26 Oct Thinking Inside the Box: How to Start a Subscription Box Business
In 2010 a little company known as Birchbox started offering customers a box of beauty-related goodies that they could have delivered to their doorstep once a month for a small fee. Five years and about 800,000 worldwide subscribers later, Birchbox has become wildly successful and the subscription box business model was created. Since then the industry has exploded.
These days you don’t have to look further than your social media feed or your television to hear about the newest box being offered. It seems like you can get everything from paleo-friendly goodies to STEM projects for your kids delivered on a monthly basis.
As you open your latest Graze box, wondering which snack to try first (the Flapjacks, it’s always the Flapjacks!), it’s likely you’ve thought about a dozen ideas that would make a great subscription box, but you’re not quite sure where to get started.
Well, look no further—we’ve put together a roadmap that can help you take your subscription box idea from concept to reality.
Step 1: Find Your Passion
When you start a business, you typically want to find a market where you can make a profit, but
when it comes to curated subscription services, you need to do a little more than that. The first step would be to look at your own passions and interests to find a concept for your subscription service because it wouldn’t make sense for a bacon-loving carnivore to try and develop a vegan-centric subscription box. You want to be able to relate and love your products so you can get your customers as excited about your subscription box as you are.
Step 2: Research Your Audience
Who are your target customers? What demographic are you aiming for? One thing to keep in mind here—don’t focus just on the existing enthusiasts in your niche. Many people are drawn to subscription box services because they’re a non-threatening, lower-cost way to try new things that they’d only thought about before. If you’re starting a comic-book box you obviously want to attract the hardcore collectors, but you also want to grab the attention of the kids at the bookstore who are just starting to explore the world of comics.
So how do you go about researching your customer’s and what they want? The concept may seem intimidating, but really it’s about talking to people and analyzing the data you gather.
Talk to people—either face-to-face, over the phone, via email or through online surveys. For subscription boxes, a great place to start may be local meetups related to the niche you’re targeting. It can be a great place to meet other enthusiasts and get a feel for what they’d want to see in a subscription box. Other ideas might include visiting local businesses that your target audience might frequent or joining online groups and forums that target your subscription box theme. Finally, keep an eye out for bigger events – like conventions or trade shows—not only is that a place to meet your target audience, but it may also be a great place to connect with potential vendors (see step 5).
Step 3: Decide on Your Subscription Model
Stay away from long-term commitments or contracts. In the subscription box world, that’s one rule you don’t want to break. Requiring customers to commit to a long-term agreement is a surefire way to limit your audience significantly. Instead, decide whether this will be a monthly or bi-monthly box and whether you’ll allow customers to pre-purchase a few months’ worth of subscriptions in advance (e.g., 3, 6 or 12 months worth of boxes).
Multi-month purchases are definitely the goal, so be sure to offer incentives for customer’s who sign up for those. Some suggestions include a discount that lowers the cost per box and tossing in extra products to sweeten the deal.
Step 4: Put Together a Prototype Box
Find some products to create your first box and then ask yourself, is this a box I would be excited to receive? If the answer is yes, then move on to Step 4; if not, go back and re-think your choices.
Remember, each box is a new chance to keep or lose a customer, so you want to keep them coming back for more.
Once you have your prototype put together and you’re happy with it, show it to others and get their input. Ask them how they feel about the box, what they’d change, and how much they’d be willing to pay. Also, be sure to ask them if they’d consider ordering it again.
Step 5: Find Your Suppliers
This may be one of the harder steps as you need to find suppliers who will sell you products at a price that allows you to offer a good value to your customer. The challenge is finding suppliers that are willing to cut you a deal when you’re just starting out.
The good news is that subscription box consumers are used to the concept of pre-ordering, so you can use pre-launch numbers (see step 8) as a way to get suppliers to work with you. Another idea is to target smaller businesses that are more likely to work with you in exchange for getting the word out about their products.
Google searches for “wholesale suppliers AND your product” are your best bet; however, there are also companies designed to connect you with wholesalers across multiple industries. Check out Worldwide Brands & Salehoo. Another resource would be to check out local trade shows, festivals, and even farmer’s markets if you want to target small-batch products.
Step 6: Figure Out Packaging and Shipping
Your packaging will be your business card. You want to be able to offer low-cost shipping to your customers, so design your packaging with that in mind while still creating something memorable.
There are tons of resources out there for packaging. Uline is a great option if you want to start out simple and keep costs low. They offer a wide range of standard boxes and some packing materials that you can customize.
Shipping costs could make or break the whole process. Chances are USPS.com is going to be your best option. They’ll have the lowest prices for domestic shipping. If you plan to ship international, then you may want to compare prices at DHL or FedEx.
Step 7: Price Your Subscription Box
Now that you have an idea of how much your products will cost and what it’ll take to package and ship them off, it’s time to set a price. The key here is to find a middle ground between pricing too low and being perceived as offering ‘cheap’ products and going too high and pricing out a lot of potential customers. It’s a good idea to look at the competition to see where they are with pricing, then get close to it or be sure you’re offering something that makes any extra cost worth it.
Not sure if you’re on the right track? Cratejoy has this awesome Subscription Box Cost Calculator that will help make sure you’re on the right track.
Step 8: Launch Your First Pre-Sale Campaign
Get your website up and start marketing yourself. Word of mouth, social media blitzes, viral videos and free box offers are going to be your main tools during this phase. The revenue generated by your first pre-sale will go directly into creating and shipping your box of curated treasures.
If you have the budget and time, consider contacting bloggers and other social media users and offer them a pre-launch version of your subscription box for free (or the cost of shipping). In exchange, you can ask them for honest reviews and feedback that you can use to improve your box and to promote it during your pre-sale stage.
Step 9: Celebrate and Get Referrals!
A strong referral program will help keep your business thriving and growing. Offer incentives for existing customers to refer their friends such as free products or boxes for both your existing customer and the friend they’re sending your way.
Ready to get started but intimidated by the challenge of putting together all of the back-end pieces? Check out services like Cratejoy that allow you to create plug-and-play subscription box websites with all the necessary bells and whistles, including referral programs. Cratejoy also offers a shipping solution with prices lower than what you may be able to get on your own.