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how to start a subscription box

How to start a subscription box business

If you have something that is worth offering in the form of a subscription service, then you’re in luck. Over the last few years subscription based services have skyrocketed in popularity. They also offer a profitable business model for those who offer unique products that can keep customers engaged and loyal. From 2014 to 2018, the industry grew by 890%, showing that it’s a business model that customers have embraced. Now 54% of all online shoppers say that they subscribe to a subscription box service.  

Today’s customers have more time than in the past, increasing their desire for entertainment and easy & safe shopping experiences. We live in a subscription box friendly economy, and this business model is only going to expand post COVID-19. In this article we will talk about what to consider when starting a subscription box service in 2020.   

Starting a monthly subscription box business in 2020

In a rush and just curious about a subscription box business is all about? Check out our video below showing you why subscription box businesses are a great option as online startups

How do subscription boxes make money?

We’ve mentioned that the subscription box industry has grown by 890% in less than 5 years. Having the actual numbers though will make you realize the full potential for these businesses. In 2011, the subscription box industry was $57 million, and by 2016 it had reached an amazing $2.6 billion. Most subscription business models are based on monthly recurring revenue, which makes it easy to predict costs vs profits. It’s something that is especially useful for businesses who are just getting started. Not only can you predict your inventory, but you can also make the most out of their marketing budget.

subscription box statistics

The subscription box model also offers a lot of flexibility for billing options. Customers are also more likely to try a new service if there are no long-term contracts involved. It can help with increasing your overall customer retention rate, if you’re willing to offer the option to pause subscriptions.  

Of course, plenty of subscription box services have failed, but most of them simply didn’t calculate their cost vs. Profits. It’s important that you take the time to calculate all possible cost before setting a price for your product. Things like product cost, shipping materials and processing fees are all things that need to be considered to make your business work. Once you have all of that information available, then you can do some competitive research. That information will allow you to come up with a price that is both competitive and profitable.

Can anybody start a subscription box business?

Yes, but if you want to do it right, then there are some things to consider. Starting a subscription box business takes more than just good product or a great new idea. Finding new products & vendors, marketing and just having a general business plan for your subscription box company are all important parts of your new business. It can get a bit overwhelming at first, but that’s normal and is where business communities can help.

business communities

Business communities are amazing when it comes to learning more, but they can also provide networking opportunities that can turn into potential partnerships and customers. If you’re new to starting your own subscription box business, then we highly recommend joining a business community for startups. Their startup business classes alone make it worth checking it out for new startup business owners.

You will also want to check into any legal considerations for your country. Make sure that you know all requirements before you start investing into your business, otherwise you may run into problems later on. You also need to know about any shipping restrictions and/or requirements for handling customer information.

How much does it cost to start a subscription box business?

The cost depends on the subscription service/product that you’re offering, but subscription box profit margins can be substantial as long as you keep things organized. There of course some baseline needs and services that every subscription box service has. It’s important to go with the right setup from the beginning. Not only will you look more professional, but your subscription box business will also have a higher chance of success. 

The most important tool that you will need is a professional website for your subscription box service. After all, it’s your way of presenting your product, accepting sales and keeping customer information. Considering the large amount of competition in the subscription service industry, it’s important that you make the right first impression. Luckily, there are some services available that are very affordable. That means that you can use expert features for your website without a professional web developer.  

Services like Subbly let you create your website for your products with professional templates and check out options for your customers. The prices ($29 per month) are actually cheaper for startups compared to having your own custom e-commerce site designed. Of course, there is nothing with going that route later on once you have a steadier cash flow. With Subbly all you have to do is add your service information, images and product descriptions and then start selling. The checkout experience is even customized for your brand, so the customer experience is flawless.  

You also have to consider the cost of the product/service that you’re selling including shipping fees. Your goal should be to price your subscription box so that the monthly fee covers the product cost, shipping and any other processing cost that comes up.  

