Step 1: Choose Your Subscription Box

The quick version: Your idea is the foundation of your business.

The first thing you need to do is decide what type of subscription box you will sell. You can choose one of the more popular subscription box categories or select something unique.

🎁 Popular subscription box niches

Your first option is to select items that are already popular, thanks to existing subscription boxes. The graph below shows the most popular types of subscription boxes:

If you choose a popular category, the challenge you face is that the market is already saturated. 

For example, there are hundreds of food and meal kit boxes already out there.

This means you may have a harder time competing with other businesses for subscribers. This is where you may want to lower the price of your box to entice new subscribers.

On the upside, if you choose a popular type of box, it should be relatively easy and affordable to source products to include. For example, if you choose beauty, you can buy these items from wholesale suppliers at a relatively low price.

🎯 Specific subscription box niches

There are several benefits of niching down and curating a truly unique box. 

Firstly, you won’t be competing with a massive market to sell your boxes as there’ll likely only be a few available in your niche. You’ll also be able to charge more per box because subscribers can’t find these products as part of a subscription elsewhere.

Additionally, although the demand for your products may be lower due to their specificity, you’ll have access to an untapped audience to sell to.

However, the downside to choosing niche market products to include in your box is that these items could be more expensive to source. 

The best niche subscription boxes are those that are based on your own passions or needs. You can directly translate this into the products you offer in your boxes. 

For example, if caring for your dog is extremely important to you, this can help you choose products for your pet-related box that other dog owners will appreciate.

🏆 Understanding your competitors

Whether you’re going with a more popular type of subscription box or choosing a highly specific niche, you need to know who your competitors are.

Without knowing who you’re competing against, how will you ensure subscribers choose your product over a competitor?

Spend some time researching the competitors that are already selling your idea and find out:

• How many boxes you’re competing with?
• What do these subscription boxes offer, and at what price?

From there, you can start thinking about how you can differentiate your subscription box from your competitors to stand out.

Step 3: Set Up Your Operational Framework

The quick version: Start things off on the right foot when it comes to the e-commerce platform you choose, website creation, shipping, and billing.

The next key step to starting a subscription box business is setting up your operations.

This entails everything from choosing a subscription box platform, setting up a website and online store, and planning logistics around customer convenience. 

The more thought you put into how you set all this up, the easier it’ll be to scale once your loyal customer base has started to grow. 

Remember, it’s best to use a platform designed for your business model. Check out the differences between different subscription e-commerce solutions to help make your choice.

💻 Choose an e-commerce platform

Simplicity is the main thing you should look for in a subscription e-commerce platform. Of course, it should also be designed for your unique model, but ensure that the platform you choose:

• Is built to scale and doesn’t charge you per subscriber.
• Is secure, reliable, and frequently updated.
• Allows you to do as much as possible in one place.

Be cautious of e-commerce platforms that lack built-in features to manage recurring payments, subscription management, customer retention tools, and tiered pricing. 

Without these built-in services, you will be forced to rely on third-party plugins or custom workarounds. 

For example, Think Outside Boxes, which sends monthly boxes with outdoor activities and gear for kids, initially used a mix of WooCommerce and manual processes. 

As their business grew, they needed a simpler, all-in-one solution to handle their online management and focus more on expanding their business. 

Today, with the help of Subbly’s all-in-one platform, their business is thriving with a simpler system that helps them run their operations smoothly. 

Here are some of the 100+ subscription-focused features you get when signing up with Subbly:

Some of Subbly’s 100+ subscription-first features

Here’s what one of our merchants had to say about choosing us over her previous solution.

