How to Start a Subscription Box Business?

March 30, 2023

Starting a subscription box company is a lucrative business model designed to keep income flowing with less effort than stocking and selling inventory on demand.

Your subscription box business can include anything trending and interesting to you. After all, business owners should love their products just as much as their customers do! Let’s learn more about how this works.

Key Takeaways:

Building your subscription box business takes a lot of planning and day-to-day management at a granular level.
To succeed, you must curate unique items from reputable brands to help you keep your business on track and maximize ROI.
Consider partnering with a 3PL to offset shipping challenges costs and volume fluctuations, thus improving your bottom line and time.

Subscription box overview—understanding the business

Explanation of subscription box business

Subscription box businesses offer a curated box of goods to customers delivered on a recurring basis. Business owners can build a subscription box model through recurring custom orders or curated boxes of exclusive goods. This lucrative business model can offer products at different intervals based on what works best for the target market.

Over recent years, businesses offering curated boxes have grown substantially. While a subscription box business typically offers a box of curated goods, this type of business may also provide custom standing orders (like supplements or pet food) only available to box subscribers. Subscription box companies can get incredibly creative and tailored, creating a unique customer experience.

Subscription boxes are available for just about any niche you can think of. Some popular boxes include fitness products, gourmet food items, coffee-themed boxes, clothing, hair care, children’s products, hobby-related items, makeup, decor, and luxury items.

If there’s a marketable interest in something, you can likely build a box business around it!

Benefits of starting a subscription box business

Starting your own subscription business comes with a variety of benefits. This business model will allow you to predict revenue and plan your finances with more stability than a traditional e-commerce business. A fixed number of subscribers will help you determine your income and expenses ahead of time, which helps with budget planning.

If you want to tap into a new market or broaden your current customer base, starting a subscription business may be a great choice to get a feel for marketability. When offering subscription products that appeal to multiple demographics, you can reach customers who may have yet to discover a particular product.

A subscription box company is also scalable. You can start by offering the box to a limited number of subscribers or with a smaller box. As your business catches the interest of your ideal client, you can start adding thematic boxes, new products, and services. You can be creative with your business and adapt to your customer’s wants and needs.

Subscription boxes are rewarding to entrepreneurs and very exciting to customers. Let’s take a look at how they started.

A brief history of the subscription box business

Subscription box companies started planting roots in the late 2000s and early 2010s. These companies answered customers who wanted a more curated and personalized shopping experience.

Birchbox and Ipsy were some of the early adopters in the subscription business model. They offered a branded box of beauty products designed to introduce new products to customers and cut down overwhelm at the cosmetics counter. Their boxes were tailored toward specific customer needs. From there, subscription box companies have grown and diversified. Major retailers like Target and Nordstrom started offering their own subscription boxes.

It’s now common for subscription box companies to leverage social media influencers to promote their subscription business by offering free or discounted boxes in exchange for compelling content geared to generate leads and increase subscribers.

Perform Market Research

Identifying the target audience

Before you decide on product offerings, you must do your homework. You’ll need to understand your audience and their needs to market your subscription business correctly.

Start this process by conducting market research. You can do this in a variety of ways. Some things that work for others include online or paper surveys, focus groups, and gathering information through other means to help understand your audience’s preferences.

Evaluate your customer data.

If you already have a customer list, look at their purchase history, shopping patterns, and preferences. Take special note of customers who have purchased similar items and those who have expressed interest in a subscription box in the past. This information will help you as your subscription box business takes shape.

Pay attention to social media.

Researching how other subscription box companies use social platforms is a great way to get customer insight. Watch commonly used hashtags and engage with your target audience in posts and comments on social media.

Consider a trial subscription option

Finally, consider offering a trial subscription. A subscription box trial will allow you to gather feedback and continue analyzing the wants and needs of your subscription model and customers.

Analyzing the competition

If you are going to offer a successful subscription model, you must diligently research the competition. Start by studying the industry that your subscription box belongs to. You can then branch out and look for other subscription box companies within that industry.

Next, use search engines to find keywords related to your product or niche market. You’ll want to pay close attention to those subscription boxes featured on the first page of search engine results.

Check social media for competitor information and pages. Capitalize on what they are doing right and provide better options for what they are not doing as well as they could.

Read the reviews! Thoughtful business reviews often tell all. Look and see what patrons are saying and build your business off of those pain points and praiseworthy items as well.

Building your subscription box

Selecting a niche and a product

Once you’ve had a chance to perform comprehensive market research, start focusing on a niche that makes sense for you.

In addition to running with a marketable idea, it has to be something you enjoy and will feel compelled to develop long-term. Ensure that your market analysis supports a niche with significant demand and the opportunity for substantial growth and sustainability in the short and long term.

