The Secret to Building a Subscription Empire – Insights from Fab Fit Fun Co-Founder Daniel Broukhim
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Not everything is meant to be a subscription, though you can leverage it. There's reasons why it makes the experience better for the customer and the business better. And so for us, the way we're able to drive such deep discounts for our members is because we have the subscription base and we know with certainty that we're going to have this many customers coming back. So we're able to place extremely large purchase orders on products that otherwise, you know, we'd be buying much smaller ones without that kind of confidence.

and we're able to pass those savings on to our customers. My name's Rudy Moore, host of Living the Red Life podcast, and I'm here to change the way you see your life in your earpiece every single week. If you're ready to start living the red life, ditch the blue pill, take the red pill, join me in Wonderland, and change your life.

What's up guys. Welcome back to another episode of living the red life. We're joined today by my friend, Daniel built a very big successful business that we're going to dive into fab fit fun. You've probably heard of it. One of the probably most successful subscription econ models that I've ever seen. Daniel, welcome to the show. Thank you. Great to be here. Yeah. So let's dive in. If someone doesn't know, you know, most people probably know the brand, right? But they might not know you're one of the geniuses behind it. Um,

Can you just give a couple of minutes on kind of yourself and what you do? Yeah, sure. So I'm Daniel Burkheim. I am the co-founder and co-CEO of FabFitFun. I was born and raised in L.A., grew up there most of my life before going to Berkeley for undergrad and then UCLA for law school. When I was in law school, I decided I didn't want to practice. And so I started working on some of my own entrepreneurial initiatives there.

Starting with the digital agency out of which I launched FabFitFun initially as actually a newsletter and blog. And then from there, we evolved it into a broader retail e-commerce platform where as part of FabFitFun, the core kind of offering is a subscription box.

But now that offering has really evolved into discount retail shopping clubs. So as part of the membership that you get, you basically get a curated menu of about 50 to 60 items every season where you pick six and you get about $300 in value and you're paying $70 a season or $220 a year. So really effectively it's $55 a season if you are buying an annual membership. And then you also get access to sales

where you get the lowest price on the internet. Yeah. Um,

and a lot of proprietary and exclusive products. So, you know, business has really evolved. There's like that core kind of consumer offering, which is the retail piece of it. But we also own and operate some brands. You know, some of them we own wholly, some we own jointly, and we help people launch brands through our platform. A couple people may know one is called Our Place, which is a direct-to-consumer kitchenware company. And another one's called Unhide, which is a direct-to-consumer brand.

blanket company and another one's called pup box which is the subscription box for dogs yes so we have that we also have also forwarded it forward into like the b2b side of things we do fulfillment product development sourcing and now starting to do some packaging for other brands as well so it's really yeah it's like changed over the years right yeah it started off literally as a blog yeah and then became a newsletter then we launched the subscription box yep and then

we customized that so it became a very personalized shopping platform. We could pick all the products and we started adding sales throughout the year. We have sales every single week and now we have a more permanent e-commerce store. We have actually a ton of products you can subscribe and save to as well as more of that permanent store. So that's really evolved and then on top of that now we start, you know, if you want to break down so there's like the

core retail business. There's the owned and operated brands. And then there's like the B2B side where we really work with brands and partner with them and help enable their operations. Yeah. I'd love to dive in like, you know, in a minute how that all came about. Cause like, you know, I've seen the same in my businesses. It's kind of like you launch with one thing and then you're like,

wow, I'm crushing it here. And then it's sometimes like, I'm making these brands a bunch of money, maybe I should start owning the brands or earning a piece of it, right? And then sometimes it's like, you know, I guess for you, you get so good at maybe an area or you master it from doing it yourself that it's like, and there's a gap in the marketplace.

Well, yeah, actually. So for us, it was actually, it started from the customer side where there were certain products that we wanted to bring to our platform that we were unable to ask for from brands. And so we're like, okay, well, we can't get these at the price points that we want. We know we can make a product that is equivalent.

if not better. And that's how we launched Unhide initially. And we had tested a few other items, actually, like there was a fruit infuser water bottle that we launched. It was like our first branded product was actually branded under the FabFitFun brand itself. And we did the bottle, we put it in the boxes. It actually went crazy. We actually listed on Amazon. It was

generating a ton of revenue off Amazon. And then we started getting all these copycats. So we better if we want to really do this, like we should probably have some more infrastructure around it. So these were really kind of customer driven things that like we're like, okay, we can't really deliver the products they want. So let's go make them. But yeah, of course, there's an economic benefit to also owning the brands because the brands don't just live on type of fun, but they go off platform so people can then enjoy them elsewhere. Sure.

