The subscription box business model has taken the world by storm. In 2022 alone, the global market size reached USD 26.9 billion. The forecast also shows that in 2028, the value will be USD 74.2 billion.
The COVID-19 pandemic played a huge role in this growth, piggybacking on the growth of the whole eCommerce industry. After all, a subscription box does offer a convenient and exciting way for consumers to receive curated products on a regular basis.
From beauty products to food and beverages—it looks like there’s a subscription box for anything! So if you’re thinking about starting your own subscription box business, it can be a great way to turn your passion into a recurring source of revenue.
Here are the steps to launching your own subscription box business. We’ve also included tips and additional strategies for each step, don’t worry!
First things first… what is a subscription box business?
A subscription box is a recurring order that gets shipped out to a customer on a set schedule. These usually come in a wide range of product categories and prices.
Recently, subscription boxes have gained popularity among younger shoppers. According to a report from Gfk, around 34% of millennials and 22% of Gen Z shoppers are currently subscribed and they are likely to continue.
3 subscription box business models
Curation
The subscription boxes usually have a selection of a few items that are based on a particular theme. Essentially, curated subscription boxes focus on the element of surprise.
For example, BarkBox is a monthly subscription box for pet owners. Each month, they send over a box with curated goodies for dogs. The pet owners don’t know exactly what will be in the box, but they do know that there will be toys, treats, and other surprises.
Another example is House of Suppliez which actually offers different subscription themes. Customers can choose to receive monthly merch, monthly nail tools, or even monthly nail art.
Go for curation subscription boxes if:
- You are aiming for high-profit margins
- You want to build stronger customer relationships
When curated subscription boxes are able to deliver great customer experiences regularly, the business then has a higher perceived value. Additionally, the truth is not all subscription boxes cater to “needs.” Most of them cater to wants. The stronger your customer relationships are, the stronger the want for your subscription box.
Replenishment
If curated subscription boxes have that element of surprise, replenishment subscriptions don’t—but this doesn’t make them less valuable. In fact, it’s a way for customers to restock items that they actually love.
Society Socks offers subscriptions with a twist! Aside from two pairs of socks delivered monthly, there will also be two pairs donated to charity on your behalf. Dollar Shave Club is one of the most popular examples of grooming replenishments every two or four months.
Go for replenishment subscription boxes if you want to achieve higher Customer Lifetime Value (LTV). These are usually the types of products that subscribers will always need, hence they will be long-term customers.
Membership or Access
This model focuses on giving subscribers access to exclusive perks and privileges along with their subscriptions. These additional benefits can range from lower prices, exclusive discounts, or even free stuff every once in a while.
Vinyl Me, Please delivers an exclusive record per month. While they do offer other products for one-time purchases, they provide exclusive access to premium products for their subscribers.
An access-based subscription box business provides more opportunities for upselling since you can continuously create offers on top of the subscriptions.
Step 1: Conduct market research
As with all businesses, it’s very important to truly understand the market you wish to enter. The same is true for subscription box businesses. Aside from being in a highly competitive space, the aim is to earn recurring revenue from subscribers.
It’s not just about getting a one-time purchase from a customer. It’s about getting their long-term commitment to stay subscribed to your brand.
Since you’re after committed customers, you have to take a deep dive into what makes them tick, what will make them stay, and how you can continue to cultivate strong relationships with them.
Here’s a checklist for the tasks usually involved in conducting market research for a subscription box business:
- Identify your target audience.
Come up with a user persona that should include details such as age, gender, location, interests, etc. Use tools like Google Analytics, social media analytics, and even online surveys to gather data. Surveys, especially, are a great way to gather feedback from potential customers so you can get a better understanding of their tastes and preferences. - Check out the competition.
It’s important to know who you’re going up against. Who are your main competitors, what do they offer, and how do they market their subscription boxes? These are just a few of the questions you need to answer. Other things you need to study regarding your competition: what are the gaps that they cannot fill? What is unique about each of them? - Research pricing strategies.
Determine the sweet spot for your pricing strategy. How much will you charge for your subscription box? A lot of factors come into play here—the logistics of delivery, your target market, industry standards, and your competition’s pricing strategies.
Step 2: Solidify your subscription box idea
Even though you may already have an initial idea of the subscription box you want to pursue, you will need to refine it once your market research is done.
After all, for your subscription box to stand out, you need to develop one that is unique, appealing, and will resonate with your target customers. Check out these tips:
- Mix it up. Aim to diversify the contents of your subscription box. You can combine popular products with other unique items that customers may not be able to find anywhere else. Another thing to consider is partnering with small businesses or independent artists for one-of-a-kind products.
- Find inspiration. Check out successful subscription box businesses and try to identify common strategies. Examples of the really successful ones are Birchbox (beauty), Dollar Shave Club (personal grooming), and Blue Apron (meal kits).
