In the midst of economic fluctuations, Bark, a leading player in the direct-to-consumer dog toy and treat subscription service, has observed a distinct trend in consumer behavior. During a recent analyst call on November 8, discussing the company's second-quarter fiscal 2024 earnings, Bark revealed that while new customer acquisition has faced challenges due to broader economic conditions, existing customers remain loyal.

Matt Meeker, Bark's co-founder, CEO, and executive chairman, expressed that the company's core toy subscription business has been impacted by these macroeconomic headwinds, especially in attracting new customers. However, since May, there's been a progressive uptick in new customer acquisitions. Remarkably, customer retention rates have soared to their highest since Bark went public in June 2021, suggesting a strong loyalty among current subscribers despite current economic hurdles.

Yet, Bark's overall direct-to-consumer revenue has seen an 11% year-over-year decrease, a significant portion since this channel constitutes 85% of its total revenue. This trend mirrors the broader pet supply subscription industry, as noted in “The Subscription Commerce Readiness Report: The Loyalty Factor,” a collaborative study by PYMNTS Intelligence and sticky.io. The report, based on a survey of over 2,000 U.S. consumers, assigns an Index score of 59 for sign-ups and 64 for retention in pet supply subscriptions, highlighting greater retention than acquisition rates in the sector.

Interestingly, consumers show reluctance to downgrade in pet-related expenditures. The “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down” from PYMNTS Intelligence, based on an April survey, found that while 47% of shoppers have opted for cheaper alternatives in at least one grocery category, only 19% have done so for pet food and supplies. This trend, however, may be shifting as economic challenges persist, with some evidence of a move towards lower-cost brands and smaller sizes in pet products.

In response to these trends, Bark is exploring revenue opportunities beyond subscriptions. According to its latest earnings report, the company is eyeing more à la carte revenue drivers, with non-subscription offerings like “consumables revenue outside of what’s included in our box subscription products” witnessing a 20% year-over-year increase. This shift suggests an adaptability to changing market conditions.

Bark's Chief Financial Officer, Zahir Ibrahim, acknowledged the significant impact of the macro environment on their subscription box products. Nonetheless, the company’s strong retention rates indicate their success in delivering what subscribers value most: joy and convenience. A study by PYMNTS Intelligence, “The Impact of Subscription Models on Consumer Choice,” in collaboration with sticky.io, found that 44% of surprise box subscribers value enjoyment as their primary reason for subscribing, followed by convenience at 20%. This insight underlines the importance of customer experience in retaining subscribers amidst challenging economic times.

Sources: https://www.pymnts.com/subscriptions/2023/barkbox-says-financial-pressures-hurt-d2c-subscription-acquisition-not-retention/