Well, and that's, I guess, a big pull on the brand side, right? Because you have such a big customer base and reach in a lot of these brands, you know, by getting a partnership with you or getting in with you, they get exposure to thousands or millions of people. 100%. You're getting, it's like, we'd like to think about like a Super Bowl for CPG, you know? Yeah. You get in the box, which, you know, the people who are buying the box itself are people who are looking for new things, looking to discover, looking to try things.

And a lot of them also, you know, they're on social media. So they're posting, they're doing the unboxing, they're sharing the information with their friends. They're usually the person, the friend group who is ahead of the trend and like kind of knows what's out there. So like, you know,

you know, I think we're like, you know, the, the, the, the kind of the tip of the spear for them. Like, this is a great way to kind of get your brand out there. And like, you know, we have obviously our core customer, which is our shopper, uh, and like our member. And like, that's always going to be number one, but we do really think of ourselves as a partner, as a brand and them as a second type of customer. So,

So in a way, it's a two-sided business where we're not just serving the consumer, but we're also serving these brands. And now that we're starting to offer these other ancillary services like fulfillment, product development, sourcing, packaging, trade finance, we really help them bring everything to life. Yeah, I love that. And I think we glanced over it, but you've done it at a big level too, you know, like a million subscribers. Drivers plus ETH.

And I remember like when I had my agency about 10 years ago, subscription boxes were like all the rage. Like I remember at the time there's so many of them. But what are some lessons for, you know, someone listening that's an e-com play or in general building a subscription business? Do you have some kind of key things that you've learned? I think every look, not all like subscription is,

is an amazing tool, right? You know, for us, because we're able to, you know, count, like, not everything is meant to be a subscription, though we can leverage it, right? And there's reasons why it makes the experience better for the customer and the business better. Then, you know,

uh, you know, it can make a whole lot of sense. And so for us, the able, the way we're able to drive such deep discounts for our members is because we have the subscription base and we know with certainty that we're going to have this many customers coming back. So we're able to place extremely large purchase orders on products that, um, otherwise, you know, we'd be buying much smaller ones without that kind of confidence. Uh,

And we're able to pass those savings on to our customers. And so like for us, I think it's a tool that's super important to know that these are like members who are repeat and coming back, uh, because it allows us to take that confident buy. Uh, and then also because, you know, we integrate so much marketing into the sort of platform itself, both with our customers, but with influencers who are promoting it and so on and so forth, the brands really benefit from that. So that's one, uh,

Also, you know, we've added like sort of like a lot of things that we wouldn't otherwise be able to add. Like, you know, we have digital components of the membership, a community like that you get as being part of a member that are kind of like these one to many goods that otherwise you wouldn't be able to deliver, invest in if you didn't have that sort of like repeat nature of the business.

Yeah, and how have you, you know, like acquisition and growth of the customer base? Obviously, you had a good baseline from the newsletter. Yeah. But have you tried everything? TV ads, social ads, influencers? Like, what are the ones that you've tried and stood out? We've definitely tried everything at a different point in time. I'd say, you know, the one consistent has always been like meta has always been the biggest for us. Facebook paid it. Instagram and Facebook, right? Like the two of those.

Uh, but like at different points we've done an influencer. And so like, and I think influencer for a while got like a little more challenging. Uh, and, uh, there was a certain point in which influencer, it got saturated. Yeah. It was the greatest channel ever. Yeah. And now you have like new things popping up. Like people are talking about app loving all the time. I think, uh,

you know, obviously TikTok has been huge. It works for some brands but not for others. TikTok shop is like all the rage. Yeah, TikTok shop is all the rage. I'm actually super optimistic about how Snapchat is going to perform in the next couple years because I think they're really fine-tuning their sort of ad platform. I think it's still early there but I'm talking to people who are actually spending on Snap pretty successfully. So like, you know, it all depends. It's also like, you know, we have a slightly older customer so ours,

you know, we'll be in certain areas. Like maybe CTV works for our brand and it might not work for another one. And like, I think that's another one where CTV is another one that people are talking about on the tip of a lot of people's tongues. And you had success with like old school and like radio, TV, and podcast. Podcast has been super successful. Radio, I think we,

tried it lightly but it's never been a big push for us. It's visual with a lot of your products, right? Yeah. Share the box. You can talk about the membership and the podcast definitely work and I guess podcasts now are usually both visual and like I wonder what percentage of podcast listeners are watching the video versus just listening but like... There's a lot of trust in podcasts though, right? Yeah. Unlike the influencer or the channel host so...