Because subscription box success doesn’t happen overnight, be committed to whatever you choose and work from that point. Once you’re confident about your niche, you can vet reputable, reliable suppliers who can provide quality products in line with what your customers need and want from a quality and price perspective.

Choosing the frequency of the boxes

The frequency of your subscription box depends on several factors. First, you’ll want to understand your customers’ expectations. Check on other companies offering similar products; how frequently do they release a new box? What are the industry expectations? You’ll need to consider several factors when managing your subscription business.

The type of product you’re offering plays a role. If you’re offering products with a shelf life, those boxes may need to go out more frequently than boxes containing a product that will remain stable.

Evaluate how frequency affects cost. The more often you send subscription boxes, the more it will cost in packaging, labor, and shipping. Many of these things will affect how often you send a box that meets or exceeds the customer’s anticipated value.

Also, how often can you vary the content? If your box has seasonal limitations or relies on vendor releases, you must plan your subscription box model accordingly.

There is no single source of truth regarding how often you should be sending boxes. Understanding your audience, experimenting where you can, and determining what works best for your business and customers are essential.

Determining the price of the box

The price of your monthly subscription box isn’t based on your cost of goods alone. You’ll have a lot of research to do when it comes to pricing out your box fairly and reasonably to your target market. A subscription box business model is like any other business. Let the research be your guide first.

When looking at different subscription box models, strongly consider your target market. Who will be ordering these products? What are they willing to pay? Can I offer quality contents and still make a profit on the box? These are all things to consider as you set up your box business. You’ll also need to check initial expenses. Be sure to evaluate many options when it comes to start-up expenses.

Ask others in the industry and ensure you’ve covered all details before committing. Let them also be your guide. Start-up costs include establishing a business, trademarking, legal fees, branding, packaging, shipping, technology, purchasing inventory, hiring employees, paying for market research, advertising, and other overhead costs.

Before committing to this, you’ll need a firm understanding of what it will cost to get your subscription box business off the ground. A subscription box business model is profitable, but you must evaluate every facet before you open the doors.

Once you start delivering, your customers will expect you to be there. Do your research so you can exceed their expectations and make a profit.

Sourcing products for your subscription business

Finding reliable suppliers

Put in the legwork to find quality suppliers. Your customers will appreciate your effort as you work to provide quality material.

Deep dive into online research. Determine what your competitors are doing, and figure out how to set yourself apart and above the competition. If your subscription box model is successful, it must stand out.

Check into wholesale providers like Alibaba or AliExpress. You can also check with local vendors to give your box a truly curated and localized feel.
Understand subscription box marketing. Spend significant time checking out other subscription box companies on social media. Do the work to understand their marketing, including branding, messaging, demographics, tone, and how they speak to their customers. Determine which social platforms they are most active on and model your brand from their successes.
Join related networking groups. Networking groups can be pure gold when building your subscription box company. Within these groups, you can work alongside other subscription box vendors and learn from them without encroaching on their territory. You can learn a lot of valuable information from the wins and misses of others in the industry.
Go with who you know. Referrals are vital to building any business from the ground up. You can ask other subscription box companies for referrals to their suppliers. This process is a great way to know which suppliers are trustworthy and reliable and which to stay away from. This legwork can save you time, money, and heartache up front.
Check on industry directories. You can use online directories, such as ThomasNet, to source products. You’ll find many suppliers and their ordering information, making building your subscription box model a breeze.

Ordering inventory and managing stock

Subscription box companies must manage inventory well to ensure accurate order fulfillment and timely delivery. If you’re thinking about starting a subscription box company, think ahead.

Forecast demand. This essential element can make or break your business. Forecasting involves predicting how many orders you’ll receive in the coming months and how much inventory will be necessary to fulfill the orders.

Accurate demand forecasting will help ensure enough stock is on hand without overstocking and wasting valuable resources.
Choose reputable suppliers. This point goes back to everything mentioned above. You can work with various suppliers, but make sure they are reliable. You may work with multiple suppliers, such as smaller mom-and-pop businesses, boutiques, and luxury brands.

Be sure the quality of your suppliers’ products meets the price you’re charging for your box. The suppliers you choose need to be reliable and also meet demand.
Plan. Understand how long suppliers will take to get products to you after you submit an order. Companies need to factor in lead time to make the entire process seamless. You must consider supply chain, international shipping, and quality control issues.

Designing the Subscription Box

Developing a brand and a logo

Not every business owner is a branding expert, and that’s okay. If you need help figuring out where to start when developing a brand and logo for your box business, start by getting a feel for your industry.

Knowing what your direct and indirect competitors do regarding an appropriate and engaging look and feel for this type of business is essential.

