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Subscription businesses have come a long way. These days, weekly subscription boxes are more likely to arrive on your front porch than a newspaper—and during the pandemic, subscriptions became one of the Internet’s most profitable eCommerce business ideas.
The success of the subscription model is due, in part, to a win-win formula: subscribers enjoy fun finds, convenience, and savings. Meanwhile, they spend up to 2.5 times more than regular customers, according to McKinsey—a boon for businesses.
Read on to learn more about the different types of subscription boxes you can offer, how to decide whether a subscription service is the right business idea for you and how to get started.
Read Also: How to start a business
Subscription box business basics
By now, you’re probably very familiar with subscription services—maybe you even use one (or several) yourself. But it’s worth a closer look at how they work to determine whether they’re a good fit for your business.
What are subscription boxes?
Subscription boxes are a type of recurring order that automatically gets shipped out to customers on a set schedule. Subscriptions are available in a wide range of product categories and prices.
As a type of business, subscription boxes are especially popular among younger shoppers: around 34% of millennials and 22% of Gen Z shoppers are currently trying and are likely to continue using subscription services, according to GfK’s FutureBuy report.
While some brands are built solely on a subscription model, plenty of retailers have leveraged subscription services to encourage repeat business.
How to start a subscription box business in 6 steps
If you’ve determined a subscription box business is right for you, then it’s time to start planning. A successful launch depends on careful planning, goal-setting and advance coordination.
01. Find your subscription box niche
Start by defining a specific niche for your subscription box service. Are you going to target your top spenders, buyers of a specific product category or a particular demographic?
If you’re not sure, start by looking at your most popular or frequently bought products. Who’s buying them? How often do they repurchase your products? What can you simulate via a subscription program?
Alternatively, you can take a look at the competitors in your industry. Conduct a competitive analysis of others who are selling subscriptions, and identify any market potential that they’ve left open.
You’ll want to get as detailed about your ideal subscriber as possible, understanding their needs, motivations, spending habits, values, and more. After all, an 85-year-old resident in Wyoming will likely want a different snack box than a 23-year-old hipster in New York. Use your persona’s desires and needs to determine your subscription frequency, box contents, and branding.
Other ways to hone in on your ideal customer:
Survey your customers
Look at customer reviews for other subscription services—what do people love or dislike about them?
Identify trending products via social media or tools like Google Trends
Perform keyword research around top products or subscription services in your industry
02. Align subscription price, products and frequency
Create the parameters for your subscription service itself. Of course, you can adjust your goals and offerings over time, but it’s essential to have concrete metrics in place so you can measure your progress. To start, decide:
What is the overall business goal?
Are you trying to capture a new market, or better retain existing customers? Are you looking to generate the highest possible revenue upfront, or perhaps drive more sales in the off-peak season? By prioritizing your goals, you’ll likely have an easier time deciding on the right pricing, product selection, marketing plan, and more.
For example, if your goal is to elevate your brand, you might opt for a curated quarterly assortment of premium products, targeted to your high-value customers. For each shipment you could choose deluxe packaging and include a hand-written note on fine stationery. By contrast, if your aim is to acquire new customers and raise overall brand awareness, you could offer a small assortment of fun low-cost finds, with splashy but inexpensive packaging, marketed primarily on social media.
How often will you ship subscription boxes?
Do you want to offer your subscription box on a weekly, monthly, or yearly basis? This can depend on:
Products: How often do your customers need your products? How long will your products last? For replenishment subscriptions, calculate intervals between orders from existing customers, if available, to determine what intervals to offer.
Budget: How often can you afford to ship your products, considering the resources involved in logistics, the shipping costs, and the price of your product packaging?
Buzz: To maintain customer enthusiasm, you’ll need to strike the balance between regularity and exclusivity. How often should you ship to remain top-of-mind, while still maintaining anticipation?
What’s included with a subscription?
If you’re launching a curated subscription service, design shipments to give customers a sense of quality, value, and essence of your brand. A mix of top sellers and lesser-known products in a variety of sizes, colors, or flavors can give your box an “eye candy” appeal.
