Online subscription based businesses are a great way to make recurring monthly revenue. Starting a subscription box is a simple idea that anybody can turn into a profitable business. In this post we’ll look at why you should consider starting a subscription box business and how to get started.
Before starting a business it may be beneficial to read the following blog post covering these 16 common business mistakes to avoid.
What Is A Subscription Box?
Subscription boxes are gift boxes containing items centred around a niche or theme. From food to pets to health and beauty, there are countless niches for subscription boxes. They can be subscribed to online and are delivered to the recipients address on a scheduled basis. Boxes can be delivered over different time periods but most often are monthly. Customers purchase subscription boxes for the convenience they offer.
The Benefits Of Starting A Subscription Box
There are several benefits to starting a subscription box business. The main benefit being a predictable and reliable revenue stream. It also ensures good cash flows as payment is usually received from the customer upfront. This can make planning and inventory management much easier when compared to selling one off ad-hoc items.
The subscription model also lends itself well to customer retention. From regular purchases you will gain a greater insight into customer behavior. It will allow you to offer greater personalization and tailor offers to your customers to satisfy their needs. This can help build brand loyalty and keep them coming back to you rather than choose a competitor.
Do you already run an eCommerce store? You could consider adding a subscription box as an alternative to your current offering, creating a hybrid revenue model.
How To Create A Subscription Box
Find Your Niche
Starting a subscription box begins with a great idea. The first step is to find the niche you want to operate in such as beauty, food, fashion etc. There are many niches to choose from, some popular sectors are;
- Food & Drink
- Health & Fitness
- Beauty
- Fashion
- Arts & Crafts
- Pets
- Alcohol
- Technology & Gadgets
- Specialist Hobby
Try to narrow it down to a more specialized smaller niche that caters to the needs of a specific audience. For instance if you wish to offer products within the beauty niche then you need to narrow it down to a further sub category. This could be offering vegan only beauty products or products that cater to a specific skin type etc.
Although the audience may be smaller, it is far better to market to a specific audience where your product meets a need than a broader audience.
Need some inspiration in starting a subscription box? Take a look at these subscription box business ideas.
Research Your Competitors
Once you’ve identified a niche for starting a subscription box, you’ll need to conduct research to check what competitors you have operating in that niche.
A good place to check competitors are online subscription marketplaces such as Cratejoy. Find how many other boxes are offering similar items to you and what their price points are. It may be a good idea to purchase a box from your main competitors to assess the quality. You can then see how you can improve upon them to differentiate your offering. Lootcrate are another good option for inspiration on more pop culture boxes.
Competition can be a good thing. It shows that there is money to be made in a niche, although too much competition can be harmful. You don’t want to be cutting prices and reducing profit margins in order to compete with others.
You’ll also need to plan what your target audience demographic is such as age, gender, income etc. When researching competitors you will be able to gain insight into the types of customer they are attracting.
Pricing Your Box
After you’ve put together an idea for a subscription box and conducted research it’s time to price up your box. There are several costs that need to be taken into consideration, these include;
- Product cost
- Boxes and packaging materials costs
- Shipping and fulfillment costs
- Advertising and marketing spend
- eCommerce platform and transaction fees
Price your box too low and you erode your profit margins, price too high and you risk losing sales. Cratejoy has a handy subscription cost calculator that can help identify the minimum price you should charge.
There are many pricing strategies that can be used, view them here; Pricing Models And Strategies.
Create Branding And Prototypes
The next step is to create your branding and put together a prototype box for marketing. First choose a selection of the types of products you will be selling and start to create high quality images.
You do not need to use the exact products but it should be a good representation of the type, quality and quantity of products you intend to include in your boxes.
Never mislead potential customers by using higher value or different types of items in your promotional materials if you have no intention of including them as this will lose trust and hurt your brand.
Once you have a collection of sample products it’s time to find your ideal packaging. It doesn’t have to be limited to a box. There are plenty of packaging options to choose from such as card mailers, bubble envelopes and boxes. It will largely be dependent on the type, size and fragility of the items you will be shipping.
You’ll also need to consider which size of packaging you will require. Utilizing the most effective sized box for your product will help minimize shipping costs.
Branding & Design
Now you’ve settled on the type of packaging materials to use it is now time to focus on design and branding. Do you want fully branded packaging, stickers and labels? A simple and cost effective way to create your designs is by using the services of a professional designer on Fiverr. This method will save a lot of time.
Pre-launch And Marketing
Before launching it is good practice to gauge interest in your product first through pre-launch marketing. Set up your social media pages to promote your launch, drive traffic to your launch page and encourage email sign ups. Facebook, Instagram and Pinterest are all good social media sites for promoting your products. Your pre-launch period should have a time frame of between 1-2 months.
A good place to start is LaunchRock. It helps new startups build and launch sites and acquire early customers. Another good option is to use Cratejoy’s pre-launch campaign. Cratejoy is an online marketplace specifically designed for subscription box sellers.
Essential sales and marketing terms you need to know; Marketing Terminology.
