Kidbox: Disruption Through Machine Learning
What makes Kidbox interesting in the hyper-competitive retail environment is that it is disruptive in a disruptive category – subscription-box retailing. As with all areas of retailing today there is a proliferation of sub-box startups. Many have no hope of creating a sustainable business, but Kidbox is different thanks to a unique business model, machine-learning algorithms, and the fact it is run by two industry veterans with impressive retail backgrounds.
Still, Kidbox has to contend with hundreds of startups as well as Walmart, Target, Amazon, Nordstrom (owner of Trunk Club), Sephora, Ulta and other large retailers that have recently jumped into the sub-box sales channel. How can Kidbox standout in such a crowded field, especially one with such a low barrier to entry?
“I saw the subscription model succeed with Trunk Club, which led to its sale to Nordstrom,” says Miki Berardelli, CEO of Kidbox. “The model lends itself even better to children, because kids grow.”
Berardelli has been the CEO of Kidbox for just under a year. During this time Kidbox took its first major steps and learned to walk. Kidbox was founded in the fall of 2015 and launched in alpha phase in May 2016. It progressed to beta stage later that summer and made back-to-school its first full season.
Unlike executives at other startups, Berardelli brings a wealth of retail experience to her role as CEO. Berardelli spent the last 15 years at Polo Ralph Lauren, Tory Burch and Chico’s FAS mostly in the role of chief marketing officer (CMO). She also happens to be the current chairman of the CMO Council of the National Retail Federation.
Machine Learning Disruption
What makes the Kidbox model disruptive is that it deploys a try-first, pay-later approach. Subscribers fill out a profile that identifies the age, size and preferences of the child. Once a shopper is enrolled boxes of outfit-ready clothing hand-picked for the child arrive five times per year – spring, summer, back-to-school, holiday and winter. Future plans call for adding summer camp and gifting elements, according to Berardelli.
Shoppers can take a week to decide what they want or send it back free of charge. If they keep the box, the charge is $98 (or $58 for Baby) and for every box kept Kidbox will donate a new item of clothing to a child in need. Another differentiator for Kidbox is a focus on premium brands such as Puma, DKNY, Jessica Simpson, Adidas, and 7 for all Mankind.
“It is important to note we are not a subscription service,” says Berardelli. “Shoppers can opt in and opt out whenever they want. We don’t want to obligate shoppers. We make it easy for them. We have free shipping and free returns. They can skip boxes and they can opt out.”
Although it has only been a year since launching in alpha phase, Kidbox is “well ahead of plan in growth trajectory and it is profitable,” says founder and Chairman Haim Dabah. “We did a seed round of funding, have a convertible note from VCs, and are contemplating our options.”
Dabah is an investor and entrepreneur with a deep history in retailing, fashion and marketing. His background includes leading collaborations with Macy’s, Kohl’s, Target, Elie Tahari, Missoni, Jason Wu, Alexander McQueen and Jean Paul Gaultier. He is also the co-founder of Gitano and Regatta.
To get customers to keep boxes and not lose interest after signing up, Kidbox uses predictive personalization techniques that determine what shoppers want. Machine learning algorithms create mixes of apparel pieces based on personal style preferences. Each transaction and return sharpens the algorithms to ensure the next shipment is more on target with the shopper’s style.
“We have just gotten to critical mass and starting to make sense of our shopper preferences,” says Dabah. “We thought our demographic profile would skew higher, but instead it is extremely diversified and we overlap with the main DMAs and household income brackets.”
The goal of using “data science and machine learning,” adds Dabah, “is to deliver insight. We leverage technology as opposed to adding human stylists. We don’t want to build a big team as we grow. Our goal is 20% human touch and 80% automated.”
The Kidbox Mission
Berardelli describes Kidbox as a mission-driven company. “We focus our business on ways to do things the right way,” she explains, describing the company’s program to give back and help promote philanthropy among a younger generation, i.e. for every Kidbox purchased a new clothing item is donated to a child in need.
“Moms are telling us it is the first conversation they have with their kids about giving," adds Berardelli. "They can go to the website together and direct which charitable organization the donation goes, such as military families and families involved in natural disasters. Because of this experience moms are having conversations with their children about giving earlier in their life than they would normally have the conversation.”
The success of Kidbox comes at a time when many retailers are struggling with over extended store counts and prolific competition. Paths to growth and profitability are limited for most retailers and virtually impossible for rigidly structured, traditional companies.
At the same time, new concepts continually emerge for those with a startup mentality, a bold vision that breaks boundaries, and, most importantly of all, a laser focus on customer needs and convenience.