’ve all heard of Dollar Shave Club, the LA based razor delivery service that was acquired by Unilever for $1 billion in 2016. But why was the company so successful? Alongside quality service, strong brand identity and flexibility, Dollar Shave Club attracted Unilever because of its powerful subscriber base. Inspired by evolving consumer expectations, as-a-Service business models are on the rise. The growing number of Infrastructure-as-a-Service, Platform-as-a-Service and Software-as-a-Service companies has led to the development of a new as-a-Service economy, but which innovative startups are leading the way?
1. Rent the Runway
Rent the Runway is a subscription model startup that rents one time occasion wear and everyday fashion items to customers. In New York City, orders placed before noon are delivered by 5pm, directly answering consumer demand for drastically reduced delivery times. On an average day, Rent the Runway processes over 100,000 products. The company’s wealth of consumer data is used to inform design, helping to create the most desirable fashion items and improving the business’s revenues in turn.
Popular health and beauty YouTuber Michelle Phan launched Ipsy in 2011, using her channel’s subscribers as a ready made customer base. Members pay a monthly charge of $10 to receive a Glam Bag containing five beauty samples. Before signing up, subscribers take a beauty quiz to set their own personal preferences. This, in theory, means that they only receive products they will like. In 2015, the company made $150m in revenue – the same as Dollar Shave Club. Ipsy currently has around 1.5 million subscribers.
Classy is the fastest growing global fundraising platform for social impact organisations. Launched in 2009 and backed by Salesforce Ventures, the company develops software for non profits. Since 2011, the crowdfunding site has helped over 1,500 organisations with more than $130m, connecting campaigns with potential donors. The company’s main aim is to make fundraising easier using PaaS. They also offer advice to organisations in the form of research and eBooks.
4. Blue Apron
US ingredient delivery service Blue Apron was set up in 2012 and sends fresh, sustainable food items to subscribers. Each month, the meal kit company ships 8 million dinners. Despite a shaky start, the company has exceeded Wall Street forecasts. Orders per customer have risen, as has revenue per customer. Blue Apron’s long term strategy is to build an end to end supply chain, cutting out wholesalers, warehouses and grocery stores. Blue Apron is one of many companies attempting to revolutionise the way people source and cook ingredients. The surge in subscription food services is a trend that big grocery businesses must take note of.
Dizzion is a Desktop-as-a-Service startup based in Denver, Colorado. The company was founded in 2011 and provides cloud based technology and advice to SMEs, including storage and delivery solutions. A monthly subscription charge enables the customer to access their applications and data on any device at any time, with the same security as an office environment. As well as being secure, DaaS solutions are scalable and cost effective. This makes startups like Dizzion incredibly attractive, particularly to small and medium sized businesses. In 2015, the DaaS market was already worth $30 billion.
As-a-Service business models are clearly disrupting traditional business. Their growth is the result of increasing customer expectations, the availability of connective tech, and the ability to use those resources to increase profitability. The cloud, automation, data analysis, Artificial Intelligence and mobile technologies have enabled businesses to integrate operations and processes, simplifying supply chains and directly benefiting consumers. This holistic approach is proving to be a smart move for ambitious startups. Not only can it improve customer satisfaction and reduce operational costs, but it is also attracting the attention of powerful investors. In short, it looks like it could be the end of the production line for traditional business models.