Saving + 10xing BarkBox

🧠 The Takeaways

Today, we’re buying BarkBox and getting it back to a $1B market cap by doing the obvious.

1. Dumping this ridiculous airline.

2. Finally fixing their dumpster fire of a site.

3. Letting customers buy products. (Crazy concept, I know.)

+ How Credit Card debt almost killed Coco in June.

LBAB! Community - Cashflow rules everything around me

Coco almost died in June. 

After having 3 strong months investing in growth and finally getting our Shopify payouts into a consistent place, credit card debt almost killed the biz.

For quick context: All costs in the business that aren’t humans are put on a credit card.

Shopify only pays out 2x/mo. 

Both are 5 biz days after the 1st or 15th of the month. (E.g., for the first half of June, we received the payout on June 23). 

The brutal reality is when our payouts are delayed, and credit card bills are due, our credit card debt stacked up quickly. 

Towards the end of June, we were within $500 of hitting our credit card limit. 

If we hit the limit, all of our vendors would shut down. This was a major issue for us.

But we survived! 

The 3 Step plan:

1. Emergency: I stepped in and loaned the biz more working capital to get us out of the red zone.

2. Planned: Dedicated the entire next payout to paying down a big balance.

3. Created a weekly cost estimate and a biweekly payoff plan to ensure we are paying down the credit card and not letting it creep up for the rest of the year.

Now, I plot our weekly estimated credit card bills to ensure that we have a good grip on our credit card balance. 

There are moments where we are aggressively paying it down and weeks where we sit on a balance because of other other expenses.

The old advice, “I want bad news, but I don’t want surprises,” couldn’t be more true when it comes to cashflow.

Let’s Examine This Biz

Note: As always, none of what follows is legal, tax, investing, financial, or any other sort of advice. And I was never here.

BarkBox, the fun Pet toy subscription box biz, is one of the last subscription-box-as-the-sole-biz-model holdouts, and its stock is trading into the ground because of it.

• Share Price: $0.85

• Market Cap: $144m

• L5 Performance: -93%

• P/E Ratio: N/A

Declining sales. Continued unprofitability. No clear path to faster growth or profitability.

Financial Summary

2024 Financial Statements (YoY Comparison)

Sales: $484m (-8%) 😓
Gross Profits: $301m (-2%) 👎
OPEX: $337m (-6%) 😐

Net Income: -$32m (-40%) 🤮

Link to Company’s earnings

TLDR Analysis: Another 1 Bites the Dust.

• Rev Declined for the 3rd straight year. 🫣

• Marketing increasing while Rev declining. 😰

• Rev is falling faster than OPEX. They aren’t cutting fast enough. ⚰️

A good biz with terrible management riding a great idea into the ground.

BarkBox needs to adapt to the times and leverage its strong gross margins to get new customers in the door, get back to growth, and get to a solid place where they can afford to have such massive overhead.

Let’s Fix This Biz

Here are my 3 moves to turn this into a $1B biz again.

1) Dump the airline

If the founder is bored, the stock is in the toilet, and he wants to move on to launch a pet-focused airline… Fine. 

More power to him.

But that isn’t a side quest for a dog toy biz that wants to move into dog food.

We’re carving it out immediately. Rebrand it and operate under its own biz.

It started as a brilliant viral stunt when they launched it. Putting their CEO in a dog crate for a flight to show how awful the experience is.

But convincing a customer to subscribe to your $45/mo. toy box biz + spend $8k on a flight from NYC -> LA isn’t a flywheel. That’s too big of a price jump that doesn’t reinforce the core biz. 

This gives me a lot of Solo Stove x Snoop Dog vibes. Insanely brilliant attention-grabbing play but won’t ring the cash register.

At $5.8m in Air Revenue, it’s a massive PR project that has no impact on Rev.

Takeaway: Toe the line between “stunt to drive awareness,” and “side quest that drags you down.”

2) Fix this dumpster fire of a site

How do I buy multiple products from barkbox.com? 

I genuinely don’t know. I’m not joking.

Go try to subscribe to toys + food. 

I’d consider myself an extremely experienced shopper and know a thing or 2 about eCom experiences.

I cannot for the life of me figure out how to add a bag of dog food, Super Chewer products, and a box subscription to 1 cart.

It’s such a hard and disjointed experience it violates the basic tenant of building a brand.

Sell the most amount of products in 1 order.

I’m the perfect customer. I have an 70lb super chewer who needs:

• Super Chewer toys 

• Dental care

• Healthy dog food

• (I’ve thought about taking the flight, but $8k for a domestic flight is insane).

My best guess after trying 6x is that I’d have to subscribe to 3–4 different subscription programs. All with different site experiences 

It’s so bad I can’t even share the screenshots of what I’m seeing. It’s truly an awful UX you have to experience yourself.

👆is why Rev has declined for 3 straight years.

Takeaway: Don’t overcomplicate the basics of selling.

3) Stop with the Subscription-or-Die nonsense

Just let me buy the products I want (without subscriptions) to see what I like, then I’ll subscribe when I find what’s right for me.

The fact that you cannot buy 1 product, and every funnel forces you into a subscription quiz is insane.

14 years later, they’re still fighting the basics of human psychology.

1. Customers want to try a product before they buy it. 

2. And they want to buy/experience it before they subscribe to it.

Let customers try and have a good experience with the product. Or you’ll eventually torch money on advertising. Because:

1. Advertising costs explode to convince more skeptical customers to buy.

2. You’ve tapped out all the customers who are willing to pay before experiencing.

3. No WoM while you grow from customers having a great experience before full-pot committing.

As a potential customer who’s interested in trying some of the toys and dental products…

JUST. LET. ME. BUY. THEM.

Takeaway: Try. Buy. Subscribe. That’s how customers purchase products.

Final Thought

I don’t know who would buy BarkBox as it is.

At a $114m cap, a retailer could snap them up for the ~2.5m toy subscribers (CAC of $57 for the Retailer). But I’m not sure what Retailer would want the burden of managing this thing.

I don’t see Chewy as the acquirer because they have significantly more subscribers.

And adding dog toys to their offering isn’t hard.

To me, a major food provider like Mars ($137B) would make the most sense. If BarkBox can get their act together and sell customers food + toys + other, this becomes a no-brainer for a huge food manufacturer with mostly retail distribution.

Think Walmart acquiring Jet.com.

Just to learn about eCom and how subscription services work would be a rounding error for a mega brand like Mars Petcare. It’d probably be more expensive for them at this point to launch DTC.

They have the scale, products, and balance sheet to make the ongoing investment into what should be one of the largest online pet brands in the world.