Episode 25: From Direct-to-Consumer E-Com to 5,000 Retail Stores with Nik Hall, Co-Founder at Vitafive

In this episode of the Subscriptions: Scaled podcast, Nick Fredrick, President of Rebar Technology Solutions, is joined by Nik Hall, Co-Founder at Vitafive.

Who is Nik, and What is Vitafive?

Nik attended Texas Christian University, where he met his co-founder Garrett. They launched a few small projects together. They loved the idea of "high lifetime value customers" and subscriptions. So they looked for a product that people are constantly using. 

Garrett had a chance meeting one day with someone who pulled out a pack of vitamins. That sparked the idea to offer custom gummy vitamin packs on a subscription basis. They started the business by offering a four-week supply of custom vitamins with customers' names on the back.  

Journey Into The Vitamin Market

Nik and Garrett were always into health and fitness. But they were not good at taking nutritional supplements consistently. Especially vitamins. So they looked for a way that people would enjoy taking vitamins. They wanted something that tastes good and made it easy to take them consistently. 

In 2015, when they first started, there weren't many gummy vitamins available.

But with the variety available today, they're always looking for a differentiator and ways to innovate. 

They started by offering their "personalized packs." However, they found it was hard to scale as they began to deal with churn. So then they started offering individual monthly pouches on Amazon, Target, and other retailers.

For the first two and a half years, they were strictly a direct consumer subscription through their website. 

They had 30 sales their first day. It amounted to around $1,000 in sales, and they thought their business was destined for hyper-growth. The excitement was short-lived, however. After about a week of family and friends purchasing, the sales stopped. 

They thought if they had a website, people would come to buy. This belief led to a rough six to nine months. They built a custom site with a complex funnel that was hard for people to navigate. They faced a ton of issues and today do not recommend custom-built sites. 

They switched to Shopify and simplified that side of the business. Then they started growing the business with Facebook advertising.  

Working in a Regulated Market

Vitafive operates with the same standards as food. Although they do not go through FDA testing, they are very regulated and have very high standards for their production facilities and ingredients. 

Because of the complexity of regulations,

they work with industry consultants to make sure they are meeting and exceeding standards.

From Subscription E-Commerce to Retail Sales

They were able to sell over $1,000,000 of vitamins with the early strategy of Facebook advertising. But they found it challenging to grow at a high-level rate forever because their churn started to catch up with new customer acquisition. 

After this growth, they decided to try retail. Vitafive sold on Amazon first, and after people responded well, they launched to Target. 

They are now in over 5000 stores.

Nik says each channel they sell through is unique from the others. As a result, the lessons they learned building an e-commerce subscription model did not necessarily translate to retail sales.

They dropped all marketing spend on e-commerce when they moved to retail to avoid raising money. As a result, Vitafive went from 100% e-commerce sales to 80% retail and 20% e-commerce. And they were able to retain about a third of their e-commerce subscribers. 

Today, about 70 to 75% of revenue is retail, including Amazon, and 25% is direct-to-consumer e-commerce. 

From Retail Customer To Direct Subscribers

Vitafive leverages creative marketing to engage customers. For example, they incentivize people to interact via SMS text message once they buy the product. They keep in close communication with those people, and that allows them to become repeat customers. 

They offer multi-item discounts on their website, along with the customized pouches only available on the site. 

Even with unique offers on their site, they understand that some people will still prefer to purchase from their preferred retailer. 

Nik says their goal is to do the most good for the longest term. And that includes their relationships with retail partners. Their goal is not to "steal" customers away from the retailers. Instead, they want their customers to buy where they want to buy. 

They also understand that just because someone tries a product doesn't mean they'll keep buying it forever or automatically purchase again. Most people need a reminder. Vitafive uses simple text reminders to see if people have run out of products they've bought. Their goal is to get people to continue to try their products.

Subscription, One-Time Purchases, & Churn

Vitafive started with only the option to subscribe on the website. Now they offer both subscriptions and one-time purchases. Approximately 40% of customers subscribe.

Nik believes it's imperative to start with a good product. Good products lead to happy subscribers. On the other hand, it's hard to keep customers if your product is terrible, leading to churn. He says one of the most helpful things is brutally honest product feedback. You'd rather know what you need to fix from the beginning. 

They've learned it's essential to understand why people are canceling. For Vitafive, they've found their customers need to pause sometimes and don't want to cancel altogether. 

Nik thinks about retention strategies as treating people how they want to be treated. Including saying happy birthday on their birthday, asking how they like things, and making things right when they're not. 

Even if making things right costs money, Nik would rather have the chance of winning the customer over. 

Growth Decisions

Vitafive tries to work as a team and let everyone work in their areas of strength. Nik and Garret try to stick to high-level strategy tasks. 

They also pay attention to others in the industry. For example, they keep an eye on what others are doing with their websites and retail strategies. And not just other vitamin or health companies. Nik says they even learn things from other companies like watch companies that sell through direct-to-consumer websites. 

The Affect of COVID-19

Vitafive grew substantially as the vitamin space got a boost in 2020. A lot of their growth was through retail. As sales at major online retailers grew, so did their sales. 

Nik says Amazon went from being a marketing game to a game of keeping inventory in stock. He estimates they lost about $500,000 in sales last year because of stock-outages. 

To hear more from Nik, tune into this episode of the Subscriptions: Scaled podcast.

—

Ready to get started with Rebar?

Head to rebartechnology.com or email info@rebartechnology.com to schedule a call today.