BarkBox Says Financial Pressures Hurt D2C Subscription Acquisition, Not Retention

Bark is seeing consumers’ budget pressures take a toll on new subscribers, but those who are already enrolled continue to subscribe despite these challenges.

The company, which is behind the direct-to-consumer (D2C) dog toy and treat subscription service BarkBox, noted on a call with analysts Wednesday (Nov. 8) discussing its second-quarter fiscal 2024 earnings results how it has seen economic difficulties affect subscribers’ behavior.

“On the [D2C] side, our core toy subscription business continued to feel the macro headwinds, particularly from a customer acquisition standpoint,” Matt Meeker, the company’s co-founder, CEO and executive chairman, said. “However, despite that, we’ve seen some encouraging progress recently as new customer acquisition has been up progressively since May. … While that’s a challenge, our customer retention rates last quarter were at the highest level since going public.”

The company went public in June 2021, suggesting that the company is now seeing its strongest retention throughout this current period of economic challenges. Still, its subscriptions are taking a hit. Overall, the company saw its D2C revenue decrease 11% year over year, and this channel accounts for 85% of total revenue. Revenue overall was down 14% for Bark.

It is not just Bark seeing higher retention than acquisition — this disparity can be seen across the pet supply subscription industry, according to the report “The Subscription Commerce Readiness Report: The Loyalty Factor,” a collaboration between PYMNTS Intelligence and sticky.io. The study, which is based on a survey of more than 2,000 U.S. consumers, found that pet supply subscriptions receive an Index score of 59 for sign-ups and 64 for retention.

PYMNTS Intelligence supports that consumers are rarely willing to downgrade when it comes to their pets. The study “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which drew from an April survey of more than 2,000 U.S. consumers, found that 47% of all shoppers have switched to a less expensive merchant for at least one grocery product. Yet only 19% have switched to less expensive merchants for pet food and supplies.

However, as economic challenges have continued in the months since, even pet parents may be beginning to change their tune. Some evidence is beginning to show trade-down to lower-cost brands and smaller sizes.

Bark, for its part, is considering opportunities outside of the subscription space. As of its last earnings report, the company was considering more à la carte drivers of revenue. Its non-subscription offerings have fared better. For instance, Meeker noted that “consumables revenue outside of what’s included in our box subscription products” was up 20% year over year.

“The macro environment has had the biggest impact on our subscription box products,” Bark Chief Financial Officer Zahir Ibrahim said.

Still, given the company’s strong retention, it seems that Bark has succeeded at giving box subscribers what they look for most: joy. The PYMNTS Intelligence study “The Impact of Subscription Models on Consumer Choice,” created in collaboration with sticky.io, found that 44% of surprise box subscribers cited enjoyment as the most important reason they subscribe, while the second-most common driver is convenience, at 20%.