🎨 Set up your website

There are many ways to set up a subscription box website, but if you’re not a coder, your process will probably look a lot like this:

1. Choose a website template: It should be easy for users to navigate and feature a simple design that avoids clutter.
2. Create a logo, or upload your own: Your logo should make it easy for consumers to spot your brand from a mile away. This is the foundation of your brand identity, so choose wisely.
3. Create your marketing copy: You may want to hire a freelance copywriter on Upwork or Fiverr to help you with this part. Getting your marketing messaging right is crucial to the success of your business.
4. Make it SEO-friendly: Your code needs to be semantic and your copy needs to use the right keywords to rank high on Google’s search engine and attract new customers. Make sure your e-commerce platform offers this (PS. Subbly does 😉). 
5. Ensure responsiveness: Your website needs to look good on every device, including mobiles, tablets, and desktops. Test your website by viewing it on different devices and reach out to your platform administrators if it looks wrong. 
6. Prepare signup flows: Make sure each customer has a personalized experience by gathering information about them, such as their names, and incorporating it as part of their signup journey. 
7. Insert visual assets: This is how you add some flair to your website and help you create and maintain a cohesive brand identity.
8. Tweak the colour scheme: It should align with your brand identity and be easy on the eyes.
9. Launch your website: Once your website has gone live, you can come back and spend time refining it based on customer feedback and your analytics.

Here’s an optimized subscription website template from the Subbly collection:

For some more tips on site optimization, check out Subbly Expert Alex Fleck’s webinar featuring five conversion hacks for your subscription box website.

🚚 Establish your shipping and fulfillment

Shipping and fulfillment are important parts of your subscription box service. Together, they refer to the process by which your subscription boxes are assembled and shipped from the warehouse – or your garage – to your subscribers’ doors.

For subscribers, it’s about the process of managing, tracking, and receiving their orders. 

Transparent, two-way communication is vital here, as is making sure all packages are shipped both on time and in good condition. 

When it comes to shipping, it’s also important to think about how you process returns. If a customer needs to return an item, make sure you have a clear, easy-to-follow return policy. 

You should also consider how it might affect your customers’ carts. 

For example, if they spend over a certain amount, will their shipping be free? Ensure you have dynamic shipping rules in place to handle these changes effectively. 

Fulfillment involves the stage between receiving your products from suppliers and packing them into boxes before they’re handed off for shipping. It’s a process that can either be done in-house or get outsourced:

In-house

This would mean you do everything yourself. For many subscription services or products, this is useful when starting out. 

You’ll get an in-depth look at every aspect of the process and directly oversee quality control while achieving significant cost savings.

Outsourcing

Outsourcing means you would pay someone else to handle your fulfillment. 

Fulfillment comes with its fair share of challenges and costs, such as liability insurance, cleaning the warehouse space, paying for labor, training employees, and ensuring quality control. 

If you manage to find a good shipping partner that you can trust, it’s a worthwhile investment for your subscription business model.

Here’s some more information on the fulfillment process, with a list of questions to ask potential fulfillment partners to save you time and help ensure they’re up to par.

💰 Set up your billing process

The last part of this step is making sure your subscription billing framework is set up correctly.

Subscription billing is a process that allows merchants to automatically charge subscribers a pre-approved amount at certain intervals in return for their goods and services.

A good subscription billing framework is optimized to ensure every aspect of the customer journey related to transactions works as efficiently as possible. These aspects include:

• The checkout process: This should be as smooth and simple as possible to ensure potential subscribers check out.
• Account management: You need to ensure every aspect of each financial transaction is customer-friendly and that subscribers have a good experience making payments.
• Analytics: Often built into your payment provider, this can provide you with data pertaining to your revenue and all the payments that have been made to you.
• Revenue recognition: This is how your revenue is recorded and reported. The goal here is to ensure your revenue matches the number of deliveries of your subscription boxes.
• Payment processor choice: You need to choose a payment processor that is easy for your customers to use so that they complete their payments hassle-free.
• Custom billing cycles: If your customers prefer being billed quarterly rather than monthly, then you need the flexibility to set this accordingly. 

What happens if your customers don’t pay their subscriptions on time? 

That’s where dunning sequences come in. They automatically remind customers to make their payments, saving you from manually chasing down overdue accounts. 

For example, Nail Mail, a subscription service for nail art boxes, cut their admin time in half after switching from Wix to Subbly. 

