Living The Red Life - The Secret to Building a Subscription Empire – Insights from Fab Fit Fun Co-Founder Daniel Broukhim

Episode Date: January 9, 2025

Daniel, an accomplished entrepreneur and founder of a leading subscription e-commerce brand, joins the discussion to share his journey of building a successful business from the ground up. With a focus on scaling sustainably and navigating the complexities of direct-to-consumer marketing, Daniel offers a candid look at the challenges and opportunities he has faced. He dives deep into the innovative strategies that have allowed his business to thrive, even as it transitions into new markets like food and beverage. His emphasis on customer experience and data-driven decision-making sheds light on how to stand out in competitive industries.In addition to sharing his entrepreneurial playbook, Daniel reflects on the personal side of running a business. He discusses lessons learned from hiring, emphasizing the value of attitude and potential over perfect resumes. His unique perspective on handling setbacks, shaped by overcoming personal health challenges, offers a refreshing take on maintaining balance and perspective. Aspiring entrepreneurs will walk away inspired by his insights into building resilience, adapting to change, and taking strategic risks.CHAPTER TITLES02:35 - Starting the Entrepreneurial Journey04:54 - Disrupting the Subscription Model07:21 - Scaling and Maintaining Customer Experience09:50 - Transitioning into Food and Beverage12:14 - Direct-to-Consumer Marketing Strategies14:38 - The Role of Partnerships in Growth16:27 - Key Business Lessons for Entrepreneurs18:39 - Hiring for Potential vs. Experience21:01 - Learning to Handle Setbacks and Failures23:40 - Advice to a Younger SelfConnect with Daniel Broukhim:Fabfitfun.comConnect with Rudy Mawer:LinkedInInstagramFacebookTwitter

Not everything is meant to be a subscription, though it can leverage it. There's reasons why it makes the experience better for the customer and the business better. And so for us, the way we're able to drive such deep discounts for our members is because we have the subscription base and we know with certainty that we're going to have this many customers coming back. So we're able to place extremely large purchase orders on products that otherwise, you know, we'd be buying much smaller ones without that kind of confidence. And we're able to pass those savings on to our customers.

My name's Rudy Moore, host of Living the Red Life podcast. I'm here to change the way you see your life in your earpiece every single week. If you're ready to start living the red life, ditch the blue pill, take the red pill, join me in Wonderland and change your life. What's up guys? Welcome back to another episode of Living the Red Life.

We're joined today by my friend Daniel, built a very big successful business that we're gonna dive into, FabFitFun. You've probably heard of it. One of the probably most successful subscription econ models that I've ever seen. Daniel, welcome to the show. Thank you.

Great to be here. Yeah, so let's dive in. If someone doesn't know, you know, most people probably know the brand, right? But they might not know you're one of the geniuses behind it. Can you just give a couple of minutes on kind of yourself and what you do? Yeah, sure. So I'm Danny Burkheim. I am the co-founder and co-CEO of FabFitFun. I was born and raised in LA, grew up there most of my life before going to Berkeley for undergrad and then UCLA for law school.

When I was in law school, I decided I didn't wanna practice and so started working on some of my own entrepreneurial initiatives, starting with the digital agency out of which I launched FabFitFun, initially as like actually a newsletter and blog. And then, from there we evolved it

into a broader retail e-commerce platform where, as part of FabFitFun, the core offering is a subscription box. But now that offering has really evolved into discount retail shopping clubs. So as part of the membership that you get, you basically get a curated menu of about 50 to 60 items every season where you pick six. And you get about $300 in value, and you're paying $70 a season or $220 a year. So really effectively, it's $55 a season

if you are buying an annual membership. And then you also get access to sales where you get the lowest price on the internet and a lot of proprietary and exclusive products. So, you know, business has really evolved. There's like that core kind of consumer offering, which is the retail piece of it, but we also own and operate some brands.

You know, some of them we own wholly, some we own jointly, and we help people launch brands through our platform. A couple people may know one is called Our Place, which is a direct to consumer kitchenware company. And another one's called Unhide, which is a direct to consumer blanket company. And another one's called Pup Box, which is the subscription box for dogs. So we have that. We also have also forwarded it into like the B2B side of things. We do fulfillment, product development, sourcing, and now starting to do

some packaging for other brands as well. So it's really... Yeah, it's like changed over the years, right? Yeah, it started off literally as a blog and then became a newsletter. Then we launched the subscription box and then we customized that so it became a very personalized shopping platform. We could pick all the products and we started adding sales throughout the year. We have sales every single week.

