In recent years, subscription boxes have taken the ecommerce world by storm. This trend grew even faster since the onset of the pandemic, when more people sought out new ways to keep themselves entertained at home.
Research supports this theory—McKinsey predicts that, by 2025, the subscription box market will reach a staggering $473 billion, up from just $15 billion in 2019.
So how can you, as an entrepreneur, capitalize on this trend and build your own subscription box business? That’s just what we’ll discuss. In this article, you’ll learn how to choose the right subscription-based business model, how to get started building your business, and plenty of tips for success.h
What is a subscription business?
Let’s go over the advantages of adopting a subscription business model:
- More cash on hand. Subscription companies typically receive payments upfront. Besides being good for cash flow, the buffer provides much-needed peace of mind.
- Predictable revenue. Knowing how much one has coming in every month helps you forecast everything from sales to inventory requirements.
- Loyal customers. Subscriptions allow you to personalize the customer experience, which is a catalyst for repeated purchases and customer loyalty.
Choosing the right subscription business model
First things first: you’ll need to figure out which type of subscription business is right for you. Here are the top models to keep in mind as you’re assessing your best moves.
Curation business model
This is the most common type of subscription box service. With curated boxes, your customers typically receive personalized “surprise” items whenever a new box comes in. Some top examples include Hello Fresh, BarkBox, and Ipsy.
The great thing about this model is that you can come up with virtually limitless subscription box ideas, including pet care, food, beauty, apparel, and gaming items— whatever you can dream up!
This business model can be very lucrative, but you’ll also need to keep in mind that you may have higher operating costs than many other ecommerce businesses, since you’ll need to be on top of your game when it comes to things like branding, packaging, and shipping.
Access business model
In an access model, your subscribers are paying for exclusive access to special members-only perks or lower prices. Examples of such subscription-based businesses include Thrive Market and JustFab.
As the business owner, you’ll reap the benefit of offering more value to your customers in the form of personalization. You’ll be crafting special perks to make your customers excited about your brand, which will, in turn, create a deeper connection with them (and make them more likely to stay loyal and recommend you to their friends).
Replenishment business model
In this subscription box business model, a brand replenishes or “restocks” certain items for customers on a regular basis. A famous example is Dollar Shave Club, which keeps customers stocked on shaving items (in addition to the curation model of throwing in some extra goodies).
You’ll need to be more particular about the items you offer in this model, because they’ll need to be things that should be regularly replenished. There’s been a lot of success with things like toiletries, foods, vitamins, and pet care supplies.
In comparison to other subscription businesses, this model often has a higher customer retention rate. Customers value the replenishment, so they’re often on board for a long period.
Add-on subscription model
Technically, this isn’t one of the fundamental subscription business models. With the add-on model, you’re essentially offering a subscription service as an extension of your existing business. This can be helpful for entrepreneurs who already have an established company, but still want to dip their toes into the world of subscription box businesses.
How to start a subscription business
Like any other business, there’s no single right way to start a subscription business. But there are some basic steps you should follow to get your company (or add-on offering) up and running. Let’s take a look.
Pick your subscription idea
Do you have an existing business that you can add subscription boxes to, like a clothing or personal care store? Or, are you interested in starting a completely new business from scratch?
In addition to this fundamental question, here are some more questions to ask yourself as you’re choosing a business idea:
- What are you passionate and/or knowledgeable about, to the point where you can make a living offering it to your customers?
- How will you create or source your products? Can you do this reliably for the indeterminate future?
- Are there any untapped markets or niches that you think you can successfully fill?
- Is there a demonstrated audience that has shown interest in buying the types of items you’re interested in selling?
Choose your subscription products
Select the type of items you want to offer in a subscription each month. This is where you want to start reaching out to brands to build partnerships. Convey your idea of curating products in an appealing way to encourage companies to work with your business.
You can even create a sample subscription or “prototype” box to give new customers an idea of the types of products they’ll receive each month.
Although you don’t have to be completely accurate with it, make sure the products you’re lining up for promotional campaigns match the type of items you’ll actually be sending.
Price your items
Once you’ve finalized the types of products you’ll be offering, you can start pricing out your subscription.
There are multiple ways to go about it:
- You can charge subscribers a flat fee per month.
- You can charge subscribers based on how often they use the service.
- You can offer different subscription levels at different prices.
For instance, Variety Fun offers two different versions of its snack subscription box: a Fit Box that’s more expensive and has healthy snack choices, and a Fun Box that’s cheaper and focuses on classic snacks.
You’ll want to price your subscription box at a point that appeals to your target audience but also ensure you make a profit. It won’t be feasible to charge only $20 for a box that costs $25 to put together.
Factor in the time and money you spend creating a subscription box, then add a margin to determine a realistic selling price.
Create your website
Your website is a critical piece of the process, especially when it comes to a store that runs completely online. Make sure your website is clean and beautifully showcases your brand.
You’ll also want to be sure that the user experience is on point. This means it’s critical that customers can:
- Navigate your website easily and intuitively
- Understand your offerings and what’s inside each of them
- Relate to your products and know how they’ll benefit and enrich your customers
- Find answers to their questions quickly and clearly
- Add products to their cart and checkout smoothly
Shopify has tons of helpful tools, features, and apps to help.
You can easily create a subscription offer by using any of these subscription management apps:
- Recharge Subscriptions. Quickly create and manage subscriptions for your Shopify brand.
- Awtomatic Subscriptions. Easily add subscription options to your products and transact customers via Shopify’s native checkout.
- Bold Subscriptions. Customize, manage, and scale a subscription service.
- Appstle Subscriptions. Offer products and services on a recurring basis.
Market your new subscription business
You can have the most magnificent website and company in the world, but if you don’t do a good job marketing, you’ll have a hard time succeeding.
Marketing can be tough, but there are plenty of ways to do it right and make sure your business gets seen by the right people.
Here are some top tips for creating a killer marketing campaign for your new subscription box business:
- Create a robust social media presence and post regularly—make sure it includes high-quality photos of your products.
- Tap into influencer marketing to work with online influencers who want to promote your brand.
- Build an email list to send regular newsletters about your brand, your background, and current offers.
- Become active in online communities of people who would be interested in your brand.
- Consider hosting contests and giveaways to get more traction and get people talking about your brand
- Consider advertising on platforms like Facebook Ads and Google Ads.
- Make sure your branding is consistent across every single marketing communication you make.
Building a successful subscription box business
Starting a new subscription services business can seem daunting. But once you’ve done your research and crafted a solid plan, all that’s left is to take it step by step. Just remember to think carefully about the type of company you want and how you’ll connect with your audience.
With some strategy, patience, and a willingness to learn as you go, the next big subscription box brand might just be yours!