Subscription boxes seem unstoppable now. But as recently as 2010, the business model barely existed. Rather, it was around 2011 when subscription boxes started to take off, with brands like BirchBox, Dollar Shave Club, and NatureBox becoming household names.
From 2011 to 2016, the subscription box industry grew nearly 100% per year according to McKinsey. According to Market Research Future, the US subscription box industry was valued at $13.5 billion in 2022 and is expected to grow to $44.5 billion by 2032, which is more than triple!
Because subscription box businesses are so hot right now, a lot of people want to cash in. You might be one of them since you’re reading this article! So let’s talk about how you can start a subscription box business in 10 easy steps.
1. Understand the basics of subscription boxes.
As with any business, you need to thoroughly understand the market before you jump in. To help you do that, we’re going to go over the basics of the subscription box business model. This will help you determine whether it’s right for you.
What’s a Subscription Box?
Easyship said it best: “subscription boxes are recurring and physical deliveries of given products which are packaged with the aim of offering consumers additional value and a unique experience, added to the actual product contained within each box.”
Basically, subscription box buyers receive boxes full of unique and interesting products on a regular basis. Subscribers pay for a recurring subscription and receive boxes on a regular basis, usually every month. The boxes are full of physical items, many of which are surprises carefully curated to please the subscriber. Many subscription boxes show customers how much they saved on the retail value of the items contained within.
Last but not least, subscription boxes are almost always gorgeous. The packaging and the contents are often beautiful and made specifically for people to record unboxing videos.
Benefits of the Subscription Box Business Model
From a business perspective, there are a lot of benefits to the subscription box business model. But we wanted a first-hand perspective here, and for that, Ben Ajenoui, Marketing & Managing Director at the eCommerce platform, Opencart, was happy to oblige.
“Our move into subscription box services was driven by the growing demand for recurring revenue models in the retail space,” says Ajenoui. “Many of our users were asking for more streamlined ways to offer subscription-based products, and we saw an opportunity to support them.”
It’s no surprise that Opencart transitioned into the subscription box space when you consider the value of recurring revenue. The following five facts, taken together, make a really strong case for starting a subscription box business:
- Since boxes are sold on a subscription basis, revenue is much more predictable than with most kinds of eCommerce.
- Because subscriptions are recurring transactions, the average customer has a much higher lifetime value than other businesses.
- It’s harder to win a subscriber than it is to win a buyer, but once you do, the odds of retention are much higher.
- Subscription boxes are all about the unique experience, which gives companies great opportunities for branding.
- Because subscription boxes are sent out around the same time of the month in large batches, this simplifies shipping and fulfillment.
Disadvantages of the Subscription Box Business Model
Of course, the subscription box model isn’t perfect. We can think of five negative considerations that you need to weigh in as well.
- According to Pitchbook, the amount of venture capital going into subscription box startups has gone down in the last few years. This could be a sign that the subscription box boom is over. Alternatively, it could be a consequence of massively overhyped companies like Blue Apron going downhill, but not an indicator that the industry at large is failing. Make of it what you will.
- To prepare subscription boxes to send, you need a lot of upfront capital to begin with.
- Subscription boxes live and die on their ability to seem luxurious and unique. That means you need a strong understanding of the fundamentals of marketing and branding to succeed.
- Because subscription boxes have become so popular, there is a lot of competition.
- Much of the magic of subscription boxes stems from the novelty of the items in them. That means when the novelty wears off, so does the perceived value of the subscription box.
There are also some operational challenges to consider as well. Among them, Ajenoui lists “recurring billing, [setting up] flexible product options, and [implementing] advanced customer management tools.” Before getting into the subscription box business, it’s worth considering if your team has the operational chops to set all of this up.
2. Identify a real market need.
In order to build a successful business of any type, you need to identify real needs in the market and come up with a wait to meet them. Otherwise, people have no reason to want to buy from you at all!
This is especially true in the subscription box business model. The reason for this is because getting someone to sign up for a subscription is harder than getting them to sign up for a single purchase. That means your subscription box needs to be so compelling that it overcomes customers’ objections so that they do not hesitate to subscribe.
“Convenience, personalization, and the excitement of regular deliveries” rank high in terms of customer values, according to Ajenoui. As you work on the particulars of your subscription box model, it’s worth considering how these values intersect with the kind of products you sell.
3. Research your competition and find a unique niche.
Because the subscription box business is fairly crowded, you need to find a niche that stands out among similar subscriptions. Your customers have lots of different options, so you need to provide something popular in a way that no one else is. This is where market research is essential!
If you want to stand out among your competition, don’t try to create a new product entirely. It’s much easier to deliver better quality products than your competition than to completely forge your own path. One way that you can do this? Find good suppliers and form great relationships with them.