As you design your products and refine your eCommerce platform, you’ll want to establish a brand and logo that feels natural to you and your customers. Your business model must match your marketing, so you must spend a lot of time on this aspect. The good news is once you have marketing direction here, it should stay the same.

If you cannot create your branding and logo, don’t hesitate to contact a creator to perform this work. This process may be as simple as contracting with someone you know who can help direct your marketing efforts.

Alternatively, you can hire an entire marketing team or agency to do this work for you. It all depends on your start-up budget. However, remember that your brand and marketing strategies need to speak directly to your customers’ needs, or they will never work.

Creating an attractive and functional packaging

The packaging is one of the most appealing parts of receiving a subscription box in the mail.

Subscription box companies can take much creative liberty when creating product packaging. The options are endless, and all return to serving customers and exceeding expectations.

Your box should reflect your brand’s color scheme and excite the customer about the contents inside. You can use fun box fillers that make opening the box feel like a truly curated experience.

Choosing the right inserts and promotional materials

We suggest using high-quality inserts that explain the box contents and provide additional brand awareness for your business.

You can give promotional information for your boxes, such as referral codes and free trial inserts, that your subscribers can pass on to friends and family. You may also include special subscriber-only access codes related to your box’s contents.

Shipping Management

Evaluating shipping options and costs

Establishing a shipping account for your business may be overwhelming, but it’s essential for any company that ships products regularly.

Pick a carrier that meets your needs regarding price point, options, delivery times, and flexibility. You must research multiple carriers and do some rate shopping to get the best option.

Choosing a shipping carrier and setting up an account

When you set up your shipping account, be ready to provide some personal information.

Some carriers require a credit check that includes your company name, contact information, tax ID, income information, EIN, and more. Just be prepared and understand this extra paperwork is simply part of the process and will make you more successful in the long run.

Managing the logistics of shipping, including packaging and labeling

Before committing to specific packaging and labeling, you’ll want to make sure that these things are accepted by your carrier of choice and not cost prohibitive.

Creating a box that stands out is great, but the cost of the packaging, filler, and inserts can negatively affect your budget.

Additionally, the carrier must accept your cutting-edge packaging and be affordable to ship. You can check these details with your chosen carrier before setting your packaging and label system in stone.

Using a 3PL Service—Scaling Your Fulfillment

Definition and benefits of a third-party logistics (3PL) service

A 3PL is a professional company that provides logistics and supply chain management services to businesses.

By partnering with a 3PL, businesses will experience cost savings, the expertise of a company specializing in supply chain management, the ability to grow or scale back at any time, and flexibility in operations.

Choosing a 3PL provider based on business needs and budget

Selecting a 3PL can be overwhelming, but there are several key components to evaluate when you decide to partner with a 3PL.

Think about the services you need, first of all. Do you require transportation, storage, inventory management, or order fulfillment? Make a list of everything you need and decide what’s most shipimportant.

Fact-check your 3PL. Evaluate their experience as a whole; also consider experience in their industry, references, and case studies. Have they worked with many subscription box businesses in the past? Evaluate the reputation of those businesses to some degree as well.
Will your 3PL’s technology integrate well with your own? This process is a vital piece of choosing the right 3PL. Your sales data should be transparent and up to date at all times. If your 3PL’s in-house technology can’t integrate with yours, keep shopping.
Understand pricing and contract requirements before committing, getting pricing details up front to anticipate any changes based on volume and seasonality.
Make sure your 3PL has a good customer service track record. Will you have a point of contact at the company? If so, what’s their policy for conflict resolution?

Customer service is a trickle-down effect. If a 3PL is providing poor service to you, it will ultimately be passed down to the customer as well. Ensure that your chosen 3PL has a strong reputation and plenty of experience.

Outsourcing fulfillment and shipping tasks to a 3PL service to save time and money

Working with a third-party logistics company (3PL) can help your new business get off the ground or provide valuable benefits to your existing company. Let’s examine why many subscription box companies partner with a 3PL.

Space management. A 3PL can provide properly vetted facilities to house your subscription box contents while they await shipment. An experienced 3PL can help you manage inventory levels and fulfill orders while keeping your products safe and secure.

A 3PL can handle all the logistics of your subscription box company, from warehousing to last-mile delivery.
Shipping. This piece of your business can be incredibly costly and time-consuming. An experienced 3PL will master your delivery process, getting them to customers on time and in excellent condition. They can also assist you with providing tracking information to customers. This process promotes transparency and trust in customers.
Scalability. A 3PL will help you scale your business up or down based on demand. A 3PL will be able to handle high-volume orders, peak season shipping, and pivot as needed.
Saving money. A 3PL can help you save on operational costs related to storage, salaries, and shipping. Reducing overhead in any way possible is a good idea; partnering with a 3PL will cut time and money while increasing productivity.