If you’re offering a replenishment box, focus on providing the right amount of items to tie your customers over until your next shipment. How long will a shaving kit last? How many ounces of tea do customers need per week?
For membership subscriptions, consider what perks you can offer that are both practical and luxurious. In addition to free shipping or discounted prices, you could offer VIP consultations, invitation-only classes, or birthday treats.
How much does a subscription cost?
Develop a product pricing strategy that aligns with your goals, customer expectations, and your chosen subscription model. Curated assortments tend to command a premium, while replenishment subscriptions are often value-driven.
Prices may also depend on subscription length. You might offer a slight discount for subscribers who commit to an annual subscription versus a month-to-month plan.
Remember to think through how perks align with existing discounts and loyalty rewards you may offer. For example, if members get 20% off merchandise with every purchase, will you apply that discount to already-slashed prices on Black Friday?
It goes without saying that whatever price you land on, you must ensure that you’re turning a profit. Make sure that you’ve factored in the cost of marketing, packaging, storage, fulfillment, and other fees associated with your program.
03. Develop a prototype subscription box
Once your parameters are set, create a prototype to use for marketing purposes and to serve as an introduction to your subscription service.
Prototyping goes beyond finding the ideal product assortment; you need to build and test every aspect of the customer experience. This includes:
Suppliers: If you’re outsourcing products for your subscriptions, thoroughly research suppliers and negotiate a price that works for your budget. If you haven’t used a supplier’s products yet, order samples to ensure quality and understand what you’re sending your customers. When you can personally vouch for the products you sell, you can provide better customer service and marketing.
Packaging: When customers open your subscription boxes, you want them to feel delighted. Emotion is a powerful driver for purchase, and a unique unboxing experience also begs to be shared. Consider what type of ecommerce packaging fits your budget and your audience, whether that involves minimalist eco-friendly materials or bright colors and confetti.
The eCommerce site experience: Whether you’re building a new website or adding to your existing one, check that your eCommerce website templates are capable of hosting a subscription service. This goes well beyond attractive site templates—rather, your platform should support product subscription options, recurring payments/auto-renewal, and easy subscription management. Wix eCommerce, for instance, includes subscription box features to simplify everything from fulfillment to self-service subscription tools for your customers.
Behind-the-scenes logistics: Put your fulfillment center to the test, and establish processes to ensure prompt, reliable subscription fulfillment. Flesh out your plan for dealing with voluntary or involuntary cancellations and customer queries. Consider running a test with friends and family to ensure that these systems interoperate as smoothly as possible prior to offering your subscription publicly.
04. Supercharge your customer service
When you launch a subscription business, your customer service teams need to deliver on a whole new level. Get ahead of customer questions by building out self-service content, subscription-related information, and various customer service options, backed by well-trained professionals.
Clarify your rules for shipping and returns, and include prominent links throughout the subscription onboarding experience. What are your shipping fees? Do you ship internationally? How long after purchasing can a customer return a box? Do you refund subscriptions, and under what circumstances?
In addition, prepare for inevitable cancellations with an “offboarding” process (e.g., asking why a subscriber is leaving and/or suggesting options to keep them around). A thoughtful approach can even recoup 15% to 30% of would-be cancellations, according to ProfitWell.
05. Launch and promote with strategic marketing
When your subscription box is ready to see, promote it prominently across your site, emails, search ads, and social media. While you should tailor the specific marketing mix to your subscription service’s target persona, consider these tactics to help your program take off:
Cross-promote and coordinate messaging across your own marketing channels: Include your brands’ social handles on your product packaging and encourage customers to tag your business in their posts. This will help new customers find you and encourage engagement online.
Encourage reviews on your online store and product pages: This creates a bank of word-of-mouth marketing and testimonials you can re-use in promotional campaigns, plus provide actionable feedback.
Consider reaching out to bloggers and influencers to promote your subscriptions: Around 72% of Gen Z and millennial shoppers follow influencers, according to Deloitte, and 56% say they’ve purchased a product featured in a post by someone they follow. By partnering with content creators, you can build your brand credibility and expand your commercial reach.