A subscription box design to talk about

You will need to consider what the unboxing experience is like once the product actually arrives. When your customers receive your products, the first thing that they will notice is the subscription box design. There’s no way around it and with trends like unboxing videos it’s something that you should seriously consider. Your packaging is the ice-breaker and the unique chance of making the first impression something extra special. Some businesses have even gone viral after unboxing videos that were posted by customers. If you’re ready to start your own business, then be sure to get a subscription box design that represents your brand. Keep in mind that you’re trying to create a experience that is worth talking about, so be sure to get a quote for a subscription box design that will be remembered.

unboxing monthly subscription box

Unsurprisingly, shipping fees consistently represent one of the highest expenses in subscription boxes’ cost of goods (COGS), mostly because it can be one of the hardest costs to lower. The shipping process gets easier if you restrict the products that your business ships each month, so that you have to rely on fewer subscription box suppliers (the companies that you get your product from). Also setting the right rules and user agreements (like shipping cut off dates) during sign up will ensure that you don’t run into inventory problems later on. Your main goal should always be to only buy the product necessary to fill your box orders for that month. That will allow you to continue focusing on upcoming boxes, instead of trying to move the inventory from previous month. Dealing with reliable subscription box suppliers also means less chance of running into problems with supplies and shipping.

How to get products for subscription boxes?

Finding products for your custom subscription boxes really isn’t too difficult once you’ve picked your niche. Luckily there are lots of major online retailers that will let you buy products in bulk. Be careful though, because customers will be able to tell if you don’t put a lot of effort into product selection. Most subscription box ideas that succeed nowadays only do so because they invest a lot of time into product research. They know that they have something unique to offer, which customers always love.

The top five websites to find products & subscription box suppliers
  • Amazon – one of the best known e-commerce sites
  • Alibaba – The best bulk e-commerce retailer
  • Walmart – Biggest retailer in the world with quick and reliable delivery
  • eBay – Looking for something very specific? You can find it on here.
  • Target – Offers lots of different family and household product.

The great thing about using the online retailers above is that they just work as a platform to connect you with the retailers that you really need. Once you’ve started to receive some sales, then you may want to reach out to them directly and establish a firmer business relationship. Often you can work out better rates or shipping scheduled when working directly with the supplier. Of course you can also find new products through trade shows, business demos and other offline events.

Subscription box business ideas that attract and keep customers

Subscription box marketing is different from most digital approaches, because you’re marketing to your customers on an ongoing basis. It involves a different approach to your marketing strategy. Your goal is to sign on new customers while retaining your current ones. Gathering data from your visitors will be the key to optimizing your campaigns in the long run. It will take some experimenting to find the right features for your subscription business, so don’t be afraid to do some A / B testing to find what works best for you. 

The top 5 ways of promoting your subscription box

  • Email List: Gathering e-mail leads can be one of the most powerful tools when trying to drive highly targeted traffic towards one of your offers. Subscription lists can be segmented into new and returning visitors, which will help you optimize offers to get the highest rate of return. It’s also one of the best tools to stay connected with your customers, since opt-in customers have already expressed an interest in your products.
  • Gather the power of Influencers: Influencers have a close relationship with their follower’s and offer an amazing resource for subscription marketers. The viewers already often trust the opinion of these influencers, so the reach potential is an amazing chance to wow a larger audience all at once.
  • Contests: Contests are an amazing opportunity for increasing your overall reach with interactive content. If done right, then people will be encouraged to join your community and spread the word about your brand. Prizes may be things like a free monthly subscription box, extended memberships or maybe a product that you offer.
  • Produce Content: Amazing content is what drives e-commerce customers and subscription box services are no different when it comes to that. It’s what will attract customers, keeps them loyal to your brand and creates opportunities for your subscription service to go viral. One of your main goals should always be to create content that other people can’t help but to share. 
  • Social media communities are loyal: Engage with your customers, spread your brand and increase the exposure for your subscription box service. Social media is still one of the best tools when it comes to generating potential customer traffic. It takes a lot of work, but the payoff is just incredible. Luckily, social media automation tools let you schedule your content ahead of time. It’s pretty much a must have for anybody that is serious about investing in their online business.

Of course these are just some of the methods that can work for marketing a subscription box service. The interesting thing about this type of business model is that you have a lot of different sales cycles that you can take different approaches for. Your initial sales approach will most likely be completely different from when you’re trying to on a campaign that boosts customer retention. Don’t be afraid to get create and stand out!

Once you’ve chosen your business and focused on your niche, the next step is to just do it

A study in 2018 shows that the best performing subscription box services cover some of the most basic human needs. Gimmicks are of course always fun, but some of the best performing subscription box services just really have a passion for the product that they’re offering. They can relate to their audience and know what makes them stand out from the rest of the competition.

subscription box business

You will still have to spend hours on running your own business, but there is a certain freedom that comes along with it. Be sure to establish the roadmap for your subscription box business early, so that you can focus on what to do next. There is lot’s of competition out there, but you can do it with the right idea and attitude. The most important part is that you have patience and the determination to overcome the challenges that come along with starting your own subscription box service.