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August 27, 2019

A Cloud Twist to the Farm-to-Table Movement

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Mail-order services, or what a cloud-enabled industry calls “subscription box” services, have become all the rage for everything from fine wine to pet food. Consumers can also order Kansas City steaks online, but a partnership between a startup and Microsoft has yielded a data-driven approach to subscription box sales that allows one entrepreneur to better track beef, poultry and pork shipments, determine which of the 21 different varieties are selling and how quickly they go from freezer to dinner table.

ButcherBox, a four-year-old startup based in Cambridge, Mass., bills itself as “Your Friendly Online Butcher.” As its business ramped up, it quickly outgrew Excel spreadsheets. The company’s supply chain also grew more complicated and harder to track.

Realizing it needed “a single source of truth” about its customers and supply chain, ButcherBox adopted Microsoft’s Power BI data visualization tool and its Azure Databricks analytics platform to gauge customer preferences.

About 70 ButcherBox employees use the visualization tool to develop a “demand plan” that crunches purchasing data to determine how much grass-fed beef, free-range organic chicken and heritage breed pork to order and ship to fulfillment centers. Employees then interviewed about ButcherBox subscribers to get a better sense of preferences and buying patterns. That business intelligence was fed into the Azure Databricks service.

Among the startup’s challenges was getting consumers to thaw and serve their frozen purchases. Initially, managers reckoned customers’ lack of freezer space was the main reason for subscription cancellations. According to Microsoft, the key reason for cancellations turned out to be “value.”

That insight prompted the startup to launch an incentive program offering members perks like free bacon (!) and product discounts. Those promotional items often undercut grocery store prices. The upshot was more customers believed they were getting a better deal from ButcherBox.

The insights gleaned from customer data also helped streamline logistics. For example, analytics help determine how much dry ice to ship with each order depending on the customer’s location. Too much means a leaky box; too little means a thawed shipment and a likely subscription cancellation.

Mike Salguero, founder and CEO of ButcherBox, said the data revealed something else: “A lot of people think of a freezer as a savings account. It’s there for a rainy day, not necessarily the place you go if you want to eat dinner tonight.”

Hence, the startup is prodding customers to thaw and serve by using customers data to determine what’s in the freezer and sending a recipe for, say, those pork chops in the back of the ice box.

“All of that is a data problem at its core,” Salguero said. “We should know what members are eating and in what order.”

Microsoft (NASDAQ: MSFT) and other cloud-data vendors may be on to something: According to industry estimates, the overall subscription product industry is booming, growing at a rate of 890 percent since 2014. Growth has leveled off over the last year, so startups like ButcherBox are scanning customer data to determine how to retain current subscribers and find new ones.

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