Americans are eager carnivores, with more than 54.3 billion pounds of beef and pork expected to be produced (and presumably consumed) this year alone. Meat subscription service Butcherbox has sought to cater to this demand, but faced several challenges, including affiliate fraud and subscriber churn. In this month’s Subscription Commerce Tracker, Founder Mike Salguero talks with PYMNTS about how the company is keeping fraudsters out, and staying competitive with individual box options.
Americans are enthusiastic carnivores, according to a study from Oklahoma State University, which found that beef consumption in the U.S. will reach 56.8 pounds per capita this year, and pork consumption will hit 51 pounds per capita. This is a market that Boston-based ButcherBox is catering to by delivering grass-fed, grass-finished meat and other humanely raised, sustainably sourced meat and seafood directly to customers’ doors on a monthly basis.
“We started out of a need of trying to find grass-fed beef for my family and [we] really couldn’t find it,” ButcherBox’s Founder and CEO Mike Salguero said. “But we realized really quickly that the same problems that were preventing people from being able to find grass-fed beef were also keeping them from finding chicken, pork and other meat.”
ButcherBox, which was founded in 2015, has expanded from offering only grass-fed, grass-finished beef to including a variety of other meats, such as heritage pork, free-range, organic chicken, wild-caught Alaskan salmon and wild-caught sea scallops. PYMNTS recently spoke with Salguero about the challenges the company has faced since its founding, including fraud, churn and an increasingly challenging subscription marketplace.
A Subscription Business From Day One
ButcherBox was designed from the ground-up as a subscription-first business, unlike many of today’s subscription offerings.
“We did not expect to be a larger company or have lots and lots of customers,” Salguero said. “What I wanted to do was build a monthly subscription, because monthly subscription lifestyle businesses are great businesses to be in. That was quite literally the impetus. There wasn’t a lot of math or analysis to see if it was the right decision, it just … aligned with [the] lifestyle design that I was going for.”
The company currently delivers meat to the contiguous 48 states in boxes starting at $129 per month and ranging in size from eight to 14 pounds.
The company did not initially rely on advanced analytics, but the growth in order volume eventually drove the company to develop a data analytics program so it could gain insights into consumers’ pain points, increase revenue and improve retention.
Keeping The Meat Secure
The firm’s growth in customers and revenue did come with an increased risk of fraud. ButcherBox has had a few instances of fraud since its founding, with fraudsters using stolen credit cards to have subscriptions sent to random addresses. Each of those instances saw fraudsters exploiting ButcherBox’s affiliate program, which paid users a $15 commission for every new subscriber.
“We ended up shipping out hundreds of boxes before we caught on and paid the fraudsters commissions when they were just running stolen credit cards,” Salguero explained. “We’re not talking about small packages. It’s a lot of money and very expensive if we don’t catch onto it and solve it immediately.”
ButcherBox deployed a security mechanism that flags suspicious transactions, such as those where the billing and shipping addresses are different, to avoid a repeat scam. No system is perfect, however.
“Unfortunately, fraud happens,” Salguero said. “It’s an arms race, and it’s tough to stay in front of it.”
The company further secured its user data by partnering with Stripe to process payments and ensure that sensitive customer information would never be stored on ButcherBox’s platform.
Is Subscription Commerce Bound For The Slaughterhouse?
Beyond fraud, one of the perennial worries of subscription businesses is churn, which can often stem from consumer dissatisfaction with the service or payment issues. Research from Recurly found that subscription businesses have an overall churn rate of 5.6 percent, although this varies depending on the industry. ButcherBox continually tracks this metric to devise features aimed that can retain existing customers. Churn can result from factors that are beyond subscription business’ control, according to Salguero.
“Life changes is the biggest [factor]. Somebody loses a job or gets sick or has some sort of a life-altering event or financial event — and that doesn’t mean that our service is not meeting their needs, it means that their needs have changed.” he explained. “But there’s another cohort of people for whom a subscription might not be the right approach for them. If we were able to offer something different, they would likely take it.”
ButcherBox is exploring the possibility of offering a one-off box, independent from its monthly subscription service, to entice this latter group. This strategy was also developed in response to changing market conditions.
“With Blue Apron going public and not doing well there, the direct to consumer subscription [business]— certainly on the food side — has really dried up,” Salguero explained. “There’s not a lot of funding and there’s not a lot of venture capital. It’s very hard to make it work.”
Whether subscription services can sustain their revenues with one-off boxes is unclear, but flexibility and a strong focus on data analytics might be the recipe to success in this increasingly fraught market.
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