There has never been a better time to start a subscription box business. In 2021, the global subscription e-commerce market was valued at $72.91 billion, and it is predicted to reach $904.28 billion by 2026. Entrepreneurs looking for a lucrative business opportunity and the substantial profits that come with it should take note of this.
Although the subscription box industry is flourishing, that does not mean your company will follow suit. You should be well-versed in the specifics of starting and maintaining a successful e-commerce subscription business.
Thus, if you want to learn everything you need to know about running a profitable subscription-based e-commerce business, this article is for you.
What Is a Subscription Box Business Exactly?
In simple terms, a subscription box business model is centered on delivering customized products to customers on a routine basis and charging these customers a recurring fee.
Traditionally, subscription box businesses share the following characteristics:
- Habitual need
- Recurring deliveries (weekly, bi-weekly, monthly, quarterly, or annually.)
- Recurring payments
- Themed boxes.
In addition, subscription-based e-commerce businesses can be further classified according to types. The three most common ones include
- Curated Boxes – a themed collection of carefully chosen products to suit the particular interests of the target buyers.
- Replenishment Subscriptions – auto-delivery of essential items that customers replenish regularly.
- Access Business Model – an exclusive box that gives access to unique products that are not widely available on the market.
Benefits of Subscription Box Business
The subscription box model has advantages over traditional e-commerce businesses, making it an attractive choice for aspiring entrepreneurs. Moreover, if you are already running an e-commerce store, you can always introduce a subscription box to diversify your online sales strategy.
So, what are the advantages of a subscription box business? Let us walk you through the most important ones.
A Steady Stream of Measurable Revenue
For any business owner, the number one concern is stable sales and predictability. One of the clear advantages of a subscription business is that you can estimate your income due to the recurring nature of the payments.
Since your customers are “locked in,” it becomes easier to predict how much revenue you are going to generate month by month.
Solid Profit Margins
Subscription-based e-commerce store owners can enjoy healthy profit margins, ranging from 40% to 60%. If you buy products in bulk, manage your shipping costs and increase the perceived value of your subscription box in the eyes of your customers, you can enjoy even greater profits.
Upselling and Cross-Selling
Subscription companies have a higher rate of returning customers, which makes it easier to sell additional products to them and improve your recurring revenue.
Maintaining Consumer Loyalty Is Simpler
Subscription box business generates excitement. If you nail the product-market fit, you can enjoy a loyal audience who will subscribe to your service for the years to come.
But, you may wonder, what elements of the subscription box are essential for repeat business? One study suggests that 52% of consumers stick with a subscription service that offers the best value for the price, while 48% desire to get high-quality items in their subscription box.
How to Start a Subscription Box Business Step-by-Step
Niche Down Your Subscription Brand
Do your market research, and do not start with just any product. Identify what would stick with your consumers. There are many subscription-based businesses in the US; some are more established than others. However, you must carefully research your competitors and decide how to differentiate from them.
Decide on the Right Subscription Model
Both curated and replenishment subscription box models make up 87% of the e-commerce subscription market, according to data presented by McKinsey and Company. You must decide which one suits your business idea better.
For example, a curated box is a way to go if you plan to launch a cosmetics subscription service. On the other hand, if your brand is about pet food and treats, the replenishment model is a wise option. Above all, ensure that you evaluate the advantages and disadvantages of both subscription models.
Invest in a Solid E-commerce Site
The subscription process starts on your website, and you need a good one to manage your subscription program and recurring payments without friction. Consider the likes of Shopify, BigCommerce, and WooCommerce.
Do Your E-commerce Merchandising Right
Subscription-based business differs slightly from traditional e-commerce stores because you do not have to display endless catalogs of products. Nevertheless, your site needs to “work for you” while optimizing the subscription pathway for your customers.
Therefore, plan out your e-commerce merchandising strategy to have the best chances of locking in your box subscribers.
Need tips on how to perfect your e-commerce merchandising strategy? Take a look at our blog, where we cover it all.
Smash Your Marketing Strategy
To attract customers to your e-commerce store and convince them to subscribe to your service requires you to invest in numerous marketing channels. Because how else are they going to learn about your company’s products? So, spend time refining your marketing approach.
Plan Your Subscription Box Fulfillment
Nothing trumps a guaranteed, timely, and fault-free delivery for a subscription business. Your customers’ anticipation is building, so ensure you do not disappoint them.
The biggest question for you is whether to keep this critical part of the process in-house or outsource it to a third-party fulfillment provider. This depends on numerous factors, from the volume of the orders to the variability of your products.
However, when your subscription business grows, fulfilling orders will become burdensome and time-consuming, forcing you to shift your attention away from your company. For this reason, you might want to hire a fulfillment partner like PhaseV who can handle the entire process.
And, now, the best part… Your business is ready for the launch!
Conclusion: Partner with the Right Fulfillment Provider
What can truly set you apart in your e-commerce subscription box ventures is the reliable fulfillment partner that can manage the end-to-end process and spearhead your business to success.
Phase V specializes in subscription box fulfillment, helping you reduce costs and grow your company.
Reach out to us now, and let us handle the rest.