Everything you need to know about starting a subscription box company with ease
Before you find out how to start a subscription box company, there’s one other question you’ll need answered: should you start a subscription box company?
By all accounts, the answer is yes. The subscription ecommerce market grew by more than 100% a year from 2013 to 2018, and shows no signs of slowing down. No doubt there’s a lot of competition out there, but if you create a subscription box that people really want, then there’s no limit to the potential success you could enjoy!
So, how can you take advantage of this latest ecommerce trend? How can you jump on the bandwagon, while still marketing a unique product? We’ve created the ultimate guide to starting a subscription box business, full of insights from entrepreneurs who’ve been there. Here’s a quick look at the steps we’ll cover:
How to start a subscription box
- Find your niche
- Price your subscription box
- Set up social media
- Choose a sales platform
- Decide on a shipping solution
- Promote your box
Ready? Let’s get started.
It seems counterintuitive at first, but the trick to maximizing engagement is actually narrowing down your audience. After all, if you try to please everyone, you won’t specifically appeal to anyone, and people want to invest in a product that feels tailored to them. In fact, 80% of customers are more likely to buy from a company that offers personalized experiences.
The first move is to decide what kind of service you want your subscription box to provide. There are three main models to choose from: discovery, convenience, and access:
|Discovery||Assembling a box of fun and interesting items, so that customers don’t have to put in the legwork of finding new products that align with their interests||Trade Coffee delivers new, handpicked coffee roasts based on the subscriber’s individual preferences|
|Convenience||Replenishing necessities like groceries or shaving supplies, without the customer having to remember to renew them||Blue Apron delivers recipes along with all of the necessary ingredients, eliminating the effort of home cooking a meal|
|Access||Improving access to products that are difficult to find||Freedom Japanese Market offers free worldwide shipping on monthly boxes of Japanese snack foods|
Once you’ve got a category worked out, you can brainstorm the kinds of products you’d like to include in your box. The challenge is striking the balance between a niche that’s already oversaturated, and a niche that’s a little, well… too niche.
You’ll know the oversaturated stuff when you see it (everywhere), but it can be more difficult to tell whether your idea will have enough traction. A great way to do this is to check social media channels and popular forums like Reddit to see if there’s enough organic buzz around your chosen niche.
You can also use Google Trends to see the popularity of different search terms over time. For example, micellar water has exploded as a health and beauty trend in recent years, and you can see that popularity reflected in search results:
The huge uptick in searches around 2014 has led to a steady level of traction.
If you’re stuck in the brainstorming process, you can always use your own personal interests as a reference. That’s what Tanja Quinn, Marketing Director of subscription drinks service Popaball, advises:
“Look at a range of subscription boxes you’d personally like to join, and then think of reasons why you would decide not to. For example, it could be the cost of postage, cost per box, frequency, variation of products… whatever you find, there will likely be others that think the same, and therefore you’ve found a niche!”
Once you’ve found a niche, you can tailor your business accordingly. Popaball didn’t actually start out as a subscription box company, but added this feature later on – both as “a way to give value back to our loyal customers,” and to make the most of a rapidly rising trend. Adding subscription boxes is a brilliant idea for anyone trying to expand an existing business and get ahead of the game.
Being able to construct a rough profile of your average customer will also help you ensure that your service is as relevant as possible. Rachel Wood, founder of Rare Birds Book Club, knew a book subscription service would cater to her company’s target audience:
“Our core customers are millennials, and they tend to be happy and comfortable paying for things by subscription; it’s how they’re used to paying, and I knew flexibility would be an important factor, so it just made sense.”
You can gather basic information about your customer base – like age and geographic location – from analytics integrations on your company’s website or Facebook page.
Rare Birds Book Club offers a monthly subscription service where readers choose between two handpicked, recently published novels, all written by women. Subscribers love the idea of no longer scouring the internet looking for a genuinely good read.
Better yet, Rare Birds’ online presence serves a dual purpose. Not only is it an easy means of placing orders, but subscribers can actually log in to the site and take part in a digital book club every month. If your subscription box idea lends itself to any sort of digital activity or community, definitely take advantage of it! Activities like this drive engagement, get people excited, and increase promotion by word-of-mouth.
