Imagine getting subscribed to a product like you do to a channel on YouTube. We all have given up on hobbies because we just couldn’t find the time to cultivate them. It can be discovering new wines, reading underrated comic books, or even as simple as painting. What if a personally curated kit was delivered to your doorstep, and all you had to do was enjoy your favorite stress buster? That’s exactly what a subscription box gives you.
From a business standpoint, eCommerce businesses can tackle major growth blockers at a business model level. Along with this, the service targets a niche market, making formulating marketing strategies and reaching customers a bit easier.
From a business standpoint, you get to create a unique position for yourself in the market. In this blog, we will discuss at length how you can start and grow a subscription box business.
What is a Subscription Box Service?
Subscription Box Services are periodic services that deliver personally curated product selections to your doorstep. They were started about a decade ago to drive repeat purchases, especially in the consumables category. The consumable market used it as a method to capture the recurring revenue from the replenishment purchases in the market. Since the business model was focused on the convenience of customers, it quickly gained popularity in the D2C market.
In recent years, bigger players like Walmart and Amazon have started using the reach of their platforms to capture this recurring revenue. In the Indian Market, the subscription service has taken over the Grocery and Dairy delivery sector. With the highest number of repeat purchases, this business model is known to have the highest retention rate amongst all D2C categories.
8 Steps to Start a subscription box service online
Subscription box services are much easier to manage in terms of products as well as customer acquisition. If you are looking to start out in this sector, here are eight easy steps to follow.
1) Formulate A Business Plan
Before thinking about the brand, its images and success, think about how you will run the business. Line up suppliers and negotiate rates with them for the various products in your subscription boxes. Do a competitor analysis on leading brands, and understand their business model.
2) Build A Marketing Plan
Once you have lined up how your brand is going to be run, you now take your brand to people. This will include a go-t0-market plan, marketing strategies for customer acquisition, and brand-building activities. It is ideal that you plan this for the next few quarters. But, you will also have to leave room to adapt according to the results.
3) Put Together A Prototype Box
Before you launch, design the design packaging, line up vendor/inventory, and set up a fulfillment workflow. This will allow you to create a prototype box before you launch. While building this, you can iron out any supply issues from the vendors, get an idea about what your product will look like in the hands of the customers, and establish a delivery workflow as well.
4) Setup your website/ marketplace account
The next step will be to ideally launch the subscription box service from a website/storefront. Set up your account and design the landing page according to the brand and product theme of your box. Use a few pictures of the prototype box and the products. This will enable your customers to envision your product better.
5) Launch with preorders/ prelaunch offers
A pre-launch offer will be like a teaser to your business. You can gauge the response of the consumers to your product. Based on the preorders, you acquire the correct levels of inventory for the first quarter, as well as make preparations for fulfillment in advance.
6) Deliver The Prelaunch Orders and Collect Feedback
As the preorders will technically be the first orders you deliver, they will require extra time and effort. You will have to set up various accounts and workflows to ensure an efficient order fulfillment process. It is vital that you collect feedback from the customer after you deliver the orders. The feedback should be about the entire experience, rather than just the product.
7) Make the Final Changes After the Prelaunch
The prelaunch phase gives you crucial insights into your product and services. Use this feedback to iron out wrinkles in your customer experiences. Consider making tweaks to the packaging, product combos, website, delivery experience, or wherever needed. These changes can be implemented before launching your website and service to a wider audience.
8) Launch your service and Start Shipping
Ensure that the outreach campaign for the website has started a few weeks before the launch. This should include customers from the prelaunch phase as well as customers that did not make the cut for preorders. Establish social media presence and build a community around your brand and product. Start shipping orders on schedule, and use the lessons learned from the prelaunch phase while packaging and delivering orders.
3 Main Types of Subscription Box Service
The subscription box service can be classified into different categories based on the type of needs it caters to.
1) Renew/ Refill Service
This type of subscription service is based on improving the convenience of using consumable products. The model is preferred by businesses and merchants from the retail sector as it enables better customer retention. The subscription structure is based on the consumption cycle of the product, and the consumer gets to enjoy special discounts.
2) Access-based Service
This type of subscription service is based on enabling repeat/subscription orders with exclusive perks. The members will enjoy special perks like quicker deliveries, additional discounts, early access to sales, etc. Brands from the fashion, electronics, and entertainment sectors tend to use this model. Walmart Plus, Amazon Prime, and Myntra Insider are all examples of access-based subscription services.
