There are a lot of subscription boxes out there. But one of the more famous geek subscription boxes has been having issues lately, but are things about to get back on track?
The History of Loot Crate
Loot Crate‘s origins can be traced back to a business contest in 2012, and it launched shortly thereafter with $25,000 in funding with the idea of “comic-con in a box”. Originally offered at the leet price of $13.37 plus $6 shipping (less for long-term subscriptions), Loot Crate delivered a shipment of items curated to comic, gaming, and other so-called geeky fandoms.
Two years after its creation, Loot Crate had grown to about 200,000 subscribers. In 2016, it was named #1 on both Inc.’s list of fastest-growing private companies and on and Deloitte’s Technology Fast 500. That same year, as the company expanded, the number of subscribers had jumped to 650,000. Its revenue had increased by over 66,000 percent in three years.
Over the years, Loot Crate has expanded to offer about 20 different boxes (crates) with themes like anime merchandise, Sanrio collectibles, gaming items, clothes, and more. The company also occasionally produces limited edition, once-only crates, like one featuring My Hero Academia.
Each crate has a theme, and most items are a mystery until fans open their box. Loot Crate managed to work directly with licensors to create some exclusive merchandise found only in Loot Crate boxes. The company also launched a spin-off site called Loot Vault which sold excess and leftover items and crates. They also sell exclusive boxes in Walmart.
As of May 2019, they have sent out over 32 million crates. The original crate now costs $24.99 plus shipping, with others higher or lower depending on the theme.
The Decline of Loot Crate
Unfortunately, even during its boom period, Loot Crate started stumbling. Layoffs started in 2016 and continued into 2017. This Los Angeles Times article from 2017 points out many of Loot Crates issues and red flags, including the following:
- Employees warned that they were expanding too rapidly and that more isn’t always better in regards to themes.
- The company overestimated the number of items.
- Loot Crate angered media corporations by using unauthorized images and vendors by making late payments or order changes at the last possible moment.
- There was reported in-fighting amongst the executives, including physical altercations.
- Hirings and firings led to decreased morale.
- They went through an $18.5 million investment in less than a year.
Other problems arose in the years following, like accusations of sexual harassment and the creation of the Loot Vault that allowed people to just buy the items they wanted.
In May 2019, a filing revealed that Loot Crate was laying off 150 employees. According to Loot Crate, this was the majority of its warehouse staff as it decided to outsource shipping.
Employees and businesses haven’t been the only ones having problems with Loot Crate; customers have had issues too. Crates like the Firefly box or The Lord of the Rings special edition have been MIA for a year or more. Other boxes are often months behind despite being charged as often as each month. Some crates that did manage to get sent out were filled with leftover items from other crates.
Shipping updates, which used to be posted publicly, were now only shown to subscribers. They were regularly offering 50% off coupons. T-shirts — many of which were exclusive to Loot Crate — were sold off to Ollie’s Bargain Outlet, a discount chain.
Loot Crate Reaches Its Low Point
Well, in mid August, Loot Crate sent out an email to its subscribers:
An FAQ was included that explained the situation. However, Loot Crate put a positive spin on their situation. They weren’t just being acquired; they were filing for bankruptcy in order to be bought.
In the following days, more info came out. According to Los Angeles Times:
“But the company is now in dire financial straits. Its credit-card processor is withholding customer billings, Loot Crate hasn’t shipped goods tied to $20 million in sales, and the company owes more than $30 million in trade debt, Kaufman said.
It’s also behind on more than $5.87 million in sales taxes.
The company dismissed about 50 people last week and now has about 60 full-time employees. It’s seeking to sell itself quickly during bankruptcy.”
Another 50 employees were laid off. It appears they had no warning and received no severance, and they are unlikely to get anything.
Loot Crate is pledging to fulfill its crates thanks to the $10 million loan, and it is looking for bidders in the next 45 days.
Will Loot Crate Survive?
It’s a large fall from grace for the market leader in geek boxes. The company made plenty of missteps — plenty — but it’s also a part of a changing market. 2012 is technically not that long ago, but those seven years have caused companies like Barnes & Noble and GameStop to expand their “geeky” merchandise sections. Meanwhile, chains like Walmart, Target, JCPenney, and more are now stocking figures, T-shirts, posters, and more — in some cases, these may be exclusives. Opening a mystery box is fun, but it can be a gamble.
Plus, this is one of those dog-chasing-the-tail situations. As more people cancel their subscriptions (or even just skip a month or two), that leads to less money coming in to pay bills while the order they’ve already placed is already being manufactured and shipped up. They then desperate to sell and get something for it and free up some warehouse space. People buy instead of paying for a box, and thus starts the whole cycle over again.
The two big questions are whether Loot Crate will survive and be able to fulfill their obligations. I think it’s likely they will, as they have a very valuable email list and contracts/licenses with high-profile companies like Marvel, Sanrio, and Adult Swim. However, they will have to cut back on the variety and/or the frequency. Not all 20 crates can be as equally popular.
They will also need to make some basic changes like locking down orders well in advance so that they aren’t stuck with a lot of excess stock. Maybe this means no holds or skipping months for a while. But, for example, the 45th anniversary Hello Kitty Crate is currently scheduled to ship September 22nd to 28th, and fans have until September 15th to subscribe. That’s not a lot of time to adjust how many items they need. It’s one thing if they were just ordering from wholesalers, but many of their items are made especially for Loot Crate.
Perhaps that’s another change to make. Cut down on the number of exclusives and search for overstock merchandise or strike discounts with manufacturers like Great Eastern. You can still have a box that’s worth $30 — and turn a profit — without having a bunch of exclusives.
Of course, I have little confidence that this crate or other crates will be sent out on time considering most are behind schedule. I’m still waiting on my June crate which, as of this writing, is estimated to ship between the first and fifteenth of September.
I have noticed that the discounts have been immediately cut back since these announcements. Loot Crate had been pushing 50% off subscriptions until August 11th; just after the bankruptcy, the advertised sale on the site will only save you a measly 10%.
Some people are worried that Loot Crate will completely go under, leaving subscribers having paid for crates that won’t ever be received. Even if customers get a refund, it could only be a portion of what they paid. Many people are urging subscribers to either contact Loot Crate or go straight to their credit card for a chargeback. I think a lot of this depends on how many more crates you expect as well as what type of crate you have. Ones with a big company behind them versus the more generic sci-fi/horror/clothing crates are probably higher priority because they likely have the money and legal team to go after Loot Crate if they feel their name and reputation is being affected. If you only have a crate or two left, it might be worth hanging on to see if you get your remaining boxes since they still have to have some merchandise still available. If you’ve been a longtime subscriber, there’s a chance you may get stuff you already have, but if you’re a newer customer, you are still likely to get some decent stuff, although the theme may be more of a stretch. I’m going to keep my Hello Kitty and Friends crate, although it’s a gamble. I’ve only received one so far, but I really like the upcoming themes.
Beyond that, I won’t renew unless it goes back to being 50% off again and there are some signs of real, positive change. Crates need to start shipping on time, and they need to reflect real value. Hopefully they can turn around so that the remaining 60 employees won’t be let go without severance as well as all the companies and subscribers get what expected.