The next move is to think about the logistics of starting a subscription box company – specifically, how much it will cost. Rachel says budgeting was an important step when Rare Birds Book Club was just getting started:
“Most of the challenges were around money – and more specifically, trying to figure out how to be as smart with it as possible. When you’re working with a small budget, you’re always doing triage, figuring out where it’s wisest to spend and where it’s wisest to save.”
There are two components of budgeting that you’ll want to pay particular attention to. Your cost of goods sold and customer acquisition cost will both factor in to the final price you’ll need to set in order to make a profit off of your box. When you’re first starting out, other points of analysis like customer churn rate (how often people unsubscribe) and customer lifetime value (the total amount a customer spends between sign-up and deactivation) won’t be as useful – that’s data that you’ll be able to collect over time!
Cost of goods sold
The cost of goods sold covers everything it takes to get your finished subscription box into a customer’s hands. This includes the cost of each item in the box, the cost of the box itself, and the cost of shipping to get the box from you to your buyer.
You can keep this cost down by purchasing your box items through wholesale suppliers. Wholesale suppliers are equipped to handle the bulk nature of business orders, and wholesale products are usually priced a lot lower than retail products. But the beauty of running a subscription box business means that you can piece your products together from whatever sources you like – in other words, the majority of your box could be made up of wholesale products, and then you could splurge on one or two unique items to make it really special.
The next question is, where would you go about finding those unique items? You could always turn the tables and check out online marketplaces as a consumer. For this, we’d recommend Etsy, since it’s a platform for handmade and original products of any kind. If you’re willing to pay, you’ll definitely find something that’s both unique and compatible with the theme of your subscription box. Just one quick search for “necklace” on Etsy returned over four million results, so a perfect fit is definitely in there somewhere!
Another place to look for unique items is in local stores. This will put you at a particular advantage, because subscribers outside of your area will really be given access to items that they wouldn’t have otherwise known about. The best part is that you can see these products in person before you decide to include them, and you can feel good knowing you’re supporting a local business!
You may even come across some free products while you’re sourcing your box, usually offered by new businesses looking to gain exposure. Our advice when it comes to free products is to test them for quality before you decide to use them in your box. It can be tempting to accept every free item you’re offered (especially when budgets are low in the beginning), but the reputational cost of low-quality products will eventually outweigh the monetary cost of better items!
Once you’ve worked out your cost of goods sold, you’ll know how much money you need to charge per box in order to not just break even, but make a decent profit.
Customer acquisition cost
This is the average amount you spend on marketing to obtain a customer. If you get good enough at social media marketing, it’ll generate a lot of word-of-mouth buzz, and you’ll be able to keep your customer acquisition cost down.
You won’t need to stress about breaking the bank on this one – the cost of marketing to, say, an international audience and a huge demographic is only a necessary expense for large companies that already have that budget to spend.
For a new subscription box company, the cost of giving a few free boxes to family and friends in your first month, or paying for a few sponsored posts on Facebook and Instagram – one sponsored Instagram post costs anywhere between 20¢ and $2 per click – will be enough. The cost per click (CPC) advertising model is great, because you’re only paying when someone actually clicks on your ad – meaning you won’t be shelling anything out for ineffectual posts.
The ultimate goal is to make more money from customers in their “lifetime” with your company than you spend acquiring them – and with social media on your side, this is a very achievable goal!
Engaging with customers on social media is the best way to get your company some invaluable social proof from regular, unsponsored people. As Tanja has learned from her experiences with Popaball:
“It is helpful to have social accounts so that people get sharing images with you that you can then repost, showing followers what great goodies they get at such a good price.”
So, how do you create content that people will naturally want to engage with? You have to know what people in your niche are currently talking about. You’ll already have a general idea of what’s popular, because chances are this is an area you’re passionate about – so don’t overthink it! You can also supplement your knowledge by browsing on Instagram and Twitter to see what users are saying.
Just a little bit of research will go a long way. Aaron Taylor, CEO of the dog treat subscription company Snack at Franks, explains how his team has used social media to become an integrated part of their target community:
“As pup parents ourselves, we know what type of online content is important to each other, and by establishing a community and engaging with other dog focused communities across channels, we started to see more people engaging with us. So now our model involves creating, curating, and delivering interesting content from across the internet while we deliver delicious and healthy snacks and surprises.”
The Snack at Franks Instagram page posts a great mix of quotes, product photos, and of course, adorable dog pictures.