Of course. And, you know, when you can do podcasts, like, you know, the ability to target your demo is so much better than, like, traditional radio in some ways. I'm sure we've done some tests because, like, you know, we've done so many things over the course of, like, you know, 13 years. Yeah. But, like, I'd have to go back and, like... So if you could only pick one platform forever channel to advertise...

what would it be? It's, it's meta is where the scales touch. Like, it's like, you know, of course, like it's gotten so much worse, uh,

over the last years right there's also like the apple changes so like it's hard to know which is which like because it was always it's been competitive for a while but then it got super competitive and then all these changes happen and then also the economy softened so it's like it's it's really hard to disaggregate like where things are coming from but like it's a bit of all of them right like exactly yeah and god knows what's going to happen if tiktok gets banned

Like, I don't know how that affects the price of advertising everywhere else. It probably, yeah. I mean, Matter and Instagram will become more saturated. And what about email? Like, you've done a good job there as, I guess, part of your... Email is always tried and true. Like, the only thing I would say is, like, in terms of CRM efforts now, what wasn't big that has become really big is, you know, obviously, I mean, I don't want to say they weren't. Well, SMS has become so much bigger. Yeah, I was going to say. And then push...

It becomes almost bigger for people who have apps. So like, you know, I'd say like, um,

It started mostly with email as our CRM strategy, and now it's evolved to include both of those. Yeah, and I think that's a... Like, when I was running big e-com brands, I took it biggest one to a million a day in revenue. Yeah, that's crazy. Yeah, it's big, yeah. But, like, text and push was, like, too underutilized. Like, ninja things that people ignore still, I think. And people under...

understate the complexity in getting those things right it's like to deliver the right text method and clients the right consumer and then like yeah of course there's uh you know how many letters and costs and this and that it's not cheap either well especially yeah we had a list of like 200 000 on text and sometimes if you send like one character extra and it sends two texts it's like oh that cost you another yeah exactly so yeah i could be really careful i mean we don't make those mistakes but well we don't yeah no long term then sometimes i'm like why is the

copy you know it's like you can be a little more creative there's a lot of space here yeah yeah uh but you know i think um yeah it's we have a lot of tools at our disposal in a way so that's good in the sense that like there's a lot of opportunity but it's also more complex than people realize sure and what about when we talk more about subscription like do you think there's a lot of nuances in like how you position the offer and the product i mean obviously you are a

subscription box it's in your core but i see a lot of e-com brands trying to force subscription now because everyone says oh it increases valuation and ltb like how would you approach it when you're like trying to build out i mean i think to always be part of the offering yeah um for most products i mean some things may not make sense to subscribe for at all right like you know like a durable good that you're not going to ever replenish or you have another one uh but like for the most part um

you know, like you should allow people the opportunity. For ours, like you can cancel any time. You know, there's a lot of fungibility. I actually think you get a lot of benefits by going into the membership and seeing the other things because the sales are actually a larger part of our business now. Well, you're sounding also like you've,

become a bit of like a Costco for online shopping. Right, that's the perfect way to frame it. So like we like to think of it, but like we like to think of it as a Costco, but in the sense that it's for like beauty and lifestyle and wellness and home, but it's also like the sort of the front of the life cycle of a product. It's like the latest products, the hottest products, the newest stuff.

uh it's a lot of that's on our platform whereas costco is just like random yeah so it's also bulk and we're not both like you don't have to go buy yeah like a gallon of what you're doing the bulk to get we're doing the bulk but at the end consumer really because you know if you go buy a ketchup from costco you might buy like ketchup for a year yeah or us if you're buying lip gloss you're buying one little one yeah but you're getting the cost benefit of course yeah the bulk buy yeah

And I guess it's... That's a great way of putting it. Yeah. And it's a great, it's innovative too because if you're a consumer, like I'm very into like, you know, my health and biohacking and stuff. So like, I'm sure you get, you know, a lot of women that they want to stay cutting edge of the latest health gadget, right? Or beauty gadget. So, and you're doing a lot of that research in advance. So how do you do that? Do you have a product team and their only job is... Oh, I pick all the products. Do you? No, I'm kidding. We have a...

