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17 Business Models Shaking Up the Marketplace
By Lauren Drell
There are 23 million small businesses in America, and 543,000 more are started every month. So if you've got a business idea and you want to stand out from the crowd and succeed, you better have a unique value proposition, diverse revenue streams and loads of creativity. To inspire you, we've rounded up 17 unique businesses that have proven their model works. From retail apps to fashion upstarts, these companies are rethinking revenue and creating compelling value for parties on both sides of the transaction.
Tell us what you think is the most unique business model in the comments.
Founders: Malcolm Ong and Michael Karnjanaprakorn
Innovative angle: A platform for learning about anything
Skillshare launched as an a la carte education marketplace — experts could teach a class on any subject, and anyone could attend, for $20 or $25. But this past March, Skillshare pivoted to a $10 per month, all-you-can-eat model. And unlike most education startups, Skillshare doesn't use professors from top-notch universities; you need not be a Ph.D. to be able to teach something useful. And on the student side of things, it's easy — and relatively inexpensive — to become a lifelong learner.
Lesson: Leverage the intelligence and expertise of normals to create a massive intellectual marketplace.
2. Stitch Fix
Founder: Katrina Lake
Innovative angle: Personal styling made smarter by data and trendy part-time fashionistas
Founder and CEO Katrina Lake says Stitch Fix's "combination of the art and science hasn't been seen before in retail industry." Her startup's proprietary algorithm is constantly processing the responses to new user style surveys — and feedback on the items they receive — to help Stitch Fix's 300+ part-time stylists in California and Texas assemble "fixes" (boxes of five items) that users are almost guaranteed to love. "There are no other services that provide a truly personalized retail experience at the affordable price point that we offer at Stitch Fix," says Lake.
Stitch Fix originally targeted the mid-20s urban professional who has a demanding job and doesn't have much time to shop, but appreciates being on-trend and looking nice. As the company grew, it became clear to Lake that "the profile of a time-starved woman is universal," and it applied to stay-at-homes and C-suite executives alike. "We're able to take one thing off their plate by delivering a fun and delightful retail experience that’s truly personalized for them," says Lake.
Lesson: A product that uses smart data to surprise and delight — and save consumers time — is a win.
3. Warby Parker
Founders: David Gilboa, Neil Blumenthal, Andrew Hunt, Jeffrey Raider
Innovative angle: Cutting out the middleman — especially a behemoth one — and transforming a medical device into a fashion accessory
The influence of Warby Parker is undeniable, and tech reporters everywhere are reminded of that daily when they're pitched "The Warby Parker for [insert stale industry here]." Warby Parker's undercutting of the Luxottica empire's price points and special collections have turned glasses-shopping into something more like shoe shopping:They're only $95, so sure, I'll take a pair in blue, too.What started as an ecommerce venture now has brick-and-mortars that outpace Tiffany and Co. (and have bouncers and lines on weekends) and has spawned pop-ups at America's coolest locations, from The Standard to Alchemy Works. Warby Parker eliminated the middleman and added not only an immense cool factor, but also a social good element, and nothing piques the modern consumer's interest more than lower prices, trendiness and the feeling that you did something good.
Lesson: Change the way people see an industry.
4. Paperless Post
Founders: James Hirschfeld and Alexa Hirschfeld
Innovative angle: Reinventing the world of stationery, by taking it online, then back offline
Paperless Post started in 2008 as the U.S. Postal Service's biggest enemy — it encouraged people to email invitations and announcements, made pretty with hundreds of design templates. The site was free to use, though premium templates and envelope liners required prepaid "Coins." In late 2012, to open another revenue stream, Paperless Post embraced paper after all, letting customers design a card at PaperlessPost.com and then send it electronically, via snail mail, or both. Alexa Hirschfeld toldMashablethat 60% of Paperless Post users wanted paper stationery. "They've told us that they love Paperless Post, but there are certain times that they really need to use paper for its archival quality, for its ability to be saved and scrapbooked." Meanwhile, digital innovation didn't stall. Paperless Post has upped its aesthetic ante via revenue-share partnerships with J. Crew, Oscar de la Renta and Kate Spade, who lend designs to the site's templates.
Lesson: Aesthetics matter.
Founders: Soraya Darabi and Maxine Bedat
Innovative angle: Curation of sustainable apparel with an emphasis on the items' backstory and beautiful design
Zady champions conscious consumerism and aims to change the way we think about the fashion industry, particularly fast fashion. Founders Soraya Darabi and Maxine Bedat focus on high-quality, hand-crafted goods that are ethically produced (think: vegan leggings), locally sourced, environmentally conscious and made in America. In their eyes, less is more.
Lesson: Storytelling — and the goods' path to consumers — matters, and people will pay a premium for it.
