How to Start a Subscription Box Business?
In the previous five years, the market for subscription box business has grown with a steady rate of 100%, which makes it a trending business idea among the entrepreneurs. Are you considering subscription box ideas to start an eCommerce business in 2019? Do you want to know how to start a subscription box business from scratch or expand into the same from a traditional eCommerce model?
This article will guide you with some very simple ways of creating a subscription box business and tapping on a market worth hundreds of millions. We will cover the topics ranging from creating a subscription box model, how much does it cost to start a subscription box and types of subscription boxes to how to start a subscription box website without investing a fortune in website development.
What is a subscription box service business model?
It’s simply is a way to automate recurring purchases, payments, and delivery of products and services to the customers without them having to place an order each time. Instead of making a one-time purchase of a product or service, the customers in the subscription box model agree to purchase a subscription. Following is how to make money with subscription boxes periodically:
Source: Business model toolbox
Take Spotify for instance. It’s not exactly a subscription box business but presents a good example of how to make money with subscription boxes. There are two ways to use Spotify Premium. You can either purchase a one-time membership that expires after a month or purchase a subscription plan where Spotify accepts your credit card to renew your membership automatically after every month. If you intend to continue with Spotify premium for a year or so, buying a subscription plan will save you from the hassles of recurring purchase and payment processes each month.
Now imagine a similar scenario with your local grocery delivery marketplace where you purchase your monthly grocery supplies. Instead of placing an order each month, you can simply subscribe to their subscription box and get your grocery delivered to your address recurrently at the beginning of each month.
Types of subscription boxes
For any product or service, we can organize the types of subscription boxes into three major categories:
- Curation boxes: These are personalized boxes curated as per customer’s preferences. Here the customer can add products of their choice. For example, a personalized box of preferred chocolates.
- Replenishment boxes: These are customized automated subscriptions purchased to set a repeated delivery of certain products. For example, grocery supplies, shaving supplies, and veggies, etc.
- Access Subscriptions: Such subscriptions offer personalized packages with exclusive benefits. More like a VIP experience in regular eCommerce services. For example, Amazon’s Prime membership offers additional benefits such as free delivery and amazon prime video access to prime members.
Why Subscriptions Box Business Model is in trend?
The millennials want everything delivered to their address with a click of a button. From food, grocery, stationery, furniture, electronics, motor-service, plumbers, to movies, anything that lets them access a product or service from the comfort of home is going to attract the millennials. Looking from a customer’s perspective, subscriptions are a step ahead of the traditional eCommerce. If there is something that customers need and purchase repeatedly, offering them a way to by-pass the recurring checkouts and ordering processes would always be a way to offer new standards in the current eCommerce market.
You might have just started and don’t know much about how to start a subscription box business, but for businesses that already offer subscriptions, it is easier to predict outcomes and have a more accurate understanding of the demand trends. It’s a contract made in advance, so it’s easier for merchants to keep the stocks ready as per demands. Even the fulfillments are less complicated when you are shipping in bulk, rather than paying the same amount to ship individual products in the retail model.
Subscription box ideas to start
There are tons of subscription box ideas to start your platform. For starters, if you deal with only certain kinds of products, you can curate and keep an inventory with you and send the items as you get the orders. Alternatively, you can also adopt the marketplace model, where you can get in terms with suppliers or sellers who send the products to you; you curate the products, pack-them up as per custom box requests, and send to the customers with your brand identity. Irrespective of the business model, you can pick from an array of products and services to curate some awesome subscriptions:
- Fashion boxes: new clothes each month
- Jewelry boxes: New jewelry every month
- Food boxes: Variety of tasty food each day
- Grocery boxes: Specified grocery items replenish each week/month
- Vegies box: Specified veggies every day/week
- Baby care boxes: Replenish baby care supplies
- Car subscription: a new car every month
- Craft supplies box: replenish craft supplies
- Office pantry box: replenish office pantry supplies
- Coffee at desk: favorite coffee delivered every day
- Music and Video-on-demand streaming
- Software license subscription
- Newspaper, magazine subscriptions
Launching your Subscriptions Box Business
To take your first step towards starting a subscription business, you need to complete some groundwork beforehand. Luckily, there are easily available solutions for each kind of groundwork:
· Identify the Target Niche, Products, and Audience
Decide the types of products and services you want to offer in your boxes. Research your target audience, their pain points, and ways to market your business as a solution to the same. To be honest, though it’s a good idea to come up with new and innovative products, it’s still very unlikely that most of the entrepreneurs would choose new product lines for creating a subscription box. Most of the time, you would be identifying the profitable products from the existing market and innovative ways to sell them to the target customers.
Based on the products you choose, figure out the optimized logistics networks in the market. Several factors drive a subscription box business -Locality, frequency, and speed of the delivery are some of them. It doesn’t matter if you want to offer weekly, monthly, quarterly, or yearly deliverables, only a well-optimized logistic can let to make some good profits. Based on the size and weight of your products, decide the types of boxes, suppliers, packaging, and shipping partners to deliver the same in the least cost possible.