Uh, and now we have a more permanent e-commerce store. We have actually a ton of products you can subscribe and save to as well as more of that permanent store. So that's really evolved. And then on top of that, now we start, you know, if you want to break it down, so there's like the core retail business, there's the own and operated brands. And then there's like the B2B side where we really work with brands and partner with them and help enable their operations. Yeah I'd love to dive in like

you know in a minute how that all came about because like you know I've seen the same in my businesses it's kind of like you launch for one thing yeah and then you're like wow I'm crushing it here and then it's sometimes like I'm making these brands a bunch of money maybe I should start owning the brands or earning a piece of it right and then And then sometimes it's like, you know, I guess for you, you get so good at maybe an area or you master it from doing it yourself, that it's like, and there's a gap in the marketplace.

Well, yeah, actually. So for us, it was actually, it started from the customer side where there were certain products that we wanted to bring to our platform that we were unable to actually buy from brands. Yeah, yeah, yeah. And so we're like, okay, well, we can't get these at the price points that we want. We know we can

make a product that is equivalent, if not better. And that's how we launched Unhide initially. And we had tested a few other items actually, like there was a fruit infuser water bottle that we launched. It was like our first branded product was actually branded under the FabFitFun brand itself. And we did the bottle, we put it in the boxes, it actually went crazy. We actually listed on Amazon, it was generating a ton of revenue off Amazon. And then we started getting all these copycats. So we're like, hey, good, we better if we want to really do this, like we should probably have some more infrastructure around it.

So these were really kind of customer driven things that were like, okay, we can't really deliver the products they want, so let's go make them. But yeah, of course there's an economic benefit to also owning the brands because the brands don't just live on FabFitFun, but they go off platform

so people can then enjoy them elsewhere. Well, and that's, I guess, a big pull on the brand side, because you have such a big customer base and reach, a lot of these brands, you know, by getting a partnership with you or getting in with you, they get exposure to thousands or millions of people. 100%. You're getting, it's like, we'd like to think about

like a Super Bowl for CPG, you know? Yeah. You get in the box, which, you know, the people who are buying the box itself are people who are looking for new things, looking to discover, looking to try. And a lot of them also, you know, people who are buying the box itself are people who are looking for new things looking to discover looking to try and a lot of them also you know they're on social media so they're posting they're doing the unboxing sharing the information their friends are usually the the person

their friend group who is ahead of the trend and like kind of knows what's out there so like you know I think we're like you know the the kind of the spear for them like this is a great way to get your brand out there. And we have, obviously, our core customer, which is our shopper and our member. And that's always going to be number one. But we do really think of ourselves as the partners of the brand and them

as a second type of customer. So in a way, it's a two-sided business where we're not just serving the consumer, but we're also serving these brands. And now that we're starting to offer these other ancillary services like fulfillment, product development, sourcing, packaging, trade finance, we really help them bring everything to life. Yeah, I love that.

And I think we glanced over it, but you've done it at a big level too, you know, like a million, you know, a million subs. Right. Plus C. And I remember like when I had my agency about 10 years ago, subscription boxes were like all the rage. Like I remember at the time there were so many of them. But what are some lessons for, you know, someone listening that's an e-com play or in general

building a subscription business? Do you have some kind of key things that you've learned? I think every, look, look not all like subscription is an amazing tool right you know for us because we're able to you know count like in says that not everything is meant to be a subscription though it can leverage it right and there's reasons why it makes the experience better for the customer and the business better then you then it can make a whole lot of sense. So for us, the way we're able to drive such deep discounts for our members is because

we have the subscription base and we know with certainty that we're going to have this many customers coming back. So we're able to place extremely large purchase orders on products that otherwise we'd be buying much smaller ones without that kind of confidence. We're able to pass those savings on to our customers. For us, I think it's a tool that's super important to know that these are members who are repeating coming back because it allows us to take that confident buy.

