At the start of 2020, Austin, Texas-based Cratejoy was planning for moderate growth, gearing up to lay the foundation to launch new initiatives and market its curated subscription box service. But then the pandemic hit, and like most small businesses, Cratejoy quickly shifted its focus to figuring out how it could survive. After all, nobody knew what was happening, how businesses would stay open, and what impact a global pandemic would have on the economy.
"Whenever there is massive uncertainty, the first line of thinking is, 'Let's make sure our people are taken care of and there is cash in the bank,'" Amir Elaguizy, CEO of Cratejoy, told business.com. "After those things are taken care of, it was, 'How can we help?'"
That approach paid off for Cratejoy, which saw sales surge during the pandemic. Part of its success was circumstance – people were stuck at home and used the internet to stay entertained and stocked up – and part of it was Cratejoy's ability to react quickly to a changing consumer mindset. Prior to the pandemic, consumers were getting used to shopping online, but COVID-19 sped up adoption by years.
Cratejoy's focus on helping others turned into new revenue opportunities.
Since 2014, Cratejoy has been selling subscription boxes on its e-commerce platform. It also created a subscription box marketplace where sellers can list and sell their boxes. Through its dashboard, subscription box sellers can manage logistics and fulfillment, get insight into customer buying patterns, and accept payments.
The venture-backed startup – which has raised close to $11 million from venture capital firms such as Charles River Ventures, SV Angel and Andreessen Horowitz – isn't a stranger to hardship. In the fall of 2018, it engaged in widespread layoffs as the entire subscription box industry faced a reckoning.
At the start of the pandemic, Elaguizy and his team at Cratejoy knew that the shutdowns and social distancing rules would force small businesses to sell online, many for the first time. They knew countless small businesses were sitting on excess inventory they couldn't move in stores that were now shuttered.
The team also realized it had an obligation to help businesses embrace e-commerce and generate recurring revenue. By getting them to sell subscription boxes on Cratejoy, it could help them unload excess inventory and free up cash flow to run their operations. It also meant more business on Cratejoy's marketplace.
"We put together a list of businesses that we thought should run a home delivery subscription but didn't have the distribution," Elaguizy said. "A big emphasis for us was reaching out to those small businesses."
The efforts paid off. Cratejoy was able to help merchants sell excess inventory, freeing up cash flow for them and boosting revenue for the company. Sales have more than doubled in 2020, and Cratejoy has twice revised its forecasts to be higher for 2021.
"We didn't expect to find so much success as fast as we did in 2020," Elaguizy said.
Nimble moves during the pandemic paid off.
Cratejoy's success didn't come only from helping more business owners sell curated boxes of products to its customers. Heading into 2020, one of its plans was to implement more technology to better predict and suggest subscription boxes for customers.
The technology, already on hand, proved valuable when the pandemic hit. Cratejoy was able to quickly and prominently highlight subscription boxes that focused on what people wanted in the early days of the pandemic: comfort, entertainment and education. The boxes ran the gamut from educational products to exercise gear, driving red-hot sales for Cratejoy.
"We put front and center what appeals to people stuck at home," Elaguizy said. "There was a massive spike in everything in April and May." That was the peak in terms of demand for the year, but Elaguizy said the company is still seeing "massive growth" throughout 2020 versus what it forecasted at the start of the year. Demand is still hot for those categories, as well as for seasonal and holiday subscription products.
While Cratejoy is past the initial coronavirus-induced growth, Elaguizy has a lot of reasons to be optimistic. A byproduct of COVID-19 is a greater general comfort level with shopping online. Consumers had little choice but to purchase everything from food to furniture over the internet. Now a greater portion of consumer spending is done online, which benefits companies like Cratejoy. Its holiday sales trends are much higher than in years past, something Elaguizy attributes to e-commerce acceptance.
On the business-to-business side, Elaguizy expects more merchants will shift to subscription models because of the pandemic, which plays into Cratejoy's strengths.
"Five years of growth is compressed into 2020," he said. "If I'm a business owner, right now I'm thinking, 'How can I go digital and sustainable?'"
Read about more small businesses that made changes that allowed them to succeed despite the pandemic in our article "What We Learned in 2020: Businesses That Did Well and Why."