Originally started by Birchbox back in 2010, the loot box industry quickly took off and exploded in popularity. The consumer demand for these boxes was so great that the industry now has around 3,500 loot box companies in the US alone. The one that became the most popular was Loot Crate. But all is not well for this multi-million dollar company and many are wondering what this means for the loot box industry.
How does a loot box work?
There is a loot box available for just about anything nowadays. The customer signs up to a subscription for a fee every month. Usually between $10 to $100 depending on the company. The subscriber will then receive a box every month delivered to their door with different products that all tie in with their chosen interests. For example: skincare, cosmetics, or comic books.
Who is Loot Crate and what happened to them?
Started by Chris Davis who was the company’s CEO, Loot Crate started by distributing all things geek, tech, comic books, and gaming. They were a massive sensation. So much so that they grew too big too quickly. The company started branching out into many other channels of interest with different Loot Crate types. Since starting in 2012, they have brought on nearly 30 different types of boxes. Over the years, the fad has worn off and many clients have canceled their subscription. After all, what does one eventually do with all that merchandise and stuff? The company has imploded itself due to this massive and sudden growth followed by a sudden fall in subscribers. Because of this, the company needed to make up some profits. The quality of the items in the box dropped severely and this only further cemented subscription cancellations.
The company first started showing signs of trouble in 2016 when they let go of 12 staff members. There were more layoffs in 2017 after they defaulted on a loan payment. July 2019 saw the shut down of their Vernon warehouse and the release of 150 employees, followed shortly thereafter by another 50 employees in early August.
Where to from here?
September 26, 2019, Neca purchased Loot Crate. Neca is a collectibles company and is owned by Joel Weinshanker, a renowned businessman who also owns the Elvis Presley franchise. Weinshanker has said that Loot Crate 2.0 will be revived and will be better than ever. It will be used to distribute high-quality items as well as actual games and books. It will be interesting to see what steps the company takes to get back on track.
What does this mean for the loot box industry as a whole?
Although Loot Crate has ended up in the dirt due to poor decision making and clear mismanagement, this does not spell disaster for the entire loot box industry. Many companies are thriving and showing great figures along their profit margins with hundreds of thousands of happy customers.
There’s something almost magical about receiving a package full of goodies delivered to our doors and the beautiful spike of dopamine that comes along with it. Consumers are looking for convenience and good value for money. As long as this service is being offered, there will always be those of us who will subscribe to it.