Founder Gaynor McCann now spends 70% of her time running the business and only 30% on administrative tasks—compared to the opposite before the switch.

Here’s how Subbly allows you to select from a wide range of payment processors:

Subbly allows you to select from a wide range of payment processors.

Step 5: Launch Your Box

The quick version: Counting down to liftoff is super exciting. Once you’ve launched, retention becomes of paramount importance, as does keeping a keen eye on your metrics across the board.

Once you’ve launched your subscription box or other model, other factors come into play. Are you ready to take the leap?

🗓️ Preparing your pre-launch

The most basic form of a successful pre-launch campaign consists of three main elements:

1. Creating a distinctive landing page: Keep your copy simple and CTAs clear. Ensure you include high-quality photos of your products and what the final box looks like to entice potential customers.
2. Driving traffic to that landing page: Use social media channels and influencer marketing to start driving people to your website. You can also include links to your website in marketing emails to drive traffic to your site.
3. Growing and nurturing your email list: Set up automated campaigns interspersed with some personalized outreach.

As your pre-launch campaign winds down, don’t lose momentum. Create urgency, keep posting on social media platforms, thank those who helped you, and make any last-minute tweaks.

📊 Looking ahead: Metrics, forecasting, and reducing churn

Tracking your metrics is crucial once your subscription box service has been launched. 

What metrics and KPIs should you be tracking?

In a subscription context, some metrics are more important than others, and you probably don’t have time to track them all. A selective approach to subscription business analytics is key.

Subbly’s analytics dashboard is key to making sure you don’t miss a beat:

A clear dashboard is key to making sure you don’t miss a beat!

The most important subscription business metrics are those that indicate that you’re delighting your customers and that they’re converting fast, not churning, and becoming cheaper to attract and retain over time.

You’ll find all of these metrics on Subbly: 

1. Average Revenue Per Subscriber (ARPS): This is the total revenue divided by the total number of subscribers. Although this is similar to the more commonly used average revenue per user (ARPU), we feel it is important to make the distinction between subscribers and users.  
2. Monthly Recurring Revenue (MRR): This is ARPU (calculated over one month) multiplied by the total subscribers (active in the same month).
3. Customer Acquisition Cost (CAC): Divide the cost of sales plus the cost of marketing by the number of new subscribers in a specific time frame.
4. Churn rate: This is the total cancellations in a given period divided by the number of subscribers at the beginning of the period, multiplied by 100 (percentage conversion).
5. Lifetime value (LTV): The total revenue a business can expect to earn from a single subscriber over the entire duration of their relationship with the company, calculated by multiplying ARPU by the average subscriber lifespan. 

Understanding revenue forecasting

The more data you collect and the more you optimize your offering accordingly, the better your results will be. This helps a lot when it comes to revenue forecasting. You’ll also need to calculate revenue recognition. 

Both of these are quite complex topics that are important to take into account as your business grows over time. To understand this fully, read our full guide on revenue forecasting.

Conquer customer churn from early on

Churn is one of your biggest challenges if you want to follow a subscription business model successfully. Your churn rate is the number of subscribers you lose over a defined period of time.

This typically occurs in two ways:

• Voluntary churn: Subscribers who make the active choice to unsubscribe from your offering.
• Involuntary churn: Customers whose subscriptions end due to issues like declined credit cards or other circumstances beyond their control.

Losing a few subscribers might not seem like a big deal at first, but over time, it can really add up. This was the case with Boddle Box, a subscription service that sends bath bombs for kids. 

While using Wix, they faced high voluntary churn, with customers canceling their subscriptions. 

After switching to Subbly, they introduced options for customers to downgrade or pause their subscriptions. 

This helped them retain customers during critical moments instead of losing them entirely.

In general, if you want to reduce voluntary churn, reach out to your subscribers proactively (ideally personally) and find out what went wrong. 

At a minimum, set up surveys and automated emails asking them for feedback so you can keep your finger on the pulse. 