- Develop a strong brand image. A subscription box business is not just about what’s inside the box, but also who it comes from. Create a brand image that resonates with your target audience. Your brand should stand out and differentiate you from your competitors. Branding does not only apply to the look and feel of the products but also to your website and other marketing materials.
- Source high-quality products and systemize inventory. When sourcing products, consider important factors such as quality, price, and availability. This may involve negotiations with suppliers so you can lock in the best deals, plus ensure a steady supply of products.
Step 3: Build your website and subscription model
Target audience: check. Subscription box idea: check! It’s now time to build your website and subscription model. Here’s a quick list of what you need to build your website. (Don’t worry, we’ve made it simple and easy to understand even for non-technical people!)
- Choose an eCommerce platform. Select a reliable one with a wide range of features and integrations. Some platforms you may want to look at first are Shopify, WooCommerce, and BigCommerce. These are proven eCommerce platforms that can be customized according to your preferences. Plus, they’re user-friendly too!
- Decide on your subscription model. Choose among replenishment, curation, or access. You will also need to decide if subscriptions will be monthly, bi-monthly, quarterly, or annual. Tip: Consider offering discounts for longer subscriptions!
- Design your website! You can hire a website designer to do this for you—but the important thing to keep in mind is this: your website should reflect your brand image. It should draw in your target audience and entice them to subscribe. Another thing to keep in mind: make sure that your website is optimized for mobile devices. A lot of customers shop via smartphones. In the US alone, mobile eCommerce spending surpassed $387 billion last 2022.
- Add the subscription functionality. The subscription functionality should be added to your website so that customers can sign up, manage their subscriptions, and even cancel if needed. Depending on the eCommerce platform of your choice, you may need to install a plug-in or just turn on the feature.
- Set up the payment processing method. Select a payment gateway that is compatible with your eCommerce platform and offers secure payment processing. Popular payment gateways include PayPal, Stripe, and Authorize.
- Test and refine before launching. Don’t forget to test every feature of your website before launching it publicly. Ensure that the subscription model is working smoothly and that customers are being charged correctly.
Step 4: Launch your subscription box business
Now comes the fun part! (Also the most gut-wrenching and anxiety-inducing part.) It’s finally time to launch your subscription box business and put it out in the world.
Before you do that, review this list for other things you need to set up before you launch.
- Test the waters.
Before you go all out in your launch, consider a “soft launch” or an “insider’s look.” Other brands usually do a pilot program and launch to a few potential customers. You can then gather feedback to help you refine your offer before you launch to a wider audience. - Create buzz early on.
Start hyping up people and creating excitement before your official launch date. A lot of new brands outsource this to marketing agencies, so that’s something you may want to consider. That way, you can focus on business operations. - Set up a customer service strategy.
Since subscription businesses are all about customer retention, an excellent customer service strategy is essential. It’s important to go above and beyond. Remember, customer retention is the name of the game and customer churn should be kept at a minimum.
A word of advice: involuntary customer churn also happens! This is what is known as a “silent killer” of subscription businesses—customers who churned without their knowledge due to lack of funds, change of payment method, or detection of fraudulent credit card activity. That’s why it’s recommended that subscription businesses have a system in place for recovering payments and lost revenue. - Develop systems for inventory and logistics.
As your subscription box business grows, you will need to eventually develop systems to handle your inventory and shipping logistics. Even your customer service will be too much to handle at some point. If you don’t prepare for these early on, there will be shipping delays, product quality issues, and unsatisfied customers.
- Evaluate your launch results and adjust.
Launching is not the end—it’s actually the start! After your official launch, do take the time to evaluate your results. Consider what worked and what didn’t. Did all the technical stuff work correctly? Also, don’t forget to pay attention to feedback from your first customers so you can refine and make improvements as needed.
Step 5: Time to scale your subscription box business
What’s next once your subscription box is up and running? The next step is to scale your operations so you can grow your business further. Some scaling strategies:
- Expanding product offerings. Add new products or create different types of subscriptions.
- Conduct marketing campaigns to drive new subscribers. You can try social ads, email marketing campaigns, referral programs, or even partnering with influencers.
FabFitFun started as a subscription box focusing on beauty and fashion. Then it evolved and now includes home goods, wellness products, and more.
Keep in mind that scaling a subscription box business requires careful planning and execution. However, if you’re able to do so, you’ll be able to build a highly profitable subscription box business that continues to grow over time.
Build a thriving subscription box business with Recover Payments
Starting a subscription box business is exciting yet challenging. Following the steps outlined above will guide you through the process starting from market research all the way up to scaling.
Keep in mind that the main difference between a subscription box business and a regular eCommerce store is the long-term relationships with customers.
At Recover Payments, we understand the unique challenges of customer retention and keeping customer churn at a minimum. The truth is, you can do everything correctly, but involuntary churn will always be a threat.
Reach out to our failed payment recovery specialists to discover how you can maximize your subscription box business.