Then also because we integrate so much marketing into the sort of platform itself, both with our customers but with influencers who are promoting it and so on and so forth, the brands really benefit from that. So that's one. Also, we've added sort of like a lot of things that we wouldn't otherwise be able to add. Like we have digital components in the membership, a community that you get as being part of a member

that are kind of like these one to many goods that otherwise you wouldn't be able to deliver or invest in you didn't have that sort of like repeat nature of the business Yeah, and how have you you know, like acquisition and growth of the customer base? Obviously had a good baseline from the newsletter Yeah, but have you found have you tried everything TV ads social ads? Influences like what are the ones that you tried and stood out? We've definitely tried everything at a different point in time. I'd say you know the one consistent has always been like meta has always been the biggest

for us. Facebook paid it. Instagram and Facebook right like the two of those but like at different points we've done an influencer and it's like and I think influencer for a while got like a little more challenging and there was a certain point in which influencerluencer was. They got saturated. Yeah, got saturated. It was the greatest channel ever. And now you have new things popping up.

People are talking about Apple Oven all the time. I think, obviously, TikTok has been huge. It works for some brands, but not for others. TikTok Shop is all the rage. Yeah, TikTok Shop is all the rage. I am actually super optimistic about how Snapchat is going to perform in the next couple years, because I think they're really fine tuning their ad platform. Yeah, I take touch jobs, all the rage. I am actually super optimistic about how Snapchat is going to perform in the next couple years, because I think they're really fine-tuning their sort

of ad platform. Yeah. I think it's still early there, but I'm talking to people who are actually spending on Snap pretty successfully. So it all depends. It's also, we have a slightly older customer, so ours will be in certain areas.

Maybe CTV works for our brand, and it might not work for another one. And I think that's another one where CTV is another one that people are talking about on the tip of a lot of people's tongues. You had success with old school, like radio, TV, infomercial. Podcast has been super successful. Radio, I think we tried it lightly, but it's never been a big push for us. It's visual with a lot of your products, right?

Yeah. Share the box. You can talk about the membership and the podcast. Definitely work. And I guess podcasts now are usually both visual and, like, I wonder what percentage of podcast listeners are watching the video versus just listening. But like,

There's a lot of trust in podcasts, though, right? Yeah. Unlike the influencer or the channel host. So, Of course. And, you know, when you can do podcasts, like, you know, the ability to target your demo is better than, like, traditional radio in some ways. That, like, you know, it's to target your demo is so much better than like traditional radio in some ways

that like, you know, it's just, I'm sure we've done some tests because like, you know, we've done so many things over the course of like, you know, 13 years. Yeah. But like, I'd have to go back and like, So if you say you started again today, and you could only pick one platform forever channel to advertise, what would it be? It's it's meta is where the scale's at. Of course, it's gotten so much worse over the last few years. It's got competitive.

There's also the Apple changes. It's hard to know which is which. It's been competitive for a while, but then it got super competitive and then all these changes happened. Also, the economy softened. It's really hard to disaggregate like where things are coming from but like. It's a bit of all of them right?

Exactly. Yeah. And God knows what's going to happen if TikTok gets banned. Like I don't know how that affects the price of advertising everywhere else. Probably yeah. I mean, a matter on Instagram will become more saturated. And what about email? Like you've done a good job there,

is I guess part of your? Email is always pride and true. Like the only thing I would say is like in terms of CRM efforts now, what wasn't big that has become really big is, you know, obviously, I mean, I don't wanna say they weren't, well, SMS has become so much bigger. Yeah, I was gonna say.

And then push, it becomes so much bigger for people who have apps. So like, I'd say like, it started mostly with email as our CRM strategy and now it's evolved to include both of those. Yeah, and I think that's a, like when I was running big e-comm brands, I took it, biggest one to a million a day in revenue.

Yeah, that's crazy. Yeah, it's big, yeah. But like, text and push was like to underutilize like ninja things that people ignore still, I think. And people understate the complexity in getting those things right. It's like to deliver the right text message and clients, the right consumer and like, yeah, of course there's, you know, how many letters and costs and this and that. It's not cheap either. Well, especially, yeah, we had a list of many letters and costs and this and that. It's not cheap either. Well, especially, yeah, we had a list of like 200,000 on text.