To reduce involuntary churn, assess your dunning process and associated communication flows and determine where to make the process smoother and easier to interact with.

The earlier you implement processes designed to reduce subscription churn, the easier it’ll be to achieve.

🤝 Top strategies for customer retention

It’s significantly cheaper to retain a customer than to acquire a new one. There are many subscriber retention strategies you can try out to keep your customers coming back for more boxes.  Some of them include:

• Creating automated offers that trigger at specified subscriber drop-off points.
• Communicating during and beyond the buying journey to maximize engagement.
• Analyzing common points from cancellation surveys and adapting your offer accordingly.
• Offering rewards and downgrade options to lower the subscription cost.
• Making sure all the crucial parts of the billing process are communicated well in advance.
• Credit the customer’s account with a balance after a certain amount of time has passed.
• Add free products to orders that exceed a specified total.
• Send an SMS promoting a one-time product offer at a discounted price.

Frequently Asked Questions

If you’re still feeling uncertain about running your own subscription box business, then have a look at the answers to these frequently asked questions: 

Do subscription boxes make money?

Subscription boxes have a profit margin of between 40-60%. This is in contrast to general small businesses, which have an average profit margin of between 7-10%. 

This means entrepreneurs with subscription business models have the potential to be significantly more profitable compared to other business models, such as one-off purchases. 

How much does it cost to start a subscription box business?

The startup costs for a subscription box business can vary widely depending on the type of product you’re offering. 

For instance, if you’re starting a meal prep subscription, you’ll need to invest in food ingredients, refrigeration, packaging, and shipping, which can be quite expensive. 

On the other hand, if you’re launching a subscription for greeting cards, your initial costs will mainly involve design, printing, and basic packaging, making it much more affordable. 

However, on average, starting a successful subscription box business will cost you between $5,000 and $50,000. 

How to start a subscription business?

Starting your own subscription box company involves five key steps. 

Each section of the article provided a “quick version,” so putting them together offers a clear summary of how to get started:

1. Choose your subscription box: Your idea is the foundation of your business.
2. Start your planning: Leave no stone unturned when it comes to planning. 
3. Set up your operational framework: Start things off on the right foot when it comes to the e-commerce platform you choose, website creation, shipping, and billing.
4. Market and promote your box: Get creative with your marketing and promotion initiatives – the more engagement you can stoke before you launch, the better!
5. Launch your box: Counting down to liftoff is super exciting. Once you’ve launched, retention becomes of paramount importance, as does keeping a keen eye on your metrics across the board. 

How do I create a subscription service?

The most important decision you will make when pursuing a subscription business model is choosing the right niche and target audience. 

From there, you’ll need to set up a reliable operational system, including selecting an e-commerce platform, managing inventory, and ensuring smooth payment processing. 

Make sure you choose an all-in-one e-commerce platform, such as Subbly, so that you launch quickly and start building your business. 

How do I start my own subscription service?

It all hinges on a good idea. If you can come up with a product or service that customers would love to receive regularly, then you have the foundation for a successful subscription business. 

From there, you’ll need to conduct thorough market research, develop a business plan, and set up the logistics—such as sourcing products, choosing an e-commerce platform, and figuring out shipping.

If you want this to run smoothly, make sure you partner with a platform that offers all the features that you’re looking for. 

How profitable is a subscription box business?

Many subscription businesses have made massive profits from their subscription services or products. Here are some examples: 

• Framed By Sarah: Their founder, Sarah Williams, says she’s made over $1,000,000 from her subscription box business. 
• Birchbox: Founded by Katia Beauchamp and Hayley Barna, Birchbox grew quickly from a small investment to millions in annual revenue.
• Dollar Shave Club: Founded by Michael Dubin, Dollar Shave Club revolutionized the razor market with its replenishment subscriptions, leading to a $1 billion acquisition by Unilever in 2016.

This shows that, by pursuing subscription box business models, both you and your investors stand to gain a lot.