Launching Your Subscription Business

Creating a website and an e-commerce platform

Creating an eCommerce website for your business is a non-negotiable part of running and managing your subscription box business.

You’ll need a place that represents your brand well and displays your products, making it easy for customers to see what you’re offering and purchase new subscriptions. You must consider several important factors as you plan for your subscription service website.

Purchase a domain. You’ll need to choose a domain that makes sense to your subscribers. It should be easy to spell and remember. Once you have a good idea, check social platforms to ensure that name is available across all major online social channels.
Create a website. You may build an online presence yourself or hire professionals to do it for you. You should weigh all your options and see what makes the most sense for your business.
Many online platforms, like Squarespace and Shopify, have built-in subscription options, making managing your subscription business from product onboarding to customer checkout easy!

Before committing to a platform or provider, ensure you can sell your products.

Add a subscription plugin or service. Subscription plugins and services are usually a cost in addition to your standard website hosting plan. Put in the effort required to understand all of the costs and fees involved and then activate your subscription service.

Keeping up on renewal dates is essential, so your project stays the same. You’ll also need a good understanding of shipping through your eCommerce subscription tool. Check on integrations if you plan on working with a 3PL.

Setting up a social media presence

Before launching your brand across social media, you’ll want to spend a significant amount of time researching how to reach your audience within social media best. You must understand where your target demographic spends the most time online.

What kind of products and pages do they engage with most often? What type of content are they clicking on? You’ll want to dig deep to understand their online behavior. Does your target demographic enjoy video content? Do they spend more time on Instagram, Facebook, Snapchat, or Pinterest?

Understanding how your audience spends time online will help you provide marketing and advertising with a solid return on investment.

If you can, consider hiring a marketing agency for a comprehensive audit and strategy. This work will give you valuable insight that you can use to strategize your approach.

Developing marketing strategies

As noted above, you must implement a marketing strategy to succeed. This process is a must-do item in today’s competitive market. You must understand your audience, evaluate trends, and define your unique selling position.

Defining your target audience is one of the most important pieces of developing your marketing strategy. You’ll want to invest time and resources into research, surveys, and marketing data analysis. Understanding this critical information will help you develop your product, pricing, promotional details, and messaging. You’ll also be able to choose the correct sales channels for your target demographic.

Your marketing strategies continue beyond there, though. Make sure you understand the competition and also make a plan to stand apart. Consistently track marketing conditions and be ready to adapt as soon as necessary.

This means your initial marketing research isn’t a one-and-done activity. You must regularly monitor the competition, KPIs, customer interactions, and sales data. After completing this work, you can refine your business and improve your marketing strategy.

Managing your Subscription Business

Tracking and analyzing sales data

If you want to experience success with your subscription boxes, you must track and analyze sales data regularly.

There are more exciting parts about running a subscription-based company, but it’s eye-opening and non-negotiable. You’ll want to use a sophisticated sales platform to manage your subscription data. This platform should track sales data at a very granular level, empowering you to make effective decisions about your products and subscriptions.

Sales data will help you understand customer experiences and how to improve your process for doing business.

Managing customer relations and feedback

It’s vital to help your customers feel seen, heard, and valued. Spend time researching how your competitors (direct and indirect) provide customer service.

You will find various options such as online chat, chatbots, email correspondence, phone support, and more. Much of this depends on your target demographic and how they typically seek technical or customer support. Whichever method(s) you choose, be sure to maintain consistency. When you’ve clearly defined how and when customers can access you, that builds a layer of trust for your business.

In addition to providing top-tier customer support, you’ll want to develop a plan for collecting data and managing your online reputation.

This process will include when and how you respond to inquiries, social comments, and complaints about your brand. No business is exempt from this, but managing your customers and listening to their feedback can quickly make or break you from a customer care perspective.

Scaling and expanding your subscription business

When it’s time to scale and expand your subscription box business, you can trust your 3PL to scale along with you.

Partnering with a 3PL will allow you to grow your business without investing in new warehouses, related equipment, and the cost and time it takes to hire new staff members. As a result, you can focus on building your business in other ways while trusting your 3PL to handle the operations and order fulfillment side of your business.

Conclusion

If you want to launch your own subscription box company, now is a great time to start.

We want you to be well prepared to understand the subscription business model fully, how inventory works for such a business, how to maximize your shipping and returns processes, and, of course, how to receive the most significant ROI in this marketplace.

We’d love to discuss your interest in starting a subscription box business or improving your current subscription business. Please give Kable Product Services a call or contact us today.

We are here to help you and your subscription business succeed.