How to Start a Subscription Box Business

author Stefan, Jul 25th, 2014

We get asked “how do I start a subscription box business?” a lot! Starting your own subscription box business (a.k.a Subscription eCommerce) is not as hard as you think and it’s a super fast growing market with loads of benefits. The likes of Birchbox and Barkbox are pioneering the way and have inspired an influx of one man bands and startups to set up their very own subscription box website. Subbly has worked with small retailers with existing products looking for a smart way to increase their sales as well as aspiring entrepreneurs who after being actual subscription box customers decided to set out and become the next Birchbox. Either way you’ll no doubt need some guidance on how to start a monthly subscription box business. We’ve already covered some best practises but what do you actually have to do to start a subscription box website? Well, there is much to consider so start by taking a look at our 9 Tips on How to Start A Subscription Box Business (or view the slide deck):

Please note: a more up to date and comprehensive version of this guide has been written and released, and can be found here: How to Start a Subscription Box Business.

View the New Guide →

1. Decide on A Product For Your Subscription Box Website

The road to a building a successful business and becoming a successful entrepreneur is long… and steep! With this in mind you should always consider pursuing a business venture you are 100% passionate about and this usually starts with products you have a passion for. When choosing what products to put into your subscription box you need to think carefully about cost of sourcing the product, the size and weight as well as shipping costs. But more importantly it’s worth reminding yourself that your future customers traditionally enjoy purchasing within their particular lifestyle and that shines through to the products they receive in their box. So if you are passionate about cosmetics it might not be a smart idea to create a subscription box website for golfers for example. You need to relate to your customers lifestyle and that can only be done successfully if you have a common interest and passion. Take a look at our list of subscription box business ideas page for some inspiration.

The founders of Flavourly in the UK were passionate foodies and craft beer conisseurs. Their extensive knowledge of the food and craft beer industries allows them to be constantly sourcing new exciting products for their customers as well as having ongoing conversations with them about their passion. The bonus is that their office is always full of tasty new food and beer to sample. So there are also perks to pursuing your passion too!

2. Figure out How You Are Going to Source Your Products

When it comes down to getting hold of your products from suppliers you have two options that will both have a huge affect on your business model and the way you operate so the sooner you decide the better.

  • Free Products – Believe it or not some subscription box businesses (usually the more established) don’t actually pay for their products. A huge volume of customers and subscribers means offering a subscription box as a marketing tool and a way for the supplier to promote their latest products to a targeted audience is possible. The advantages are obvious savings in time and cost but it can prove to be a disadvantage in terms of not having full control over the products you are providing your subscribers.
  • Paid Products – Approaching suppliers and negotiating costs of the products you want to offer in your subscription box is never going to be easy. It;s going to be a strain on your margins on top of additional shipping costs etc. However, it’s a great way to start and will give you complete control over what products your very important customers are receiving.

3. Set Your Price. Now.

It’s not just as easy as thinking about a price, getting customers and making millions of dollars. In fact, the price point is the most important element of starting your own subscription box, it could make or break your business. Charge too low and people will see your subscription box as ‘cheap’. Too high of a price will drive people away.

Charge too low and people will see your product as ‘cheap’. Too high and you'll drive people away. Click To Tweet

Maybe it’s worth conducting some research on your competitors price points and use that as a starting point. You then need to work out your margins after taking in to account how much sourcing your product is going to cost in addition to shipping etc. Check out this handy little budgeting tool you can use to determine the right price for your subscription box too if you need more guidance.

4. Identify Your Perfect Customer

We were chatting to a friend of ours recently who owns a well known gourmet food subscription box company and we asked him about his ideal customer. He suggested that this should be one of your first and highest priorities when creating your own subscription box website. Remember the old Chinese proverb “If you chase two rabbits, both will escape”? Well think about consumers in the same way and hone in on a specific customer in a particular niche and lifestyle. There is so much opportunity in the subscription eCommerce market so don’t try to cater to everyone. Pay as much attention to choosing your perfect customer as you did to choosing your product.

Defining your customer sounds boring, but if you don't you'll fail Click To Tweet

5. Shipping & Handling

In a recent post we shared a story about how one subscription box company we spoke to reduced the size of their box by just 2cm and significantly saved on costs because now their boxes fit perfectly into a standard mailbox. It seems simple but if you are just starting out you are going to have very tight margins and every single penny counts. So, start thinking about how you are going to ship your boxes. Is it worth packing and sending them out yourself? Or would it be more cost effective to have a 3rd party handle this for you? These are all things you should consider

6. Experiment & Test Membership Options

Before you even get your first customers you should have a clear idea of what they actually want. How frequently do your customers want their subscription box? Every month, week or even every quarter? The only way you can find this out is by testing it and analyzing the data. Perhaps it’s worth considering offering a free trial to increase word of mouth sales? On the off chance that you were considering contracts with your customers membership… DON’T! You aren’t dealing with businesses you are dealing with everyday consumers and nothing scares away a consumer more than long term contractual obligations and commitments. Even cell phone companies are finally realizing this. You’re going to acquire far more customers with an easy setup and free to cancel service.

7. Marketing

A subscription box business isn’t a subscription box business without customers and you should be thinking about how to acquire your customers at the very earliest of opportunities. The CPA (Cost per Customer Acquisition) is one of your most important metrics to measure so you have to be smart, think outside the box and explore as many ways as possible to acquire your users at the lowest cost possible. It’s not going to be easy and a successfully optimised PPC strategy via google or facebook ads as well as other traditional online and offline strategies can generate you good levels of traffic and customers. But, if you really want to stand out from the crowd and generate a huge volume of customers overnight you have to focus on getting your subscription box to go viral, just like we experienced.

