A subscription box business delivers boxes filled with a certain type of product at set intervals. Customers typically pay a set amount to receive a new box at the same time each month. Some subscription box businesses vary frequency of deliveries and offer the product at different tiers, which changes what the customer will receive.
The product can range from items like organic snacks and children’s books to pet toys and treats. Regardless of the product, the subscription box business model is experiencing major growth.
The Business of Subscription Boxes
An industry report from March 2016 found a 3,000 percent increase in visits to top subscription box websites over the previous three years. More than 21.4 million visits were made to a custom category of leading subscription box sites in January 2016, compared to 722,000 visits in 2013.
Total monthly visits represent a third of what the top retailers receive, but the growth in visits demonstrates how popular the subscription box business market is becoming. The top 500 online retail sites grew by 168 percent in the same period as the 3,000 percent increase for top subscription box sites.
Subscription box businesses appeal to entrepreneurs as well as customers. Entrepreneurs can more accurately predict sales for the subscription box model than with other businesses. Customers enjoy the convenience or excitement of opening a box that provides them with what they need. There is a surprise element to their subscription. Subscribing to something in the physical world as opposed to a digital subscription (like Netflix for online media or Spotify for music) is another new element for consumers.
There are two models for subscription box businesses.
- In a convenience commerce model, customers receive the same products automatically on a repeat purchase. They choose how often they would like to receive the products so they are not without the items. “This type of subscription box is all about making people’s lives that little bit easier,” according to digital marketing agency Pretty Klicks. “By providing frequently purchased items on a subscription basis, businesses can save their customers a lot of time and effort.”
- In a discover commerce model, customers receive and sample new products that they may not have heard of or tried before. If consumers enjoy the sample size they received, they may purchase the full-size version. This works particularly well in the beauty industry, as popular beauty subscription box business Birchbox has demonstrated.
7 Steps to Subscription Box Success
- Come Up With a Unique Idea: Think of a product that people are likely to want or need on a regular business. Pay careful attention to the community associated with the product category. “If you don’t know what your potential customers care about, it can be very difficult to create a product they’ll care about,” according to entrepreneur Jameson Morris. Try a product idea in a category where culture is important (e.g., yoga or veganism).
- Research Your Target Audience: Learn as much as you can about the community and niche you have chosen. This will help you position your product in a meaningful and appealing way.
- Find the Right Supplier: Pretty Klicks recommends looking at the suppliers of your competitors’ boxes. Once you identify potential suppliers, make sure they can meet your requirements, check if they’re reputable, negotiate costs and don’t forget about your packaging. Alternatively, companies like Cratejoy can support your business and help with shipping and other areas of running a subscription box business.
- Determine the Price: Morris recommends leaving at least a 40 percent to 50 percent gross profit margin after all cost of goods.
- Build Your Brand: Consider the name of your business along with your website, logo, order management platform and more.
- Market Your Product: Develop a marketing plan that incorporates email marketing, social media, content marketing and search engine optimization (SEO). Sending promo boxes to influencers and advertising on Facebook can help you get started. Identify some initial steps to take and mix them in with long-term approaches to marketing your product.
- Ship Your First Boxes: Pay attention to any feedback you receive. Address any problems and implement changes so that you will be prepared when your business grows. Customer service is crucial to your business.
Enhancing Your Skills in Business
Alvernia University offers an online MBA to help you reach your potential in business. Learn the skills and knowledge you need to pursue management-level positions, start a business or reach other career goals. The program takes place in a completely online learning environment, enabling you to maintain your work and personal schedule.
Published in partnership with Alvernia University