Price is the most crucial aspect that decides the fate of your business. It’s obvious that customers will look for the cheapest prices if they are considering a subscription rather than purchasing on-demand. However, it’s also a fact that you need to protect your margin. Considering the variables, you need to decide a pricing policy that gives you at least a 30% margin after paying your bills and overhead expenditures:
- Product cost: Cost price of the items in the box.
- Box cost: Cost of the box, printing, and stickers or stamps.
- Packing cost: Cost of the materials required for the packaging of the box.
- Shipping costs: Cost of shipping a box to the customers.
- Transaction fees:Processing fee to the payment processors on every transaction.
- Marketing costs:Cost of marketing, Ads, social media, and SEO to drive sales and customers
- Overhead costs: Additional costs like email, accounting software, and eCommerce platform, etc.
Managing the back-end of a subscription box business
Once you are ready with your groundwork and the business plan, you are half way towards knowing how to start a subscription box business. Your next job is to set up the back-end operations to run the business without a breakdown.
· Finding Suppliers, Sourcing Products
Product sourcing is a tricky job, especially when the entire system is automatic and you expect suppliers to fulfill your orders on time. Of course, the selection also depends on the type of products and your profit margin, but always work with a reliable supplier, even if a little expensive. It should be reliable in terms of demand fulfillment, product quality, and understanding of the shipping cycle.
· Method of the Box Production
How to make your own subscription box? It’s a responsible job. As a business, it’s your responsibility to adopt sustainable approaches wherever possible. Adopting a sustainable production method would be the best way to achieve sustainability in your case. Collaborate with a business that produces environment-friendly boxes with renewable and recyclable materials. Aligning with the sustainable approaches will not only make you an environment-friendly business but would also grant a positive image among the customers and in the market.
· Box Printing Method
Once you know how to make your own subscription box sustainably, and have your boxes ready, you can start with printing your brand identity on them. There are three main ways to print: Digital, Flexographic, and lithographic. Out of the three, Digital printing is the cheapest method to start with as a small business. However, once you get in the market and start receiving a large volume of orders, you should consider switching to flexographic and lithographic methods to get high-quality prints. These methods come out as a cheaper alternative to digital printing when you have a bulk of orders.
Source: pack lane
· Custom Packaging
Packaging plays an eminent role in both order fulfillment and establishing a positive brand identity. It’s something that differentiates a serious business from profit extremists. Creating a subscription box with personalized unboxing experiences can let your customers trust your professionalism. Create custom packaging personalized for specific products, put your branded stickers, wrapping papers, and personalized messages to let every customer feel special. The more they feel valued by your brand, the more they would trust your business for long-term relationships.
Source: dollar shave club
· Shipping your Subscriptions Box
Since customers generally schedule subscription boxes in advance, you might need not spend extra in priority shipping services. However, you still require a reliable shipping service to pick-up and deliver the scheduled boxes on time. Go with reliable shipping brands that can guaranty a trustworthy service.
How to start a subscription box business
Building an eCommerce website is not a big deal these days. There are ready-made eCommerce platforms you can install and customize to build and launch your custom website in a quick time, but how to start a subscription box website? Since this eCommerce doesn’t work on regular eCommerce models, a traditional eCommerce platform can’t offer these functionalities without substantial customizations. In this case, you need a custom eCommerce platform.
It would take some time, money, and efforts to develop from scratch. Scratch approach is not suitable for small startups with limited budget constraints who have just begun with unveiling the basic questions like how to start a subscription box business.
If you go for a custom eCommerce platform, you don’t have to worry much about how much does it cost to start a subscription box. Since you get the source code of your website, it is always affordable than developing the same from scratch or subscribing to a SaaS that doesn’t even provide the source code. However, it’s a bit tricky process to choose the right kind of platform based on your requirements.
Choose an eCommerce platform
You need all other functionalities as any typical eCommerce platform, except an additional monetization channel is necessary for creating a subscription box business –Membership Subscriptions. The platform must allow you to create multiple membership plans including curated plans and custom plans as well. Moreover, it must support special payment processors capable of accepting recurring payments and should allow canceling the same on request of the customer. Once you have your customized eCommerce platform, you just need to-
- Choose a hosting partner,
- Set up your website,
- Optimize for SEO, and
- Launch with a bang.
That’s it, you have your website ready, back-end is all set up, and products are live. You now have a decent knowledge of how to start a subscription box business. Moving forward, you can employ o your creativity to uncover tons of possibilities to grow your business. You can experiment with different types of convertible subscriptions and launch marketing campaigns with Paid Ads, social media, influencer marketing, and a lot more. Work on continuously optimizing your shipping services, product quality, website design, and business model, this is the only way to gain subscribers for your boxes.