A Beginner’s Guide To Creating a Subscription Box Service
by Carl Wasinger
In today’s economy, retailers cannot afford to let their industry’s notorious unpredictability continuously chip away at profit margins. Their success depends on their abilities to not only forecast demand but also stabilize their income in general, ideally with the help of a loyal customer base.
One of the most sensible paths to this goal is starting a subscription box service. Hailed for their low costs, a subscription box is a recurring service that delivers a curated selection of items directly to the subscriber’s home. Subscription boxes can contain everything from dog treats to home goods to electronics to beauty products.
Most subscription box services target a very specific niche and highly focused audience. From there, it’s all about following a specific process for curating products at regular intervals and mailing those products out to a subscription audience. But first, it’s important to explore why subscription boxes have become such a popular business model.
Recurring deliveries of subscription boxes are typically paired with recurring payments from customers, which creates a steady and predictable source of income for the business. This makes it much easier to plan for future expenses. Similarly, the subscription model enables businesses to accurately forecast demand for different items and order appropriate amounts of inventory. By minimizing deadstock inventory, subscription models can produce remarkable profit margins, sometimes as high as 60 percent.
Researching your idea
Step one in creating your own subscription box service is to determine if your subscription box idea is worth pursuing. If you’re not sure, you might want to ask yourself two questions. First, does your box cater to a sizable but highly specific market? And two, does your box feature items your customers want to acquire on a recurring basis? If you can say “yes” to both, you can move on to the next step, which is determining how to set your subscription box apart.
Choosing your items will help you figure out an appropriate pricing structure for your subscription box. In addition to the typical cost of the included items, your price should account for the cost of packaging materials, shipping expenses, and transaction fees. Keep in mind that the more expensive boxes tend to feature highly exclusive or limited edition items that often require drop shipping. All in all, your pricing structure should aim to generate high profit margins while leaving lots of room for scalability.
With your idea and pricing structure in place, you’re ready to create a prototype box, which will help you conceptualize the look and feel you want customers to experience when they open the box. This box can also act as a visual marketing tool that shows customers what kind of products they can expect each month. On that note, this is also the point where you should set up a user-friendly website to sell and advertise your box. As part of your website, you should also implement a subscription management system that handles sign-ups, billing, and customer account management.
Planning the logistics
Now that your website is ready for orders, it’s time to ensure that your subscription boxes are prepared and delivered on time by putting efficient logistics and fulfillment systems in place. Many established retailers accomplish this by forging partnerships with third-party logistics providers, which can streamline the numerous processes involved, such as order fulfillment, replenishment, and returns processing. Third-party logistics providers can also handle inventory management and will monitor the availability of your items for you, so you never have to worry about demand outweighing supply.
When shopping for third-party logistics providers, you may consider inquiring about your potential partners’ abilities to accommodate common problem scenarios, such as unforeseen surges in demand or disruptions in the supply chain. As an experienced retailer, you know that these inconveniences are an inevitability, so your third-party logistics provider should have the same mindset.
For example, if demand for your subscription box service were to suddenly skyrocket, does your potential partner have the resources to fulfill this increase in orders on time? Contrarily, if a problem with a shipping carrier or a distributor arises, do they have a backup plan to keep operations flowing smoothly?
Another advantage of using a third-party logistics provider is that it gives you more time to focus on other vital aspects of subscription box success, like marketing. Due to the lower expenses of subscription boxes, companies tend to focus their resources on marketing quite aggressively. Since subscription boxes target highly specific audiences, you should create highly targeted marketing campaigns on multiple channels, including email and social media. Let your audience know that signing up for your subscription box is the perfect way to get to the heart of your brand without spending too much money.
As you can see, creating a successful subscription box requires a blend of creativity, strategic pricing, and the right resources to keep customers satisfied. Once you’ve launched your service, you can continuously improve your offerings to better suit your audience’s needs and solidify the profit margins that propel this booming business model.