Over five years ago I tried the nerd/geek subscription box, Loot Crate, and found it to be a poor value, and I also found the company to have questionable ethics when it came to billing. You can read that review HERE. Basically Loot Crate was a monthly surprise box filled with T-shirts, comics, toys and trinkets. I thought it was overpriced. Currently the price is 25 bucks a month, plus shipping, if you don’t go with one of their slightly cheaper plans that you have to pay for months in advance.
I will give them credit. They managed to milk that lousy value and awful customer service way longer than I thought they would. Loot Crate has been in serious financial trouble for at least three years now, defaulting on loans and stiffing more than a few suppliers, but it wasn’t until earlier this year that the wheels began to fall off completely.
The boxes were arriving later and later, and as I write this, they don’t seem to have sent any out since May. Reportedly they owe customers over twenty million dollars worth of late subscription boxes.
Last year Loot Crate started re-using items from earlier boxes that they’d over-ordered. They also sold tens of thousands of “exclusive Loot Crate T-shirts” to Ollie’s the discount liquidator chain, who sold them for five bucks each or less. Loot Crate had apparently been over-ordering items for their boxes for a few years.
At one point it was believed that Loot Crate had half a million subscribers who were paying twenty-five bucks or so a month for their monthly surprise box of nerd culture items. Evidently, the number has actually been abut half of that for some time. Unfortunately for Loot Crate, they kept buying inventory to fill way more boxes.
At the time they claimed that they were outsourcing those jobs to a third-party fullfilment house.
Last week the company laid off an additional 50 workers (leaving them with about 60 full-time employees) and filed for Chapter Eleven bankruptcy. This appears to be part of a plan to sell the company to a new lender, and get out from under tens of millions of dollars of bad debt.
Last week’s layoffs were sudden, and no severence packages were offered to their employees.
At this point the company promises that they will deliver all the ordered subscription boxes to their customers and they even continue to offer new subscriptions. It is remotely possible that they have a plan that will allow them to stay in business, but that really doesn’t seem likely to me.
My guess is that they will try to fulfill their outstanding orders with leftover items from their warehouse…that is if they haven’t already sold all of that to liquidators…and then quietly terminate the subscriptions. At some point after the dust has settled, I think we may see the name pop up on some other form of surprise package, maybe as an exclusive to a major retailer. I don’t see customers remaining loyal enough to the brand to give them their billing information again.
As for what happened–how did it all go wrong? Well, most of the generic subscription boxes have gone under already. The costs of acquiring items for the box, plus the ever-rising cost of shipping, made it necessary for the subscription boxes to start going with cheaper, lower-quality items, and customers started bailing out after realizing that they don’t really need all that crap.
There was also the problem that the folks who curated the boxes were of the mentality that all nerd and geek culture appealed to all nerds and geeks. That is pure nonsense.
I’m a life-long comic book fan. I have never played Dungeons and Dragons or any other RPG. I stopped paying attention to videogames around 1984. I stopped reading Manga when the publishers decided to print it right-to-left, instead of reversing it when they translate it. I collect some toys, but not all of them.
And even though I’m a longtime comics fan, I’m much more of a DC fan than a Marvel fan. The “nerd” culture that people have been targeting of late is actually just Pop Culture, and it’s way too general and diverse to satisfy with one subscription box.
There’s no reason to assume that somebody who likes Adventure Time is also going to like Transformers or Zelda or Back To The Future. There is, of course, some crossover among the various genre, but it’s far from universal. Loot Crate even included stuff based on YouTube influencers, who should not even be a thing.
There are still successful subscription boxes, but they’re all specialized. Pusheen sends out a quarterly box for fifty bucks every three months, and it’s a great value, not only because they include cool stuff, but also because everyone who orders it knows that they like Pusheen. Loot Crate had tried to get into the themed subscription box business, but they sort of proved that they had no idea of how to manage inventory for a subscription box service and wound up losing money on those too.
If you do the quick math, and assume that they had 250,000 subscribers, that means that they should have been clearing around a million and a half bucks a month. However, reports are that they over-ordered inventory, and bought enough supplies and inventory to fill up and additional 150,000 units per month.
And that was money spent that didn’t bring any revenue back in, so each month they would have been around a million dollars or more in debt. And that’s on top of the overhead of maintaining warehouses and offices and 260 employees.
These are all hypothetical numbers based on rough estimates, but they would explain why the company is so far behind on shipping out Loot Crates.
According to the L.A. Times, the bankruptcy filing claims that they owe suppliers over thirty million dollars, they’re almost six million dollars behind on sales tax remittals and they owe customers twenty million dollars of boxes. Their credit card service has been withholding payments due to customer complaints, so they have no money coming in. This was no shock to me. Below you can see an example of Loot Crate’s typically deceptive promotion, which combined the cream of the crop of several month’s worth of stuff to make it look like you’d get this much cool stuff in one shipment.
My advice for Loot Crate customers: If you haven’t already, cancel your subscription immediately and dispute the charges for the boxes you haven’t received yet. Otherwise you could lose any money that you’ve already sent them. Chances are that, if they do send out the boxes they owe you, they’ll be filled with leftover stuff that you may already have.
That is this week’s PopCulteer. Check back for all our regular features.