And sometimes if you send like one character extra and it sends two texts, it's like, oh, that cost you another. Yeah, exactly. So yeah, I could be really careful. I mean, we don't make those mistakes, but long term. Then sometimes I'm like, why is the copy? You know, it's like, you can be a little more creative. There's a lot of states here. Yeah. And then sometimes I'm like, why is the copy, you know, it's like, give me a little more creative.

There's a lot of stays here. Yeah. But you know, I think, yeah, it's, we have a lot of tools at our disposal in a way. So that's good in the sense that like, there's a lot of opportunity, but it's also more complex than people realize. Sure. And what about when we talk more about subscription, like, do you think there's a lot of nuances in like how you position the offer and the product?

I mean, obviously you are a subscription box lot of nuances in like how you position the offer and the product? I mean obviously you are a Subscription box is in your core But I see a lot of econ brands trying to force subscription now because everyone says I increases valuation and LTV Like how would you approach it when you're like trying to build out? I mean, I think you should always be part of the offering. Yeah For most products. I mean some things may not make sense to subscribe for at all, right? Like, you know, like a durable good that you're not gonna have a replenish

or you have another one. But like, for the most part, you know, like you should allow people the opportunity. For ours, like you can cancel anytime, you know, there's a lot of fungibility. I actually think you get a lot of benefits by going into the membership and seeing the other things because the sales are actually a larger part of our business now.

Well, you're sounding also like you've become a bit of like a Costco for us. Right. That's the perfect way to frame it. So like we like to think of it, but like we like to think of it as a Costco, but in the sense that it's, it's for like beauty and lifestyle and wellness and home, but it's also like the sort of the front of the life cycle of a product. It's like the latest products, the hottest, the newest stuff. It's a lot of that's on our platform.

Whereas Costco's is like random stuff. Yeah, it's also bulk and we're not bulk. Like you don't have to go buy like a gallon of... Well, you're doing the bulk to give... We're doing the bulk, but at the end consumer area, like if you go buy a ketchup from Costco, you might buy like ketchup for a year. Yeah, or us, if you go buy a ketchup from Costco, you might buy ketchup for a year. Yeah, or us, if you're buying lip gloss, you're buying one lip.

Go on that, but you're getting the cost benefit. Of course, yeah, the bulk buy. And I guess it's- That's a great way of putting it. Yeah, and it's innovative too, because if you're a consumer, I'm very into my health and biohacking and stuff, so I'm sure you get a lot of women

that they wanna stay cutting edge of the latest health gadget, right? Or beauty gadget. So, and you're doing a lot of that research in advance. So how do you do that? Do you have a product team and their only job is? Oh, I pick all the products. Still you?

No, I'm kidding. We have a pretty robust merchandising team. I don't- How many do you pick? Do you still pick products to put on? I definitely, on occasion, will suggest a product to the merchandising team. But it's not like I don't force them to ship anything.

But you have several staff just sat there all day. That's their only job. Oh yeah, there's 30, 40 people on the merch team like working. Yeah, it's a pretty big team. Okay. You know, because they're coming for products, coming through working. Yeah, it's a pretty big team. Because they're coming for products, coming through thousands of products, talking to

lots of brands. Getting sampled. Yeah, and also the compliance issues with these massive orders. We're ordering a couple hundred thousand units of something. There's a lot involved in the back end. And so there's a sourcing component to it. But I would say that it, you know, it's kind of like a joke, like, you know, I want us to go into food and

Bev and like, I sourced like our first hot sauce, and I put this hot sauce, this hot sauce called zabs on there and it's sold out. And I was like, look, you know, who has a higher self-review? Or the you guys like they still like make fun of me and I mean, one of them and like, I have fun with a merge. Yeah, probably the most fun part of the org in some ways. Like Christmas shopping, right? Exactly.

It is like, yeah, until like, you know, so we were going to food and bev now. So that's fine. Yeah. And what let's, you know, we talked a lot about the direct consumer marketing side, but obviously most of my audience are entrepreneurs and founders and CEOs like me and you and business isn't without failures, risk and mistakes along the way and yeah the bigger you get the harder the fall I always say so like building all this have you got any business lessons for the entrepreneur listening big things you

would teach? Oh man that aren't cliche or that are cliche like cliche's are pretty good you know I, I think, hmm, like, what are the things? Like, I think, you know, I'll say this, like, there's, like, you know, people say cash is king, true, like, all these things, like, any business tips? Or big mistakes that you learn a ton from, like, the- Big mistakes that we... You know, I think the one thing is...