  • Viral Videos – Dollar Shave Clubs entire business was built off the back of their genius video marketing campaign that propelled them from just a standard razor-blade company to one of the most successful subscription box businesses globally. Featuring the companys founder Michael Dublin, the YouTube videos focused on him and his employees in the Dollar Shave Club Warehouse. Sounds pretty boring, but Michael, who had a little experience in stand-up comedy nailed the video (now at 15 million views and counting) and within 24 hours had crashed the companies servers and received over 12,000 orders he was not ready to ship! You can check out the video below and read his story in more depth but it proves that thinking outside the box can actually work wonders for your subscription box business.

  • Coupons & Vouchers – Word of mouth is always going to be a clever way to promote your subcom business. First of all, it’s essential that your box is so awesome and unique that every one of your existing customers wants to share it with all of their friends and family. Offering coupons,vouchers and promotion codes is one effective way of increasing this viral marketing technique and adding that extra little value to your customer. A happy customer who has received more than they expected are always more likely to share on their social networks. The result? More signups for you and all it took was a simple promo code! Graze box based in the UK built their business with a well known referral strategy back in 2009. If you are a Graze customer then the minute you signup you are able to give one of your friends a Grazebox for free and then receive your second box at half price. The deal swept corporate offices throughout the UK with many people sharing with their friends, family and co-workers. Overnight, Graze box became a household name and a perfect example of how a referral strategy can be successful with many consumer facing retailers learning from it. Offering something people will instantly want to share was the first win, but to then reward them again with a second box for half price was the ultimate cherry on top. People will always appreciate a personal recommendation. It means more to them than any online and offline advertisements because it comes down to trust. The surprising part about Graze’s referral strategy though is that they also made the offer feel exclusive. They didn’t advertise the offer on their website or in any promotional materials or advertising campaigns. Instead they made people feel like they were getting an exclusive opportunity to grab a bargain because their friends are existing customers. The friend looks good and the new customer is getting a bargain. The ultimate win-win marketing technique!
  • Influencer Outreach – Often time consuming but very effective if done correctly is influencer outreach. There are hundreds if not thousands of people out there talking about the industry you are in, the products you are selling and the lifestyle of your target customers. They are constantly looking for new material to write about. Reach out to them, tell them about your subscription box website and get them to feature you in their next blog. Yes, it may cost you to send them out a box so they can review but hey, that’s only fair right? Getting your product to go viral requires you to build a community of loyal advocates for your brand and that isn’t going to happen overnight. The smarter option for now would be to leverage someone else’s influence and hope the impact triggers more exposure for your business amongst other channels such as Facebook, Twitter and other blogs and well established news outlets. Also be sure to check out www.subscriptionboxes.com and www.mysubscriptionaddiciton.com and get your subscription box listed.

8. Be Prepared for Challenges

If you’re just starting your subscription box business then as with all businesses, you’re going to experience challenges as you learn about the market and optimize your business for success. It’s always a good idea to do your research on other competitors and find out what problems they faced and how they overcame them. This will mitigate the problems you will face and position you better for when they do arrive. It’s always worth reminding yourself that problems are inevitable. The most important thing is how well positioned you and your business are to respond and overcome the challenge. Startups usually have an advantage as the team is normally smaller and can adjust focus quicker than larger companies and you should use this to your advantage. Here are a handful of challenges our subscription box friends have encountered along the way to success and things you should look out for.:

  • Curation – Sourcing the right products for your customers, writing marketing and sales descriptions for all your products and managing fulfilment every month is going to be time consuming and hard work. Be prepared to get your hands dirty.
  • Shipping & Logistics – Depending on how you handle the logistical side of your subscription box means that you will always be reliant on 3rd parties. This means that lack of control over deliveries can cause even more problems.
  • Returns – Inevitably, some of your customers won’t be happy with their product and will want to return it. Be sure to pay attention and clearly outline and communicate your returns policy with your customers.
You’re going to experience challenges as you learn about your market. So start sooner. Click To Tweet

9. Benchmark 3 Subscription Box Businesses

  1. Glossybox – From only $21 per month Glossybox pride themselves on delivering 5 or 6 luxury beauty samples or full sized products every month. They offer something different to other beauty focused subscription boxes by including foreign brands with the idea being that customers are exposed to products they otherwise wouldn’t have known about. Glossybox also taps into the need for customers to feel different to their peers. They also add a little extra value to the consumer should they like one of the samples by providing them with a discount on items included in their boxes and also have a cool rewards program called GlossyDots.
  2. Mantry – If you haven’t worked it out yet this subscription box is a play on the traditional ‘Pantry’ but for men. Each month you receive 6-8 artisan food products. The secret to Mantrys success is their delivery box or should we say crate. Stylish and musky your products will arrive in a special signature handmade wood crate from Brooklyn.Mantry Subscription box
  3. Kiwi Crate – A great example of honing in on a specific vertical and audience, Kiwi Crate targets the millions of parents out there who want to keep their kids active. Not only is this subscription box a smart way to continually motivate yourself to spend time with your kids but it’s fun too. Arts, crafts and science projects will keep the whole family entertained on a regular basis. These guys have won awards for almost everything from the “Dr.Toy 100 Best Children’s Products” to an “Oppenheim Gold Seal Best Award” so they must be doing something right!

 

And now you know…

We hope this guide helps you on your way to start a subscription box business. Let us know if you have any questions! We’d be happy to help.

 

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Read more:
Marketing Your Subscription Box
Marketing Your Subscription Box – 12 Tips to Get Your First Customers

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