Founders: Umang Dua, Oisin Hanrahan, Ignacio Leonhardt and Weina Scott
Innovative angle: On-demand home services, like cleaning or repairs, bookable from a sleek mobile app
We're living in an on-demand era. We want things and we want them now. Handybook has emerged as a more user-friendly instant-gratification-enabled Angie's List. It operates in 26 cities and recently raised $30 million to grow the team, specifically the mobile engineering department. Hanrahan toldMashable , "The way we set up Handybook is to think about all the services you need inside your home and how we can be a remote control for managing those services." Looks like people are clicking that remote — Handybook has more than 10,000 bookings a week, of which the company reportedly keeps 20%.
Lesson: Convenience is key.
Founders: Brian Sugar, Lisa Sugar, Andy Moss, Jason Rhee, Arthur Cinader, Krista Moatz
Innovative angle: Multiple, symbiotic revenue streams for the Popsugar woman
Popsugar's content covers everything its target demo is interested in — entertainment, celebrity, fashion, beauty, fitness, food and parenting — in a variety of formats, including online, in-app and on TV. In 2007, the company acquired shopping search engine ShopStyle, and piggybacking off the Birchbox trend launched Popsugar Must Have, a subscription box curated by Popsugar editors. It's become a global lifestyle brand with 41 million unique visitors and 234 million pageviews monthly.
Lesson: Content drives commerce, and people love a one-stop shop.
Founders: Gautam Gupta and Kenneth Chen
Innovative angle: A twist on the subscription service — Naturebox isn't curating, it's making all-natural snacks in-house
Naturebox is taking on the $64 billion snack food category that to date has been chock-full of manipulative food science and unhealthy additives. To date, NatureBox has developed 120 snack varieties and shipped 1 million boxes. Half the subscribers are in the Midwest, where access to organic markets and Whole Foods is limited. "We solve that problem by sending better options straight to their doors," says NatureBox's Amanda Natividad. "We empower our happy snackers with choice," and an algorithm that considers dietary preferences and snack popularity determines what arrives in members' boxes. The company saw 20x growth in 2013, and traffic to the site's blog has grown steadily, indicating an increasing interest in learning about healthy eating.
Lesson: Making your own product gives the business an edge unparalleled by competitors who curate.
Founders: Erica Bell and Katie Finnegan
Innovative angle: Tracks the items you want via SKU, makes shopping (even more) fun via a Tinder-like interface
Hukkster's giving consumers the advantage when it comes to shopping. The startup's Hukk It Chrome extension creates a one-click experience for tracking coupon codes — in real time — for the items you want, whether it's apparel, accessories or housewares (70% of discounts in the marketplace are coupon code-based). Hukkster tracks coupon codes and sales at the SKU level and then sends real-time alerts to shoppers. The open rate for these emails is 70%, says Bell, adding that it's a win-win for everyone — Hukkster "works directly with the brands to help drive traffic and sales in-season at healthy margins and shoppers can gain access to the products when they're interested in them." For now, Hukkster is paid an affiliate fee when shoppers purchase through the platform (partners pay increased commissions for better and customized sale alert emails), though Hukkster is "excited to work with [brands] directly down the road," when it has a canon of data surrounding purchase intent. Helping the company gather data is a new app with a Tinder-like interface, wherein shoppers swipe left to "hukk" something and right to pass.
Lesson: Shoppers like saving money; helping them do it means everyone wins.
Founders: Shan-Lyn Ma, Nobu Nakaguchi and Kevin Ryan
Innovative angle: A fully customizable registry, with group-buying for bigger gifts and a "cash fund." Down with pots and towels!
A cohort of Gilt veterans (founder Kevin Ryan also founded Gilt Groupe, among other New York startups) decided the wedding registry had become stale and unimaginative. As Pinterest was helping spouses-to-be develop creative wedding ideas, the registry process remained boringly point-and-scan. The founders came up with Zola as a new alternative, designed for millennial fiancees that enabled couples to create a registry that offers freedom and personalization. Zola was projected to have 3,000 couples use the service in year one, but the team already has 16,000 engaged couples just seven months in (Ma credits word-of-mouth, since friend groups tend to marry in waves). Ma says the top-selling items are the Lodge Cast Iron Skillet, waffle makers and lasagna dishes, which are "most likely tied to the popular brunch and easy-to-prepare meal trends," says Ma. But she's also seen immense interest in registering for experiences, like meal-delivery services, cooking classes and honeymoon activities. This gifting trend "supports our bigger belief that couples today want to register not just for tangible products, but also for experiences that allow them to spend time together and keep date night alive," says Ma.
Lesson: A beautiful interface and the ability to customize go a long way, as does reinventing the traditional way of doing things.
Founders: Eric Stromberg, Andrew Brown, Willem Van Lancker
Innovative angle: Ebooks plus a beautiful user interface
Subscription ebooks have become a trend, but in the past year, Oyster has emerged as a runaway success. In 2012, the social reading startup raised $3 million in 2012 from Founders Fund, and since then — in addition to raising another $14 million — the service has amassed 500,000 titles, including new releases,New York Timesbestsellers and National Book Award winners from more than 1,600 publishers. The monthly subscription is $9.95, which is far less than the price of a single book, hardcover or paperback.
