- Xenia Chen left her investment banking job and started subscription hosiery startup Threads in 2018.
- In 2020, she was able to increase her revenue tenfold by focusing on growing her subscription model.
- She did it by building trust, trying new content, and involving subscribers in the creation process.
- See more stories on Insider’s business page.
Xenia Chen founded direct-to-consumer subscription hosiery startup Threads in late 2018 after having left her job in investment banking and private equity with a $230,000 yearly salary.
The company, which employs two full-time and two part-time staffers, made $50,000 in its first year in business, Chen told Insider. But when COVID-19 hit, she integrated some new strategies that led Threads to close out last year with $500,000 in revenue. About a third of the company’s total revenue is from subscription sales, while the rest is from one-time purchases, Chen said.
She estimated that the subscription side of her business tripled in 2020, as the number of subscribers ballooned from 665 at the start of the pandemic in March to 1,840 at the end of January 2021.
Team salaries make up around 20% of revenue, with the rest going back into the business.
“As an early-stage startup (that’s also bootstrapped!), we’re trying to grow as much as possible while also being profitable and mindful of cash flow,” Chen said. “I didn’t start paying myself a salary until the middle of 2020, and I still pay myself what I consider a ‘minimum’ so I can invest everything back into the business.”
Chen shared with Insider how others can follow in her footsteps in growing their own subscription business.
Avoid tricking customers into subscribing
Many potential customers are turned off from the subscription model because too often, they’ve been the victim of the trap of getting billed without their knowledge or having a service that’s tough to unsubscribe from.
“This just makes customers more frustrated and leaves them with a bad taste in their mouth, and discourages them from coming back to your company in the future,” Chen said.
To that end, she explained that it’s important to build trust with customers before they subscribe, such as letting them try out the product first.
“The majority of our subscribers become subscribers after trying out our tights and purchasing one time to start,” Chen said. “It seems obvious, but you’d be surprised at the number of subscription businesses that are subscription-only,” she added.
Threads also sends customers an email giving them a heads up a few days before their monthly subscription/charge date, giving them the choice to skip that month’s shipment, change styles, or even cancel their subscription.
“The most common reason why people unsubscribe (by far) is that they end up having too many pairs of tights stocked up and need to take a break, but they state they will come back when they’re in need again,” Chen said. “This is a totally valid reason, but if you make it hard for them to unsubscribe, it’ll make them frustrated and not want to come back because now their last experience with your company is a negative one.”
“Customers really appreciate this (as this is often cited as something they love about us in their reviews) and we have a low churn rate as a result,” she added.
Take the time to understand what content resonates with your audience
“Data and analytics is everything,” Chen said. “Track what your audience is responding well to and engaging with. And track what they’re sharing with others — those are the pieces of content they are really interested in and want to share with their own circle.”
The platform on which her company runs its lifestyle blog “The Thread,” which includes productivity and work-life tips, book recommendations, style guides, and wellness advice, provides analytics on which articles are most viewed, as well as which ones are being shared on social media. Threads also sends out a once-a-week newsletter that focuses on what’s new at the company.
Another strategy is to ask her audience about their content preferences.
“Sometimes you’ll think your audience wants to see more of something but it could actually be something totally different,” Chen said. “The best way is to ask them.”
“This is a never-ending process — I don’t think we’ll ever be ‘done’ with testing, iterating, and experimenting with what types of content our audience wants to see,” she added. “Your audience will evolve, and so will their tastes for content.”
Involve your subscribers in the creation process
Chen said word-of-mouth continues to be Threads’ most robust customer-acquisition channel.
“Humans innately have a desire to be the first one in their social circle to discover and tell others about new findings,” she said.
But her team’s always striving to improve their product and offering, and there’s nothing they value more than customer feedback. They don’t just listen to subscribers but implements suggestions from them when appropriate.
“We actually have a team meeting every month and we go through customer feedback as a group and are always brainstorming ways we could improve based on what our community is telling us,” she said.
After every first purchase by a customer, Chen sends out a personal email asking for thoughts on the product.
“By connecting with these customers individually, you’re able to get higher-quality feedback than you’d get just from public reviews,” she said.
A big learning for Threads since its launch was that there’s a huge market of men who wear tights.
“Currently, 50% of our subscriber base and six out of 10 of our top customers by lifetime spend identify as male,” she said. This inspired Chen to create a line of hosiery specifically catered toward men. The waitlist already has over 1,000 people on it.
“Everything they already love about our original tights, but designed to better suit the male body (including a ‘pouch’ in the brief area to make bathroom trips easier),” she said.
Members of the Threads male community also indicated interest for an online social group — so last week, Chen and her team started subreddit r/TightsForAll.
“This is so members of our community can discuss anonymously, and we can support and promote the normalization of men wearing hosiery,” Chen said.