Things that I've gotten more comfortable with that maybe I would have done sooner. One, like, I was weary of hiring friends early on. And now I realize, especially if you have smart friends, it could be a really good blessing. It gives them a great opportunity. Well, and they're loyal often too. Yeah, often, right?

So like we've been able to really do well with people that we've known for a really long time and are usually super high aptitude. And like we'll often also take a risk on someone who maybe doesn't have all the experience yet for someone who has more potential actually. Right, because I think like, you know, I think

if you're like at like Amazon or Facebook or Meta, and maybe this isn't applied to like, you know, this is like, you know, you get to certain, we got to large company, it's like, okay, do you bring in like large company people or do you kind of stay entrepreneurial? And I think, you know, taking the risk on staying entrepreneurial and hiring people who kind of still are earlier in the years and have more like we made that mistake. So I got to 110 staff, yeah, me. And I started hiring these great resumes,

executives, and it was just honestly honestly like some of my best staff are the ones that just have the good soft skills and attitude and personality. Of course, hiring for for attitude is a big plus like you know usually they're my love some of these and some of them are like people I'm close to already like we already have kind of like yeah we know an entity from that that standpoint but I think for me, okay, maybe they don't have all the perfect experience, but they're super talented. And they can learn.

And they can learn, and they're motivated to prove themselves. And often, if you get to a big stage, you're still out there as a meta. Who goes against the best of the breed in terms of people who have all the experience. And it's also like a difference in cost, right? And it's like you start seeing some success

and then you all of a sudden, let's hire the talent. Like I've never seen him done this before and like whatever. And like there's some truth, like of course, if you could find like the perfect person, right? Then like great, bring them in. But like often like the smart person who's hungry, who's capable, who wants to learn is more than good enough and they can grow into the role more than that over time. So there's a

balance. I wouldn't over lean in one direction versus the other. We went in one direction, now we've kind of come back and we're somewhere in the middle. Yeah, you're course correct. Yeah, definitely. And then just a follow-up question on the failure side. How, personally, as an entrepreneur entrepreneur do you deal with setbacks and failure? honestly, I'm not too affected by yeah, like I think you know, we've been lucky to have a lot of success, but I think also like I just I You know, I'm I said has that changed cuz I've got a lot of it's changed

I would just say I have like a pretty unique perspective in the sense that like I also had cancer. So like I'm a cancer survivor. Yeah. And so like for me, it's like, this is all fun. It's a business. Yeah. This is like, it's a game. I'm probably in a position where like, I'm never gonna,

like, look, it doesn't, it's not fun to lose money. Yeah. Right. But like, I'm probably in a position where like, I'm never gonna be. On the street. Yeah. I'm probably in a position where like I'm never gonna be on the street. Yeah, I'm never gonna be like suffering, right? Like, you know, I may be able to buy a few more things or buy a few less things and like feel a little more comfortable, feel a little bit like for the most part, I'm gonna live a pretty decent life at this point. So like you kind of keep that perspective and you're like, okay, well if that's the case, like what's the worst that could happen?

Like I have my health now. Thank God. It's back I can you know spend time with my family. I have a lot of good friends Yeah, I enjoy what I do which is you know, it's fun I love business like so like yeah and like business has ups and downs. I think you realize Money comes and money goes and so like that gives you a much healthier perspective towards money I think like especially we've all seen it. Because if you started your career, when I started my career, it was 2010, and had a 10-year run.

And then all of a sudden, you're like, oh my god, 2020. I didn't know it could get like this in 2021. And obviously in COVID, things were good for a while. But then it got bad. It was the whole thing. You're just like, OK, well, I haven't lived through the cycle. And now that you've lived through the cycle, you're like, well, it can come and it can go. It's not the end of the world.