4. Figure out what to put in the subscription box.
At this point, you will want to figure out what your subscription box itself will be like. Subbly suggests considering the following factors:
- Pricing
- Number of items
- Type of products and their packaging
- Size of the box
- Design and aesthetic
- Engagement experience
- Written content and packing information
Naturally, this will be different for every industry and for each type of box. What you want to do here is figure out how to take several different items and figure out how you can tie them together and create a unique experience for the box opener.
5. Master the unboxing experience.
Much of the magic of subscription boxes comes from the feeling your subscribers will have when they are opening the box. There is a reason why many people take videos of themselves unboxing subscription boxes and post them online. There’s a reason people watch these videos, too – vicarious pleasure is a very real thing and it compels many new people to subscribe to your box!
So how do you actually do that? We have a few suggestions:
- Use custom packaging so that when your box arrives in the mail, people are immediately excited about it.
- Pack the boxes in such a way that not all items are seen at once. One way you can do this is by covering the contents with a thin sheet of cardboard and putting a small letter on top for people to read before opening the rest of the box.
- Make sure the individual items themselves are bright and colorful and that their packaging really stands out, making a feast for your subscribers’ eyes.
6. Set up the supply chain.
Understanding the supply chain is one of the key success factors for subscription box businesses. You need to make sure the boxes are a reasonable size and weight, so you need to have all that information from your item suppliers in order to proceed. Hopefully, you will also receive a discount on the items themselves so that you have a healthy profit margin. You may need to tweak the items in the box in order to get them to fit or to get the price to be reasonable.
Especially important to subscription box businesses is having good relationships with custom packaging providers such as Noissue or Arka. While custom packaging definitely costs more, remember that the experience is the selling point, not the items themselves which can all be purchased individually.
Lastly, you will want to work with a fulfillment company that you trust. Odds are, the items and packaging will arrive separately and in large quantities. While you can pack and ship your own items, companies like Fulfillrite can take care of that for you. In particular, preparing subscription boxes in advance would be considered a kitting project. As far as receiving the supplies themselves and then sending out the subscription boxes, both of those are very routine tasks that can be cost-efficiently handled by a fulfillment company on your behalf.
7. Start marketing your subscription box before launching the service.
Treat your subscription box service launch like you would any other product launch. You need to start marketing it long before you actually start shipping boxes. At a minimum, you need a good brand name, logo, and website. If you’re not sure where to start, you can always use Shopify.
Marketing for a service launch is more complicated than we can adequately discuss in a post like this, but we’ll give you a few tips here:
- Build your website with conversions in mind. Everything on your site needs to ultimately increase the odds that someone will subscribe to your service.
- Create a sense of urgency with special offers and landing pages. Getting new subscriptions is harder than retaining them!
- Remember the marketing funnel: first someone becomes aware you exist, then they become interested, they think about buying from you, then they ultimately choose to buy from you. Then after that, they choose whether or not to purchase from you again.
- Customize your boxes as much as possible.
- Build a mailing list.
- Start content marketing online, including guest blogging.
- Implement a referral program.
- Look into pay-per-click advertising on sites like Facebook, Instagram, and Pinterest.
If you want to research this subject in more depth, we stumbled across this fantastic guide that will show you how to market your subscription box!
When in doubt, consider the advice of Ajenoui. “The most effective strategy for acquiring subscribers has been offering a seamless, customizable experience.” Clearly, providing a good customer experience is not something that can be overlooked!
8. Figure out shipping and fulfillment.
We touched on this before, but it’s especially important. If you have 500 subscribers, that means someone will need to receive all your supplies and packaging, prepare the subscription boxes, apply postage, and then send them to your subscribers. You can do this yourself, but it makes a lot more sense to work with a fulfillment company since they specialize in handling large quantities of orders at once.
If you go through a fulfillment company, you don’t have to worry about assembling the boxes by hand. All you have to do is design the packaging, pick the items, and go find customers. Everything else can be taken care of for you, leaving you with a lot more time to find subscribers and make money!
9. Take feedback, make improvements, and retain customers.
As with any business, once you start shipping your first few subscription boxes, you will need to gather customer feedback. Customer retention is essential, so try to incorporate feedback as much as you can. Make improvements when they are recommended. In the long run, it will pay off!
When it comes to retention, Ajenoui advises offering “personalized engagement, exclusive offers, and flexible subscription management.” He later mentioned that “streamline your operations with a reliable platform is essential for scaling and long-term success.”
As you gather feedback, consider what questions you can ask to ensure that you are in line with Ajenoui’s thoughts on best practices.
10. Establish great customer service.
Customer retention is essential for a subscription-based model. That means that once you have started shipping boxes, you need to have excellent customer service in order to keep customers subscribed. Do anything and everything you can to keep customers happy. Be sure they can reach by phone, email, and – if you have the resources to adequately manage it – social media!
Final Thoughts
Subscription boxes provide customers with unique experiences and business owners with unique opportunities. If this is a business model that you want to pursue, follow the tips above and you’ll be well on your way to success!