We have a pretty robust merchandising team. How many do you pick? Do you still pick products? I definitely, on occasion, will suggest a product to the merchandising team. But it's not like I...

uh you know i don't like force them to do anything but you have several staff just sat there all day that's their only job oh yeah there's 30 40 people on the merch team lab working yeah it's a pretty big team okay uh you know because they're coming for products coming through thousands of products talking to lots of brands getting samples yeah and also yeah and also like the compliance issues with like these massive orders we're ordering a couple hundred thousand units of something like there's a lot involved in the back yeah we're interested and so like there's a sourcing component to it uh but um

I would say that like, you know, it's kind of like a joke. Like, you know, I want us to go into food and Bev and like I sourced like our first hot sauce and I put this hot sauce, this hot sauce called Zabs on there and it sold out. And I was like, look, you know, who has a higher self through me or the like they still like make fun of me and I make fun of them. And like I have fun with a merch. Yeah, probably the most fun part of the org in some ways. Like Christmas shopping, right? Exactly. It is like, yeah, it's like, you know.

uh so we were going to food and bev now so that's something yeah and what let's you know we talked a lot about the the direct consumer marketing side but obviously most of my audience are entrepreneurs and founders and ceos like me and you and business isn't without failures risk and mistakes along the way and yeah the bigger you get the harder the fall i always say so like building all this have you got any business lessons for the entrepreneur listening big things you you would teach oh man uh

that aren't cliche or that are cliche, like cliches are pretty good. You know, I, you know, I think, like, what are the things like, I think, you know, I'll say this, like, there's, like, I, you know, people say cash is king, true, like all these things, like, any business tips, or big mistakes that you learn a ton from, like, big mistakes that we, you know, I think the one thing is,

Things that I've gotten more comfortable with that maybe I would have preferred

done sooner. One, like I was weary of hiring friends early on. Okay. And now I realize, especially if you have smart friends, like it could be a really good blessing and gives them a great opportunity. When they're loyal often too. Yeah. Often. Right. Like so like we've been able to really do well with people that we've known for a really long time and you know, are usually super high aptitude and like we'll often also take a risk on someone who maybe not

doesn't have all the experience yet uh for someone who has let's go more potential actually yeah right because like i think like you know i think um if you're like at like amazon or facebook or meta uh and maybe this doesn't apply to like you know i this is like you know you get to certain someone we got to large company it's like okay do you bring in like large company people or do you kind of stay entrepreneurial yeah and i think uh

you know uh taking the risk on staying entrepreneurial and hiring people who kind of still are earlier in their careers and have more like we made that mistake so i got to 110 staff yeah me and i started hiring these great resumes executives and it was just honestly like some of my best staff are the ones that just have the good soft skills and attitude and personality of course and i

Hiring for attitude is a big plus. Usually, some of them are people I'm close to already. We already have a known entity from that standpoint. But I think for me, okay, maybe they didn't have all the perfect experience, but they're super talented, right? And they can learn. And they can learn, and they're motivated to prove themselves. And often, if you get to a big stage, you're still...

out there as, like, a meta, right? Like, who goes against the best of the breed in terms of people who have all the experience? So, like, and, like, it's also, like, a difference in cost, right? And it's, like, you start seeing some success, and then all of a sudden, let's hire the talent. Like, I've never seen him done this before, and, like, whatever. And, like, there's some truth. Like, of course, you can find, like,

the perfect person right then like great bring them in but like often like the smart person who's hungry who's capable who wants to learn is more than good enough and they can grow into the role more than that over time so like you know there's a balance like I wouldn't over lean in one direction versus the other we've actually you know we went in one direction now we've kind of come back and like we're somewhere in the middle yeah you're course correct yeah yeah definitely and then just a follow-up question on the failure side how has it

Personally, as an entrepreneur, do you deal with setbacks and failure? Honestly, I'm not too affected by it. Yeah. Like, I think, you know, we've been lucky to have a lot of success, but I think also, like, I just...

Has that changed? I don't know if it's changed. I would just say I have a pretty unique perspective in the sense that I also had cancer, so I'm a cancer survivor. And so for me, it's like, this is all fun. This is business. Yeah, this is like, it's a game. I'm probably in a position where I'm never going to... Look, it's not fun to lose money, right? But I'm probably in a position where I'm...