3) Curation-based Services
This type of subscription box service is a product-focused way to introduce consumers to the brand and the product. The service mostly focuses on allowing customers to explore products from a certain category. Subscription boxes like Wine of the Month or Meat of the Month come under this category. This category usually includes products from apparel, wellness, FMCG category, etc.
4 Key Benefits of Starting A Subscription Box Service
When D2C companies are successfully operating in the ecommerce sector, why should one deviate towards starting a subscription service? It may seem like more effort at the start, but it does have its own advantages. Here are four primary advantages of starting a subscription box service.
1) Steady Cash Flow
As compared to traditional D2C businesses, Subscription Boxes are more stable in terms of cash flow. When a customer makes a purchase under a subscription service, they make this purchase for a period of time rather than a one-time purchase. This allows you to have a continuous stream of revenue and project it much more accurately beforehand. These projections come in handy for future expansions and make it easier to finance them.
2) Lowered Customer Acquisition Costs
The subscription model has a retention rate of 50 percent or above. As a result, the customer acquisition costs are quite low for these businesses. However, some categories of subscription services tend to have a higher churn rate. Since these boxes are targeted at a niche customer base, designing marketing and sales campaigns becomes quite easy and has a better success rate.
3) Better Brand Image
The subscription box model offers a ton of branding opportunities. Your website can also be customized more to reflect your brand more optimally. Along with this, pre-scheduled deliveries allow you to cater to the needs of the customers more effectively. All these factors contribute to a better brand image than a D2C brand image. If the market response to your service is good, a better brand image will convert into recurring revenue that will continue growing.
4) Higher Profit Margins
Unlike product-based D2C businesses, inventory can be smartly acquired for subscription boxes. This is because businesses can project their sales figures more accurately. Along with this, the limited number of products allows for a more cash-efficient operation. This allows these businesses to enjoy a higher profit margin than other D2C businesses.
Top 4 Tips to Grow Subscription Box Businesses
If you are new to the market, you are likely to face blockers while growing in the space. Here are a few tips that will help you in building a better business model for your subscription boxes.
1) Analyse Your Competition
The best way to know what you are doing wrong is to know what others are doing right. If you are not able to reach your targets with your products, but there are other successful businesses in your category, you should definitely analyze your competition.
This will allow you to make changes to your customer experience and products to cater to the needs of your target customer base. You should also check if your product category is still a viable business opportunity in the market.
2) Personalize The Experience
Personalization is a surefire way to elevate the entire customer experience to a new level. Especially in the curated subscription box category, personalizing the curated boxes as well as the post-purchase experience is shown to have a positive impact on the revenue.
You can make small personalizations in the push notifications, product recommendations, and packaging. This will enable you in delivering a better customer experience.
3) Invest in Customer Retention
The strength of the subscription box business model is customer retention. Invest in features that allow you to boost customer retention rates on your platform. You can improve retention by providing better customer support or allowing customers to create and store information on your website.
Automatic promotional emails and messages can be used to re-engage past customers. It can also be an excellent way to improve the retention rate and repeat orders.
4) Diversify Your Marketing Efforts
If your company has not performed as per your projections, it may be time to reanalyze and diversify your marketing efforts. Strategies that have worked in the past may not have performed well due to the volatility of customer behavior in the modern market.
A low number of website visits and higher bounce rates would suggest that you need to diversify your marketing efforts. Focus on cultivating newer strategies that can generate a steady stream of customers. This can include focusing on newer methods like Influencer Marketing, Meme Marketing or revamping your website to fit the changing SEO standards.
For an ecommerce business, the business model of the subscription service box is like a dream come true. It allows you to capture recurring revenue in the market with limited product offerings. This reduces the overheads on the operational side and improves the output you are likely to receive from your marketing efforts. Hopefully, the above blog has allowed you to start in the right direction.
1) What are the challenges while fulfilling subscription box orders?
Finding the right packaging that can keep all the contents safe during transit is the main challenge while fulfilling subscription box orders. The secondary challenge is finding the right suppliers, especially if your box has products from multiple vendors. This is because, even if supply is down for one product, you will not be able to fulfill any orders.
2) How many items should be in a subscription box?
Ideally, customers expect anywhere from 5-10 items in a subscription box. This can vary depending on the value of the items as well as the category of your subscription service. For example, in a box from a replenishment category, customers expect supplies that will last them for at least 15-30 days.