Sourcing Products
Sourcing products that are high quality but low cost is an important step. There are many ways to source products and where you go can depend on what types of products you are selling. You have two different options – free or paid products.
Free Products
Free products can sometimes be obtained from brands and manufacturers that you are able to include in your subscription boxes. This will usually be samples of new items that the manufacturer wishes to promote. And allowing another business to distribute them for free to potentially thousands of new customers is a beneficial marketing tactic.
Products provided to you for free can greatly increase your profit margins as you aren’t responsible for the product cost. It can also be attractive as it gives you more leeway on pricing your boxes to customers. It could allow your boxes to be both low cost and highly profitable.
There are however some disadvantages to this method. For starters it will be more time consuming as you will have to pitch to the product manufacturers to really sell your business and how it can benefit them. Good sales and networking skills are a necessity. There will also be less control over the products to include in your boxes as you will be reliant on what the manufacturers are able to provide you.
Paid Products
The usual method is to purchase the products for your subscription boxes. By paying for products you are in full control and can pick and choose everything that is included. There are a multitude of ways to source paid products including wholesalers, retailers and manufacturers. We’ll explain each one below.
Wholesalers
Wholesalers sell products in bulk to other businesses to resell. Good examples include AliExpress, Kole Imports, Spocket and SaleHoo. As products are purchased in large quantities, significant price discounts can be achieved. Although it is worth remembering that there are usually relatively substantial minimum order volumes. The types of products will also tend to be more general mass produced items rather than unique, hard to find or one off items but there are some niche wholesalers.
Find top US, Chinese and European suppliers for your business.
Retailers
Traditional retailers are also an option – either eCommerce or traditional bricks and mortar stores such as Walmart. You may find a wide variety of product options and may also find discounted offers. Although you are unlikely to be able to source products at a lower price than buying in bulk at a wholesaler. You may find more unique or hand crafted products at local stores.
Manufacturers
You can source products directly from manufacturers. This is especially useful when you want something customized to your brand or completely unique items.
Set Up Your Website And Start Selling
When it comes to creating a website and selling online there are lots of different options. There are many easy to use eCommerce platforms including WordPress and Shopify. These platforms make it easy for a beginner to build a website as no coding is required.
However there are still a lot of things to set up and integrate such as mailing lists and payment processing which can be time consuming. It is often beneficial to hire a freelancer on Fiverr to create a professional website for you.
The Cratejoy platform is a great alternative as it is an online marketplace designed specifically for selling subscription boxes. So you can both build a website and list your subscription boxes on the online marketplace.
This is a helpful option for beginners as it offers an easy set up experience with marketing features and easy access to an online marketplace. But a drawback to this is that transaction fees are likely to be higher and you may have less control over your website.
With a WordPress website there are countless plugins to help with everything from social media management to marketing and more.
You could choose one or both of the above options. It will depend on your experience, budget and time constraints as to which path you wish to go down.
Running Your Business
Once your site is up and running you are ready to take orders and start shipping your subscription boxes. Remember to keep marketing your site through your social media channels and consider using paid ads or using affiliates to market your products.
Paid ads through the likes of Google or Bing will help increase traffic to your site by displaying ads on search engines.
Affiliates will promote your products to their audience and receive a percentage on any sales made from their traffic. Utilizing affiliates is a fantastic way to grow a business as it can generate lots of high quality traffic quickly. Some of the best affiliate marketing platforms to join are ShareASale and FlexOffers.
Effective marketing is something many people struggle with. If this is you then once again Fiverr is your friend. Any element of running a business that you require assistance with you can be sure there is an expert on Fiverr able to help.
Starting A Subscription Box Conclusion
To recap, a subscription business can offer reliable recurring revenue streams. One of the most popular type of subscription business is a subscription box.
As we’ve seen, starting a subscription box is quite a straightforward process to follow. However you must put in time, hard work and dedication to ensure any kind of success.
If you are looking at starting a subscription box business, first think of a niche and narrow this down. Then do lots of research on competitors, pricing and target audience, order boxes from your competitors to assess quality. The best place to find the largest variety of subscription boxes to assess is Cratejoy.
Create your brand and design a prototype box that you can pre-launch to gauge customer interest. If the response is positive then you can proceed to source products which can be either free or paid.
Create your eCommerce store and begin to take and fulfill orders. Ensure you analyse your customer behavior for spending habits, interests, demographic etc.
Analyzing data allows you to adapt your product offering, pricing and personalization. This will help to retain customers, up-sell and cross-sell products and improve margins. It’s also important to implement an effective marketing strategy. You can utilize many free and paid methods including ads, emails, social media and affiliates.
For anybody willing to put in the hard work there is a growing market for subscription boxes and many under-served niches to be exploited. Picking the right niche along with good quality products, sensible pricing strategies and marketing effectively could prove very profitable.
Please view our blog for more content like this including;
- 50 ideas to create online income streams
- Why you need multiple sources of income
- Things to know when starting a business with friends
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