Episode 134: Unlocking Success in Learning Subscriptions with Guilherme Martins at Sandbox Experiences

Years ago, in the city of São Paulo, Brazil, today’s CEO of Sandbox Experiences, Guilherme Martins, was having a problem. He and his partner were shopping at all the local bookstores to buy books for their children, but they had no way of knowing if they were buying the right things. They were struggling to know which books were best suited for each child’s age and interests.

Leiturinha

Armed with backgrounds in mechanical engineering and computer science, Guilherme and his partner decided to see if they could build a subscription platform that would select the perfect books for their children. As a result, their subscription service, Leiturinha, was born. 

Leiturinha, which roughly translates from Portuguese as “little reading,” is a pioneering book subscription service tailored to children and their parents. Its mission is to assist parents in handpicking books that align with their children's specific ages and interests. 

Guilherme had some professional exposure to operating a subscription business. He had a family business that was eventually sold to FLEETCOR, a company making its early inroads into the Brazilian market in 2013. Guilherme worked in the position of tech director for Latin America at FLEETCOR for 18 months or so, gaining valuable insights into collaborating with American professionals and sharing knowledge about their operations in Brazil. 

His time with the company exposed Guilherme to the subscription model, which would later influence his entrepreneurial activity. The family business primarily dealt with manager benefits in Brazil, specifically related to transportation, such as fuel cards and vouchers.

Early Bootstrapping

The early days of their project were completely bootstrapped. Because they had such a small team, they all took on many roles, from curating book selections to crafting handmade stamps and using craft paper for packaging. 

Each subscription package is meticulously assembled with books, toys and user-friendly instructions for parents. The essence of this service is to create an enriching and positive reading experience for families.

One touch that set Leiturinha apart was the aromatic scent sprayed onto each package. Guilherme has a friend who is a scent specialist, and she created their signature scent. They didn’t think it would make the impact that it did — they now buy that scent by the liter!

Growing Pains

Guilherme and his team began to deal with logistical complexities that emerged as the operation grew. Initially, they struggled with managing inventories and stocks efficiently as the logistics of their operation expanded significantly.

To accommodate this growth, they found themselves constantly adding new facilities, and they found themselves with three physical locations in São Paulo, one administrative location and two warehouses. It was all getting very expensive.

Despite these initial challenges, the business began to flourish. In the first year, they secured 1,000 subscribers, increasing to 10,000 subscribers the following year. Subsequently, they managed to scale up even further, reaching an impressive milestone of 30,000 subscribers.

As they grew, they began to see better purchasing terms and more support from suppliers and partners than when they were a newcomer to the market. Despite the difficulties faced during the early stages, the company persevered and ultimately overcame these obstacles, and they continue to grow and establish their presence in the market.

Paying in Installments

The decision by Guilherme and his team to offer six-month recurring subscriptions was influenced by the unique financial landscape in Brazil. The concept of "buy now, pay later" through installment payments is a longstanding practice due to the country's high credit card interest rates. Because the rate is so high, people don’t carry a balance.

To address this, Brazilian consumers rely on a system where they buy products in installments. It includes a complex structure that guarantees payment to sellers.

Considering this local financial context, Guilherme and his team decided to offer subscriptions on a six-month basis, with an emphasis on the recurring nature of the service. They have also recently introduced an annual subscription option. 

While monthly subscriptions are available, the annual offer provides the best pricing. These subscriptions are not prepaid. Customers pay in installments, and the bank issuing their credit card guarantees the receivables, ensuring a steady flow of payments for the subscription service.

Marketing Efforts

Early marketing and customer acquisition were fueled by digital advertising, with Facebook and Google emerging as Leiturinha’s primary channels. They dabbled briefly in other digital advertising options but found those two platforms to be the best performing channels. Reinvesting every ounce of profit back into marketing endeavors, they saw robust growth from the beginning.

In order to scale their marketing efforts, they ventured into television, cable TV, radio, newspapers, magazines and even partnerships with influencers. They collaborated with household brand names like Nestlé. Their presence extended beyond the digital realm into physical stores, and they sponsored participation in book trade shows to showcase their offerings. 

They were trying a lot of different things and keeping a close eye on what was working and what wasn’t. Television ultimately lost its effectiveness, and they refocused their efforts on the digital domain, going back to Facebook and Google as their digital marketing foundation. 

As they got deeper into the world of influencer marketing, they found that their offerings were best suited to micro-influencers, and an ambassador program was launched for them.

Partnering With PlayKids

Their growth trajectory took a strategic turn when they sold 25% of Leiturinha to PlayKids in an effort to scale, secure funding and create new networking opportunities. This move laid the foundation for synergistic collaboration between Sandbox and PlayKids, with a focus on merging physical and digital products to cater to their young audience's evolving needs.

The partnership focuses on shared learning. Sandbox benefits from PlayKids' expertise in product development, while PlayKids is learning valuable lessons in customer retention from Sandbox’s experience in managing customer churn. PlayKids' proficiency in purchasing from China became a knowledge-sharing opportunity.

Over time, these two companies forged a deeper bond, culminating in the merger of PlayKids and Leiturinha into a single entity, creating a holding company. Guilherme, remaining a minority shareholder, swapped his shares into Sandbox.

Cultural Differences

With a growing presence around the globe, Guilherme and his team are discovering cultural differences by region. For example, in Europe, subscriptions were traditionally met with skepticism, and offering easy cancellation options became essential to win over customers. 

Conversely, in Brazil, convenience was most important because of the vast geographical diversity and limited access to bookstores. The pricing strategy in each region had to be tailored to that region, taking into consideration the minimum wage and its impact on potential customers' budgets.

The spirit of entrepreneurship and adaptability has been the driving force behind the Sandbox journey. Their commitment to creating enriching experiences for families, regardless of geographical boundaries, remains, and the future holds the promise of even greater adventures and accomplishments.

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#SaaS #Subscriptions #SubscriptionBusiness #SubscriptionService