I've spend my 40 months on www.VanilyaClub.com that I've started up in September 2011. My Vanilya Club story ended in December 2014, by an exit of an amount that did not worth all the hard-work and sacrifices; however the amount I've received was enough to let me spend my time without working for 1-2 years and start a new business in a modest way.
What is Vanilya Club & How Does It Work ?
Vanilya Club started as an online beauty box subscription service (like Birchbox or Glossybox) (in Turkey, October 2011) where consumers are buying memberships (monthly, recurring or fixed length subscription like 3 to 12 months) and in return they get a surprise box of 4-5 travel/sample size beauty products each month.
The Assumptions Behind The Business Model
The main assumption behind the idea is that people are looking for new beauty brands and products and they are willing to buy those products if they like; but that there is no efficient way for them to try & discover these products. Since people who are looking for new products are potential customers, brands would be willing to give away their products' samples for free.
Why I've Choosed This Busines Model ?
I did start this business model (even though I did not know anything about beauty and cosmetics) because it seemed like it requires no big capital: The sample size products would be supplied from the brands for free and people talking about the surprise box each month would offer free marketing. It sounds perfect for an entrepreneur without capital.
The Launch
The launch was good enough thanks to the viral video and all the bloggers buzz around the new offering. The only page that was about to collect e-mail addresses got more than 20K distinct email addresses in 15 days.
My Partner Comes In
Before the launch my ex partner came into the board. He was satisfied with the results and wanted to jump into the business. He is a perfect partner for anybody so we could easily get into agreement.
The Reality Appears
The real launch was in October 1st of 2011. In 20 days, there were more than 500 paying members. Everything was looking good in terms of demand.
However the real problem showed very early: the brands were not willing to give away free samples. Actually before the launch, I had visited more than 20 brands to introduce Vanilya Club and all the extraordinary(!) benefits it will offer to their brands. However the returns were blurred and I did not notice that, that actually mean "stop".
First Pivot
When I've realized that supplying free samples will be more than difficult each month, in the end of 1st month I've decided to change the business model. I've increased the membership fee to 35TL/month from 15TL/month; and I've announced to the brand managers that I will pay for some part of the costs of the samples and travel sizes. The business suddenly become more balanced in terms of both supply and demand however it was now clear that neither demand nor the supply can scale rapidly. In the end of 1st year, I've decided that it will not work out.
Second Pivot
I've always thought about selling full-size products in Vanilya Club but I was aware of the fact that keeping inventory is very risky and increases the need of capital very aggressively. My partner was believing that we could find some creative ways through cooperating with brands (mainly through consignee, drop shipping ..) however I have not been convinced for a long time.
So we started to look for other subscription models. The real reason behind it was that we were ready to launch any subscription business in terms of IT, payment and delivery infrastructure. After a big list of subscription businesses that I've deeply analysed, I've come up with the Babbabox or similarly Kiwicrate model. We were incredibly fast and we launched in 3 months our new service: PandaKutu (www.PandaKutu.com)
We have terminated PandaKutu in its 7.months due to the feeling that it has serious problems in terms of demand. I will not get into the details about Panda Kutu in this post but certainly I can in another post.
Third Pivot
Meanwhile, Vanilya Club was going on smoothly, we were breaking even thanks to our economical style of living & working. After Panda Kutu, we started to look for expansion opportunities again. At the end of long discussions, even though I never was convinced, we decided to give e-commerce a try. The mathematics of e-commerce was very cruel for companies without capital so I've build a financial model to find out what I would expect from a supplier in terms of profitability and payment term.
Somehow many of the suppliers did not disagree with my aggressive working conditions due to the very good and friendly relationships I've built: %40 top-down profitability on discounted consumer prices and 120-150 days for the settlement date. These conditions were much better compared to our competitors' .We started to buy products, keep small inventory and sell full size products. The business more than tripled in less than 6 months however the need of capital has never been negligible.
Funding Options
We had some talks with venture capitals however none of them was excited to invest in beauty category of e-commerce, due to the fact that there were some companies that had investment and did not go well.
How Did Not We Go Bankrupt ?
We have implemented a lots of marketing offering into the site for cross selling, bundling and promotion. We have increased our profitability for more than 20% on the overall portfolio, due to all the marketing tricks we have discovered. We offered 3 free samples and 1 gift within each transaction which affected our sales and word of mouth marketing very positively.
My Partner Quits
At the end of the summer 2014 my partner decided to quit because he draw the conclusion that e-commerce is the hardest and riskiest way to earn money. I was also agreeing with his conclusion however I was not ready to give up because I was feeling that all the things we do differently, all the marketing tricks we've discovered were making us much more profitable than our competitors and all I need to do was to show this mathematics to an investor, raise capital, and dominate the market.
Investors That Do Not Like Math
Unfortunately I did not meet any angel or venture capital that can think really analytically or mathematically. I've never talk to someone who can discuss the mathematics of the business. The overly complex excel analysis and plans were to frightening for them to get into.
My Exit
One day (end of 2014), I was chatting with the partners of a company I was buying products from. They showed their intention to buy Vanilya Club. Within a week we get into agreement.
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