Why There Has Never Been a Better Time to Create a Subscription Box Service

Why There Has Never Been a Better Time to Create a Subscription Box Service

I see them everyday in my Newsfeed, providing me with a short-lived escape from my adult life of mind-numbing routines and responsibilities (who needs any of that?): No, I’m not referring to the cheesy inspirational quotes and puppy videos (ok, I receive those too), but rather the sponsored posts asking me to sign up for a subscription box service. If you spend even a quarter of the time online that I do, you’ve likely come across such an ad or two yourself. Those monthly packages serve endless niches, from dog treats and beard care, to even makeup. What they all have in common though, is the way they operate.

The sub box model is a simple-to-grasp, yet very lucrative way to deliver goods to people who already have high buyer intent. The steady increase in subscription box searches since 2011 shows that this concept has made its way into mainstream consumerism in the States and in the UK. Thus, if you are on the fence about starting up a huge project to consume more than just your weekends, there has never been a better time to start a sub box.

Disclaimer: The barrier of entry to own and operate a sub box service isn’t lower, but rather that the amount of resources available, such as investment capital and how-to guides, has skyrocketed in the last five years. One of many such examples is BirchBox, which has raised $71.9M in funding.

The general subscription model has its benefits, with the first big one being recurring revenue. There are many fixed costs on the other hand, like manufacturing or sourcing, employees, and shipping. As long as you don’t pay more to get customers than you make back from them (acquisition cost), you’ll have a lot fewer reasons to stress out.

So why is now such a solid time to consider launching a sub box? If you had tried to start a subscription box before 2011-2012, you would’ve immediately noticed the lack of valuable case studies, such as this one written by Rohan Gilkes of Wet Shave Club. He lists some of the processes he and his partner Kevin Pereira undertook to grow their sub box company from a tiny operation to become part of a group of businesses. Some of the steps are especially valuable, like how he reached out to social media influencers and ran contests through Gleam.io to get website traffic.

His team manages a Facebook support group for subscription box and service-based business owners, where as a sub box owner in the auto detailing niche, I enjoy plenty of advice about various tools, strategies, and even free critique. One such tool is a website speed analyzer, which breaks down where a website’s load time can be improved, thus making the experience better for visitors.

Before you throw an assortment of your guilty pleasures together into a pretty little box, smack some postage on it, and drop it off at the nearest post office, you should probably know about some “niche” problems that invite themselves back from time-to-time (relax, I don’t mean your creepy ex  trying to check in). On the monetary side, you will see fraudulent orders and payment disputes, called chargebacks when you lose. Your payment gateway, like PayPal or Stripe, can close your account if you have too many, because they themselves view you as a risk. When it comes to shipping, stuff will go missing, even with tracking numbers. If you have international customers, the risk of shipping goes up.

As with any new startup, one of the leading reasons for a subscription box to fail is–you guessed it–keeping an affordable cost of acquiring customers and retaining them. Get a handle on this part as soon as you can. It will take time though; nailing that perfect balance of cost-effectiveness is probably the hardest thing you’ll do. On the other hand, if you don’t properly test and tweak your marketing strategy, it will be the most expensive mistake you’ll ever make. Most of your resources (especially in the beginning) should be poured into marketing, period.

I recently had the opportunity to build a sub box website for a friend’s loose leaf tea store, and in while doing so, I learned just how many A/B tests you might do just to get a handful of customers (a lot). Every little detail must be tested, from the color pallette of the photos in your ads, to which social media platforms you put them on. Study successful advertisements like this Facebook ads case study and run some tests of your own. Grow a following on Facebook and Instagram for social proof. You can even use automated tools to reach out. Make sure you build some quality backlinks from respected online sources to get traffic, or hire a trusted SEO expert to figure it out for you.

The resources mentioned here are living proof of just how much is out there to help you create a new sub box business. I repeatedly see people dismiss the sub box model as the “latest fad” or an unsophisticated, low-entry business, however that couldn’t be further from the truth. There are tons of us out there, yes, however only the strong (or in this case valuable) will survive. Just remember, the general concept of subscriptions has been around for decades and isn’t going anywhere anytime soon. On that note, I encourage you to consider a sub box for your next venture, just as I have chosen to do.

Skills

Posted on

September 8, 2016

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