I'm never going to be on the street. Yeah. I'm never going to be like suffering, right? Like, you know, I may be able to buy a few more things or buy a few less things and like feel a little more comfortable, feel a little like for the most part, I'm going to live a pretty decent life at this point. So like you kind of keep that perspective and you're like, okay, well, if that's the case, like what's the worst that could happen? Like I have my health now, thank God it's back. I can, you know, spend time with my family. I have a lot of good friends. Yeah.

uh, I enjoy what I do, which is, you know, it's fun. I love business. Like, so like, yeah. And, and like business has ups and downs. I think you realize, uh, money comes and money goes. And so like, that gives you a much healthier perspective towards money. I think like, especially we've all seen it. Cause like, you know, if you started your career when you,

I started my career was like 2010 and like had a 10 year run. And then all of a sudden you're like, Oh my God, 2020. You're like, I didn't know it could get like this in 2021. And like, obviously in COVID things were good for a while, but then they got bad. It was like the whole thing. Like, you're just like, okay, well, I haven't lived through the cycle. And now that you've lived through the cycle, you're like, well, it can come and it can go. And like, there's not, you know, there's not,

It's not the end of the world. Yeah. I mean, I guess at the end of the world, I agree, but I mean, it's so good for people to hear because we were maybe seasoned now, like, you know, I hope it's helpful. Yeah, no, it is. It is because I think I, you know, I work with a lot of beginner entrepreneurs and they're,

they're in a lot of fear and when they have the setbacks, they think, oh, am I going to ever make it? Is this for me? And when you become more seasoned, it's like you just learn to roll with the punches. Yeah, it's like part of the day, part of the week. Good. So last couple of questions as we wrap up today. I always say, you know, ask everyone this. So if you could go back in a time machine to your younger self and tell yourself one thing, what would it be? Buy Tesla stock. Oh, yes. That's a good one. Yeah, that was...

Sorry, joking.

A lot of it. About how far back? However you're further out of business or something, any tip for yourself or mindset wise or something? I mean, I think like the one thing is like you realize that like, you know, the at bats also matter. And so like I started my entrepreneurial career a little bit later in life. And like what I think about like. How old were you when you started your entrepreneur career? Probably 27, 28. Okay. Like around that age, 27-ish. And I think like you,

You could start earlier, right? If you want to be an entrepreneur, it's like... It's all years. Right? Or it's three years. You're like...

learning like a sponge and then after two three couple years you're kind of like okay you're swinging you know like you're like trying to make it happen and like the more at bats the more likelihood that you'll succeed and like those five and also like your energy when you're i mean like you have a lot of energy but like the things you're willing to do when you're like 22 yeah it's like insane like i think back to like what i would do at 27 or 28 29 and like if i did those same things now i don't

I'd still want to. I couldn't fathom. There's smarter, you can work smarter, but am I going to sleep on my couch and wake up in my office and be up all night doing things? No. I remember in my 20s, I'd have a whiteboard in my house and you'd be up until 2 a.m. Yeah, I'd be up in my office many times. Yeah, yeah, yeah. But also, you get to a point where you realize you don't need to do that.

too right like i mean it's fun yes you get smarter i think it's fun when you want to do it but like you also realize as you get like now what's a marathon it's not a race yeah and also as we get bigger like over christmas for example we gave the whole company 10 straight days off and people were like aren't you working rudy and i'm like i don't really have any work to do because my work is my team yeah and if my team are off i have what are you gonna do whereas i'm

10 years ago, I did everything, right? I would have been writing the emails, writing new landing pages, filming new ads, setting up the ads, you know, doing the email inbox. So over time, I think you can step away more as you bring in the people. Of course, like at some point, like, you know, if you're not there for a week or two, not much should happen. Realistically, six months or a year, you really have all the pieces in place. Like there might be like the major strategic initiatives or some things like you're specific. Like I work on certain specific things.

Like buying a business. Yeah, exactly. Like I specifically work on M&A. Yeah. And like, you know, I'm here in Miami. And like while I'm in Miami, it turns out that I might be getting an M&A deal done. Yeah. Right. And so like it just and maybe two. So like, yeah.

it just so happens that like that role, like if I wasn't doing it right. And, uh, and maybe someone else, like maybe it would, it may or may not happen. Yeah. It will be the right decision. Or the, or yeah. And that's like pretty critical. Yeah. Yeah. No, I love it. So last question, easy one. Yeah. Where do people find you and learn more about the business? Uh, so you can actually, uh,

uh, you can email me Daniel at fabfitfun.com. I'm also on, uh, X and Instagram now. Uh, I'm, I'm recently tweeting more. So you're on X, but you still tweet. Yeah. I'm tweeting more, but I don't tweet a ton, but I post on both platforms, uh, from time to time. So, uh, maybe I'll be doing more of that in the future. Uh, but yeah, um, love to stay in touch. Anyone wants to reach out to me, they can find me on those platforms as well as, uh, email. Uh,

and love to stay in touch and thank you for having me of course thanks yeah this is a great convo and guys hope you learn a lot and got to see behind the scenes on one of the biggest ecom subscription plays that's around it's done under appreciate the knowledge here and as always keep working hard and keep living the red lie i'll see you guys soon thank you