On Monday, nerd culture subscription box company Loot Crate announced that it’s filing for Chapter 11 bankruptcy protection. Founded in 2012, the firm offered consumers access to a range of unique pop-culture themed collectibles. Though the corporation has more than 250,000 customers across 35 countries, it’s struggled with financial issues in recent months.
Despite its filing, Loot Crate pledged to ship out all existing orders and to continue normal operations.
Though the subscription e-commerce company is framing its bankruptcy as a temporary measure, it has been struggling for quite some time.
In August 2017, Loot Crate defaulted on a $21 million loan. Beginning in May, the firm’s customers reported not receiving their monthly boxes. Last month, the corporation shut down its central warehouse and laid off 150 workers. In its bankruptcy filing, the corporation noted it let another 50 workers go, which brings its total full-time workforce to 60 individuals.
As a result of those cash flow and staffing issues, the company is currently sitting on $20 million worth of customer orders. Consequently, the firm’s payment card processor is withholding its customer billing.
Nevertheless, Loot Crate stated it intends to ship out all of its paid-for boxes. Furthermore, the company received a $10 million loan from Money Chest, LLC to stay open while it seeks a buyer. Unfortunately, that sale will likely prove a challenge given its current financial situation. The Los Angeles Times reports the organization currently has $30 million in trade debt and owes $5 million in overdue sales taxes.
How It Came to This
Like its contemporaries Blue Apron, Dollars Shave Club and KiwiCo, Loot Crate rose to prominence as part of the subscription box craze of the mid-2010s. Forbes reports the online subscription market grew from $57 million in 2011 to $2.6 billion in 2016.
Shortly after launching, Loot Crate established itself as a leader in the lifestyle segment. By partnering with a host of movie and TV producers, game developers, and comic book publishers, the firm packed its boxes with one-of-a-kind pop-culture goodies. In a few years, the company racked up a quarter-million subscribers who had to have items like Los Pollos Hermanos aprons, Stark Motors t-shirts, and Neon Genesis Evangelion-themed plushies.
However, the company’s early success may have led it to overextend its resources. In addition to its flagship brand, Loot Crate expanded its offering to include professional wrestling, gaming, anime, horror, and science fiction themed subscription boxes. The firm even sponsored an eSports team called OpTic Gaming in 2014. Unfortunately, the service’s move to diversify its product line coincided with a significant industry downturn.
Research firm Hitwise noted the subscription box sector underwent a significant market contraction in 2017. Though the field recovered somewhat in 2018, the lifestyle segment lagged behind the rest of the industry. Presumably, Loot Crate didn’t have the resources to endure the recent market dip and has been spiraling ever since.