LOS ANGELES -- Chris Davis wanted to sell "energy infused" snacks to video game fanatics, so he tried catchy names -- Cashews of Chaos, Seeds of Victory.
When that didn't work, he tried a new tactic -- offering up a subscription to "geek and gamer" products, delivered to doorsteps. Customers wouldn't know what they were buying until the monthly surprise arrived, much like a wine or book club.
He tried to put together "Comic-Con in a box" for gamers, he said, referring to the annual convention in San Diego celebrating comic book and superhero culture.
The resulting business, Los Angeles-based Loot Crate, now peddles all kinds of toys, magazines, T-shirts and trinkets to more than 200,000 geeks and gamers in 10 countries. The 2-year-old company joined a growing industry of subscription box sellers, including several based in Los Angeles, that are catering to dozens of different passions and needs.
Loot Crate's October box, with a theme of "fear," included a chain saw/hammer pen, a book on surviving a "Sharknado," an exclusive The Walking Dead comic book and a T-shirt decorated with scary cats organized as a skull.
"For $20 a month, you can get items no other company can give you, because we're working hand in hand with major entertainment and video game brands on items designed just for our community," said Matthew Arevalo, a Loot Crate co-founder.
The concept isn't exactly new. Entrepreneurs have long tried enticing subscribers to pay for regular shipments of items as varied as fishing bait, shaving razors and socks. Such services appear and disappear each month.
But a few seem to stand out, with the leading companies scoring more than 1 million subscribers and tens of millions of dollars in venture capital.
To become large enough to challenge traditional retailers, Loot Crate and its peers may have to shift strategy. During the past year, some companies have become product manufacturers themselves to lower costs. Others have expanded offerings, considered acquiring competitors or sold out to big-box retailers.
Los Angeles start-up Dollar Shave Club, which counts 1 million subscribers and $73 million in funding, added a $4-a-month option for a 40-pack of toilet wipes to its signature $1 package of five razor blades.
Making sign-ups outpace cancellations is every box's challenge.
"Negative reviews -- and the fact that consumers often end up with wasted products they never use -- make it difficult for box services to maintain momentum," said Danny Silverman, vice president of business consulting services at retail advisory firm Clavis Insight.
Though analysts are skeptical that the box curators can build $1 billion businesses, interest from traditional retailers has kept entrepreneurs excited.
Target and Amazon now offer discounts for recurring shipments. In August, Nordstrom said it paid $350 million in stock to buy Trunk Club, a men's clothing subscription. Nordstrom identified subscriptions bundled with strong customer service as a growing trend but decided that it would be tougher to build a competitor.
Arevalo said Loot Crate has won people over online through transparency -- showing the team hand-stamping the first boxes at Davis' father's house, and stuffing them with items such as "Avengers"-themed cologne -- and influencers, such as YouTube stars who promote the service.
"We're trying to be entertaining and interesting, not just a company that sends you cool stuff," Arevalo said.
The large following recently allowed the 50-employee company to commission a 10-minute film based on the Fox show Firefly. Loot Crate's huge order of the Rocket Raccoon comic book led it to debut at No. 1 on the monthly sales chart before falling to No. 17 the next month.
A recent crate included a pair of fashionable lightning bolts meant to be tied to shoes. Shwings, the Los Angeles company that makes the accessory, saw Loot Crate's audience as a new one, President Alan Johnson said. Despite selling the shwings at a discount, he called the campaign successful because online sales rose 20 percent the month after the crate shipped.
"That's certainly going to have trickle-down effect, when you put a product in 200,000 people's hands," Johnson said.
SundayMonday Business on 11/23/2014