Last July I posted on Hacker News about an experiment to start a Japanese candy subscription service. I live in Japan, so the idea was to send surprise candy stuffed into envelopes twice a month to subscribers directly from here. How did the experiment turn out?
How things started
I am from Finland, but this idea started in Thailand. I was on holiday with a friend, partly inspired by the idea of working online while traveling. Things were going really well for me, I was running a MySpace app (yes, they have a platform) that was generating some revenue and working on that for a few hours each day and enjoying the beach and sun the rest of the time.
We didn't really have the time to start something new, but just for fun we were throwing around site / service ideas. There were many, but one thing I wanted to experiment with was some kind of a subscription service. Originally I thought about traveling around the world and keeping a blog of the places I go, then try to support that by offering to send subscribers souvenirs from each place I visit.
I never started doing exactly that, but that idea morphed into something new after I settled in Japan. As MySpace died I suddenly had free time and a need to start something new. So now was the time to finally try my hand at a subscription service. I needed to find something local here that I could keep sending. Something consumable, so that unnecessary items wouldn't pile up for the recipient. I enjoy trying out local soft drinks and food, but as I couldn't really send those, I chose candy instead.
To get the service started and to be sure someone would actually pay for it, I just emailed a few people asking if they would pay for such a service. A few said they would, so I created PayPal subscription buttons and sent it to them. I did no API integration, just used the "website payments standard" button generators to get a link that would let the interested people start a subscription by just clicking over from the email they received.
For the first few shipments I had only a handful of subscribers. After the subscriptions seemed to be working properly, I posted about the service on Hacker News. That really kickstarted things and resulted in great initial growth. Some bloggers discovered the service through HN, mentioned it on their sites and that fueled the growth even more. Since those were Japan-related blogs, the traffic from them was very targeted and lead to many subscribers.
Really getting going
The subscriber count was now in the hundreds and we were really scrambling to fulfill all of the orders. I enlisted my wife and some friends to help with the packing efforts and together we managed to do it. Preparing a shipment was an undertaking that took all day from morning to late at night. There is a lot of manual labor involved.
After each shipment things were getting better however. I bought some equipment to print out labels automatically, then later figured out further ways to cut down the time spent packing by hours. The amount of packages was felt even at the local post office, which hardly had any international packages sent, then suddenly they were seeing hundreds. We started to clog up their service, so at one point the postal office boss introduced me to a service which picks up the packages directly from home.
So now we no longer had to lug the packages to the post office, which saved a ton of effort and waiting in line. But still we were moving boxes of candy from the supermarket to our 3rd floor apartment without an elevator. Since I had been buying a lot of candy very regularly from the supermarket (I represent about 50% of their candy sales), my relationship with the manager had become good enough that I could ask him for help. He agreed to try if they could just do the packaging inside the supermarket, so that we wouldn't need to move the boxes home.
Since I now knew very well the effort involved in making a package, I knew how much time it would take them to do it for me. We agreed on a flat per package packing fee. The initial trial run went well, and they have been making packages for me ever since. I just show up twice a month there with the address labels and other materials I have prepared and they take care of the rest. Post office picks up the packages directly from the supermarket. This has almost turned into a drop-shipping operation.
Decline and uncertain future
The subscriber count peaked at 300, but started to go down after that. The reason? There is always churn in a subscriber business, and unless you can continue to bring in traffic to make up for the churn, there will be a decline.
In my case I enjoyed an immense boost of high quality initial traffic. Those initial subscribers are now churning out and I haven't yet found a way to make up for the lost customers. The only thing helping is great Google search result positioning for "japanese candy" and "candy japan" that is still bringing in a trickle of good quality traffic.
That alone has not been enough though. The subscriber count is now at 277 and still slowly declining. I briefly experimented with paid advertising, trying Reddit ads etc., but traffic seems to be just too expensive to buy for a service with such a low profit margin as this (it cost about $60 to get a conversion through the channels I tried).
I really hope to find new sources of traffic and to find ways to improve the experience for my existing customers to reduce churn and reverse the trend. The service seems to be something that many people enjoy, and the process of sending the candy is now quite well thought out, so I hope to be able to continue doing this for a long time.