Lesson: Embrace the direction of media consumption habits, make the price undeniable.
Founders: Travis Kalanick and Garrett Camp
Innovative angle: Upending the taxi/transportation ecosystem with on-demand drivers and dynamic pricing
Despite legal woes and backlash toward surge pricing, Uber has become a fixture in some of the world's biggest cities. To date, the company has raised $1.5 billion and has hinted at expansion to other logistics markets, like same-day delivery and errands, a space it's experimented in with activations like Goodwill pickups and ice cream delivery. With so many cars on the road to do these tasks, should Bezos watch his back?
Lesson: Innovation is an uphill battle, but it's one worth fighting.
Founders: Jeff Steitz, Ryan Westberg and Nate Holterman
Innovative angle: Bootstrapped, cause-oriented apparel with an army of campus reps
Each of the pocket patterns on a Serengetee tee originates from a place the founders have visited and is tied to a social cause in the region. Customers personalize shirts (base color + pocket pattern) and thereby support a cause, thus becoming tied to and invested in global issues.
"Our message is not that we can save the world but we can definitely change it through a sustainable business model," says cofounder Ryan Westberg. Serengetee gets the word out to college kids through a campus rep program, which reached 2,500 this summer.
Lesson: Millennials like customization and social enterprises — and they'll evangelize for you.
Founders: Allison Beal and Brian Garrett
Innovative angle: Fashion meets media in this fashion label, whose designs are inspired by customer interests
The Los Angeles-based retail company began not as a fashion label, but as a self-publishing platform where style-minded users could create their own "tear sheets." Those tear sheets were then used by founder Allison Beal as inspiration for the inaugural StyleSaint collection, an apparel canon she could be sure would resonate with her community in a model she calls "creator-to-closet." Today, StyleSaint makes new collections every six to eight weeks based on those tear sheets, and uses $10.1 million of venture capital to fuel growth. The direct-to-consumer approach, founder Beal says, helps to reduce excess inventory and eschews fast fashion in favor of quality goods.
Lesson: The customer is right, especially when it comes to her own taste.
Founders: Brian Chesky, Joe Gebbia and Nathan Blecharczyk
Innovative angle: Create a sharing economy that utilizes empty rooms, apartments and homes, upending the hotel sector
Like Uber, Airbnb is not without its legal troubles, but the "space marketplace" is a $10 billion business that has become the poster child for the sharing economy (see also: Rent the Runway, Lyft, Neighborgoods, etc.) and the behavior known as "collaborative consumption." The site hosts 300,000 listings and has helped more than 4 million travelers book stays. Not content with just the space booking element, the site is also experimenting with group dining experiences.
Lesson: Sharing is caring — peer-to-peer models save consumers money, help owners make money and create a more authentic, local experience for travel.
16. Rent the Runway
Founders: Jennifer Hyman and Jenny Fleiss
Innovative angle: Rent inventory of high-end dresses at a fraction of the price to create a "Cinderella moment" and introduce women to brands they wouldn't otherwise wear
The rise of Instagram and Facebook photos means the pressure is on to look and feel great at events ... and to not repeat an outfit. Rent the Runway was founded after a closet-full-of-clothes-and-nothing-to-wear moment so women could have access to the red carpet looks they see on celebrities, without breaking the bank (rentals are typically 10-15% of the dress' ticket price). But unlike other discounted apparel sites, Rent the Runway doesn't offer last season's goods — it buys in-season merchandise like Bloomingdales or Neiman Marcus do, and rents the items out to different consumers every week, so it recoups the cost of the itemsandfunctions as a gateway for women to get into luxury brands. The company started online, but has experimented with pop-ups to overome consumer hesitations and ensure a perfect fit (therein lies the biggest risk of Rent the Runway, though its consumer feedback data attempts to give women the skinny on how items fit). The rent-not-buy model has been mimicked in other categories by brands like The Black Tux, Chic by Choice and Eleven James and has plenty of potential for expansion.
Lesson: Aspirational fashion and try-before-you-buy are potent sales drivers.
Founders: Katia Beauchamp and Hayley Barna
Innovative angle: Subscription boxes whet the appetite for beauty fiends
How could we not include the mother of all subscription services, Birchbox? The beauty startup spawned an entire industry and influenced several of the businesses on this list. Birchbox introduced us to expert curation, the joys of surprise and delight and the idea of discovery ecommerce. And its growth has attested to the fact that it's working — $71.9 million in funding, the bulk of which came this past April after a successful holiday season. "We still feel like we are in the earliest innings, but this is a moment, this is an inflection point to invest in and really push hard when we are seeing traction, momentum and excitement," Katia Beauchamp toldMashable .
Lesson: A little curation goes a long way in a crowded industry.
Category: Business ideas