View a list of 14 eCommerce marketing strategies for more inspiration.
06. Monitor and adjust your business strategies
Now that your subscription business is up and running, revisit the goals and metrics you established prior to launch. Track performance carefully. Analyze sales performance, customer feedback, product reviews and social posts to optimize your offering.
Don’t be afraid to adjust your subscription service—just be transparent with existing customers about what changes are coming, with ample lead time to allow them to cancel or change their subscriptions as needed. If you’re making changes in direct response to subscriber feedback, let them know this; you may earn plaudits and trust for responding to customers' needs.
3 types of subscription box business models
Here are three popular ways to structure your subscription service, with examples of how Wix merchants are leveraging them.
01. Curation
Under this model, shipments contain a selection of one or more items based on a theme, style, or customer preference. The purpose is usually to introduce subscribers to expert-picked goods and/or new products and brands. Apparel brands like Stitch Fix pioneered the curation concept. But curated boxes are now prevalent in various categories, ranging from wine to wellness to beauty. House of Suppliez is one such beauty supplier that offers several types of monthly subscriptions that makes it easy for customers to discover the latest nail business trends.
02. Replenishment
The replenishment model offers a way for customers to conveniently restock on their most-used items, such as toiletries, food, or household supplies.
For example, online food marketplace Napa Wild offers weekly shipments of fresh produce boxes, with the option to choose a “100% organic” or “organic/conventional mix” of goods. Since Napa Wild boxes contain perishable food, subscription boxes are limited to areas located by the company’s headquarters in Napa County, California.
03. Membership (aka access)
A membership model focuses on giving subscribers access to exclusive pricing and other perks with their subscriptions.
Amazon Prime and Walmart Plus are two of the most well-known examples of this, but retailers of all sizes offer paid memberships to boost brand loyalty, beef up AOV, and subsidize the cost of free shipping.
For instance, home and wellness retailer MightyNest combines its subscription box services with membership perks. MightNest members can enjoy free shipping on all items across its online store, plus up to 35% off everything every day.
Pros and cons of subscription business models
A subscription service may sound like a no-brainer. However, there are various benefits and challenges to be aware of.
The upside: more cash. The challenge: higher costs.
With a subscription offering, you can charge a membership fee right away or incentivize upfront prepayment, resulting in a healthy boost to your bottom line with every signup. Even better, subscription services offer predictable, recurring income.
However, running a subscription business also requires thorough planning and investment. It can add an extra layer of complexity to your operations between managing virtual subscriptions (including new signups, late payments, renewals, and cancellations) and managing the eCommerce logistics behind it. Moreover, you’ll need to plan out your marketing strategies and packaging plan.
The upside: built-in loyalty. The challenge: customer churn.
Subscription boxes inherently generate repeat customers and recurring revenue. And by including products that customers may not have tried on their own, subscription boxes can help to build up interest in new and/or higher value items—thereby increasing a customer’s lifetime value.
With that said, the key to generating momentum is keeping subscribers enrolled—and therein lies the challenge. More than a third of consumers cancel their subscriptions in less than three months, and over half cancel within six months, according to McKinsey. Higher churn rates makes it harder for you to recoup acquisition costs, so you’ll have to effectively differentiate your box and price competitively.
Note: involuntary churn caused by glitches like expired credit cards is another potential headache, accounting for over half of all subscription cancellations, according to billing vendor Chargebee.
The upside: less excess inventory. The challenge: personalization rules.
Overstock items that haven’t caught on can be more appealing if packaged with other curated items, or if thrown in as an extra thank-you treat for subscribers. In this way, a subscription service can provide an avenue to keep inventory moving.
However, the potential challenge comes with balancing these practical considerations with customers’ expectations for personalized assortments. More than seven in 10 consumers expect personalization whenever they shop online, McKinsey found. That expectation may be heightened when it comes to subscription products, which aim to align shipments with customers’ personal tastes. Undercutting that promise with random inventory can breach trust, leading to cancellations and a tarnished reputation.
Ready to create a steady cash flow and spark a loyal customer base? Start your own business and sell subscriptions with Wix today.