Bark co-founder Henrik Werdelin shares why he believes Bark's subscription program has staying power. With 500,000 subscribers, he says taking, and using, customer feedback is important.

Dog toy and dog treat retailer Bark can be categorized in many ways. Bark, which created the subscription service BarkBox, could be called a digitally native brand, a subscription box retailer or a toy manufacturer. And if dogs could talk, they’d call it a treat.

Bark co-founder Henrik Werdelin

Bark co-founder Henrik Werdelin

But labels aside, what Bark co-founder Henrik Werdelin cares about is being the go-to place to shop for dog stuff.

And so far, consumers seem to agree. After five years in business Werdelin says Bark became profitable in the first quarter of 2017, having sold more than 50 million products. Bark’s total 2017 sales were $150 million, up from more than $100 million in 2016. For 2018, the retailer is forecasting $250 million in sales.

The path to profitability

Bark launched BarkBox.com in 2012 with its staple product BarkBox. The monthly subscription has 500,000 subscribers and sales from BarkBox.com have grown 70% from 2016 to 2017. The e-retailer has a 95% shopper retention rate, meaning 95% of customers have bought more than once.

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To sign up, a shopper indicates the weight of her dog and how frequently she would like to receive a box–once, monthly for six months or monthly for a year. Consumers who sign up for a longer-term subscription pay less per shipment ($20 per box when prepaying for one year) than shorter subscribers. A box purchased one time costs $29.   The toys and treats in each box follow a theme such as “Sniffin’ Safari,” or are tailored to the dog’s “play style,” such as a “destroyer,” a “de-fluffer” or a “squeaker.”

At first, BarkBoxes contained toys and treats from independent product developers. As the retailer received feedback from shoppers and analyzed their buying patterns, the retailer started designing its own products. The first Bark-made product launched in November 2012.

Today, Bark designs more than 90% of its SKUs, and the retailer has a manufacturer produce them, Werdelin says. Bark designs about 10-20 products a month, Werdelin says. That means consumers can’t shop around and find the product elsewhere, such as on Amazon.com, if they want it.

Based on feedback, the retailer learned that shoppers wanted products that were not always selected for their box. Shoppers also wanted to replenish a toy they had received in a box (for example, because their pet had destroyed the toy). Plus, the shoe box-sized boxes Bark uses to ship orders limits the size of the products Bark could send. Bark ships subscriptions through DHL with final-mile delivery by the U.S. Postal Service.

barkboxSo in October 2014 the retailer launched a separate e-commerce site, Barkshop.com, where shoppers can purchase single products as opposed to the subscription box format.

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Bark expanded its reach further in August 2017 through a sales arrangement with Target Corp. Target now sells Bark-brand toys and treats in its 1,800 stores and online at Target.com. Target is No. 20 in the Internet Retailer 2017 Top 500.

The relationship is great, Werdelin says, as it allows Bark to get products in front of a lot more shoppers.

“There are still a lot of people making their purchases offline, and we like to provide our services to them too,” he says.

So far, Werdelin is happy with the Target relationship, although he declined to reveal specifics other than it’s “going to be a substantial part of our overall business.”

Staying power

At the start, Werdelin and his two co-founders Carly Strife and Matt Meeker bootstrapped the business. Within a few months of launching, Bark raised a $1.7 million round. Bark has subsequently raised a “few more rounds,” collecting $77 million in venture capital to date, Werdelin says.

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Raising capital is never easy, Werdelin says, however, the retailer’s high sales growth, its profitability and high Net Promoter Score have been able to pique investor interest, he says. The Net Promoter Score index measures a customer’s willingness to recommend a business to others and runs on a scale of -100 to 100. Werdelin says Bark’s Net Promoter Score is in the 70s.

BarkBox is among many web-only subscription boxes available in numerous product categories, such as healthy snacks retailer NatureBox Inc. (No. 362), meal-kit provider Blue Apron Inc. (No. 197), cosmetics box BirchBox Inc. (No. 199) and personalized outfit box retailer Stitch Fix (No. 134).

Success of these subscription retailers vary widely. Stitch Fix generated $295.6 million in revenue in its first fiscal quarter in October, up 25.3% year over year, whereas Blue Apron reported in its third quarter ended Sept. 30 that it lost customers for the second quarter in a row and sales only increased 2.5% year over year.

Most subscription retailers have a significant customer churn, says Forrester Research vice president and principal analyst Sucharita Kodali, who adds she is skeptical of BarkBox’s high retention rate.

“[Bark] seems to have created a fun brand with a lot of personality but the challenge with these businesses is that they are wants not needs,” Kodali says. “If the product you get in the mail is underwhelming or even if your recipient isn’t in the mood to receive it, customers question the value of the service and are more likely to churn.”

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While it may seem like this is a subscription boom, Werdelin believes this is just a new iteration of this type of retailing style. The subscription business, such as for a magazine or a wine club, has existed for decades, he says.

barkbox dog

“[BarkBox] has other dynamics that makes us have a little bit more staying power,” Werdelin says.

And the wind is at Bark’s back. U.S. consumers spent an estimated $69.36 billion on pet products in 2017 up from $66.75 billion in 2016, and a 68% increase from 2007, when shoppers spent $41.2 billion on pet products, according to the American Pet Products Association. About 68% of U.S. households own a pet, which is roughly 84.6 million households, according to the pet association’s National Pet Owners Survey. What’s more, 60.2 million households own a dog, according to the survey.

Further, unlike subscription boxes that consumers buy for themselves, the box is about making a shopper’s dog happy. Unlike consumers who are receiving a box of clothes that might not fit, or coffee that they might not like, “dogs are less picky,” Werdelin says.

“Most people who buy the box, they want to make their dog even happier,” Werdelin says. “What we provide is the products that go into the box, the toys, but really what they are getting is an experience when they open the box together with the dog.”

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And that experience of opening toys with the dog is what Bark tries to capitalize on for growth.

On the tag of its toys, the retailer encourages shoppers to post pictures of their dog and BarkBox toys on social media. On Instagram alone, there are at least 66,000 public posts using the #BarkBoxDay that shows dogs with Bark toys.

This also creates buzz around its brand and makes it less transactional, Werdelin says. Bark has more than 6 million social media followers, and its social media team is mostly comprised of comedians. One video includes a “Dog Mom Rap” that has more than 41 million views on Facebook.

In nearly six years, Bark has fetched success. The retailer has more than $100 million in annual sales, is profitable and has secured a partnership with massive retail chain Target, which will only widen its customer base.

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