Yeah. I agree, but it's so good for people to hear because we're maybe seasoned now. I hope it's helpful. Yeah, no, it is. It know, I work with a lot of beginner entrepreneurs and They're in a lot of fear and when they have the setbacks they mean Oh is am I gonna ever make it is this for me? And when you become more seasoned It's like you just learn to roll with the punches. Yeah, it's like part of the day No part of the week good. So last couple of questions as we wrap up today I always say, you know, ask everyone this. So if you could go back in a time machine to your younger self and tell yourself one

thing, what would it be? Buy Tesla stock. Oh, yes, but the good one. Yeah, that was sort of joking. A lot of it. But how far back? However, your business or something, any tip for yourself or mindset wise or something. I mean, I think like the one thing is like you realize that like,

you know, the at bats also matter. And so like I started my entrepreneurial career a little bit later in life. And like what I think about like how old are you when you start your entrepreneur career? Probably 27, 28. OK. Like around that age, 27 ish. And I think like you could start earlier. Yeah. Right. If you want to be an entrepreneur, like it's 27-ish. And I think you could start earlier. If you want to be an entrepreneur, it's like 12 years. Now that we're talking.

For the first three years, you're learning like a sponge. And then after two, three, couple years, you're kind of like, OK, you're swinging. You're trying to make it happen. And the more at bats, the more likelihood that you'll succeed. And also your energy when you're, I still have a lot of energy, but the things you're willing to do when you're 22, it's insane.

I think back to what I would do at 27 or 28, 29, I'm like, if I did those same things now, I don't still want to. I couldn't fathom, do I am smarter, you could work smarter, but am I gonna sleep on my couch and wake up in my office? You know, like, be up all night doing things?

No, I don't. I remember, I mean, I remember in my 20s, I'd have a whiteboard in my house and you'd be up till 2 a.m. Yeah, and we're out of the lab. I'd be up in my office many times. Yeah, yeah, yeah, yeah. But also, I mean, if you,

you get to a point where you realize you don't need to do that too, right? Like, I mean, it's fun. Yes, you get smarter. I think it's fun when you wanna do it, but like, you also realize as you get, like now- Well, it's a marathon, it's not a race. Yeah, and also as we get bigger,

like over Christmas, for example, we gave the whole company 10 straight days off, and people were like, aren't you working, Rudy? And I'm like, I don't really have any work to do, because my work is my team now, and if my team are off I have what are you gonna do? Whereas ten years ago. I did everything right I would have been writing the emails writing new landing pages filming Yeah ads setting up the ads, you know doing the email inbox. So over time I mean you you can step away more as you bring in the people and of course like at some point like, you know

If you're not there for a week or two not much should happen like realistically six months or a year you really have all the pieces in place like there might be like the major strategic initiatives or some things like your specific like I work on certain specific things like I'm buying a business yeah exactly like I specifically work on M&A yeah and like you know I'm here in Miami and like while I'm in Miami it turns out that I might be getting an M&A deal done. Yeah. Right. And so like it just and maybe two.

So like it just so happens that like that role, like if I wasn't doing it, right. And maybe someone else like maybe it would it may or may not happen. Yeah. It will be the right decision. Yeah. Or the or yeah, one that's like pretty critical. Yes. Oh, yes. Yeah. No, like maybe it would, it may or may not happen. Yeah, it'll be the right decision. Yeah, or yeah, one that's like pretty critical. Yeah, yeah, no, I love it. So last question, easy one.

Where do people find you and learn more about the business? So you can actually, you can email me, daniel at fabtipfun.com. I'm also on X and Instagram now. I'm recently tweeting more. So you're on X, but you still tweet. I'm tweeting more, but I don't tweet a ton. But I post on both platforms from time to time.

So maybe I'll be doing more of that in the future. But yeah, love to stay in touch. Anyone who wants to reach out to me, they can find me on those platforms as well as email. And love to stay in touch. And thank you for having me. Of course. Thanks for coming here. Yeah, this is a great convo. And guys to stay in touch and thank you for having me. This is a pleasure. Of course, thanks for coming here.

Yeah, this is a great convo and guys, hope you learn a lot and got to see behind the scenes on one of the biggest e-comm subscription plays that's around. It's done under it. Appreciate the knowledge here and as always, keep working hard and keep living the red light. I'll see you guys soon.

Thank you.