If you’re managing multiple social accounts, there are plenty of “social media management” tools that can help keep things organized and running smoothly. Popular platforms like Hootsuite and SocialPilot can:
- Show what people are saying about your company in real time by monitoring multiple streams
- Plan and schedule large numbers of posts in advance
- Coordinate your posts between different social media networks
- Facebook: Weekdays between 11a.m. and 1p.m. CST.
- Twitter: Weekdays between 8a.m. and 4p.m. CST.
- Instagram: Weekdays between 10a.m. and 1p.m. CST.
- LinkedIn: Weekdays between 8a.m. and 1p.m. CST.
Subscription boxes are the perfect product to sell online, since the entire experience revolves around the buyer’s convenience. So, the question is: how to build a subscription service website?
There are only two types of platforms that are up to the task of starting a subscription box business: ecommerce website builders, and online marketplaces. We’ll cover both in-depth, but first, here’s how they differ at a glance:
Ecommerce Website Builders
- Built-in help and support
- Quick setup
- Built-in customer base
Now, let’s break it down so you can pick your favorite platform:
Ecommerce website builders
Ecommerce website builders, like Shopify and BigCommerce, are the easiest way to set up a customized, on-brand online store. You simply select a template for your store, and then drag and drop elements around the page to design it – no coding necessary. You can also easily integrate a variety of ecommerce apps, from shopping carts to payment gateways, to enhance your customized store.
Starting a subscription box with an ecommerce website builder
|Cost||$20-$30/month, plus transaction fees|
|Pros||Customizable, easy to use, in-house customer support|
|Cons||No built-in base of shoppers|
|Best for||Creating a branded, personalized shopping experience|
If you decide to use this type of platform, you’ll have a lot of options. We recommend Shopify, because its ease of use and powerful features earn it the number one spot in our ranking of the best ecommerce platforms. And we don’t take that ranking lightly – we’ve put in hours of in-depth research to inform our decisions. You can also check out our Shopify Review and BigCommerce Review for more in-depth information about these platforms!
Shopify is a scalable, feature-rich online store builder that, for all its power, doesn’t sacrifice ease of use. It currently serves over 800,000 businesses, and offers top-of-the-line ecommerce features like tax calculation and abandoned cart recovery.
Shopify’s Basic ecommerce plan costs $29.00/month, which is on par with the industry standard. The additional cost of a 2.9% transaction fee drops to 0% if you use the Shopify Payments payment gateway.
If Shopify doesn’t sound like your cup of tea, you can check out our full ranking of the Top 7 Ecommerce Website Builders to discover more options.
Online marketplaces, such as Cratejoy and Etsy, are the fastest way to start selling online. After signing up for an account on the existing website, you can simply start listing your items, no setup necessary.
The main snags to keep in mind with online marketplaces are the commissions that they take on your sales. Most of the time, this charge won’t exceed 3% of the sales price, but it can be a frustrating surprise for a lot of new sellers.
Starting a subscription box with an online marketplace
|Cost||$19.00/month, plus 10¢ transaction fees and 1.25% of sales|
|Pros||Extremely fast setup, built-in audience|
|Cons||Huge competition from other sellers, lack of customization|
|Best for||Expediting the selling process|
Cratejoy offers integrated tools to help you manage subscriptions, collect payments through multiple gateways, and gain customer insights. In fact, you can easily view customer information to gain insight into your target audience – which as we now know is key information to have for promo purposes.
So, how much does it cost to sell with Cratejoy?
We picked the middle tier of Cratejoy’s three pricing plans as a summary: this costs $19/month, plus 1.25% of your sales and a 10¢ transaction fee.
Depending on which plan you choose, you’ll get a corresponding amount of features. The simplest Cratejoy plan costs $0.00/month, but takes 11.25% of your sales, plus the normal 10¢ transaction fee. For comparison, Etsy charges a 20¢ listing fee per item, plus 3.5% of your sale price.
Which platform works for you?
The choice between an ecommerce website builder and an online marketplace is ultimately yours to make. If you want great customization and don’t mind putting in extra effort to promote your store, then a website builder will be best. If you want to start selling fast and don’t mind a lack of personalization, then an online marketplace will do the trick. If you’re stuck, you can use our Shopify vs Etsy Comparison as a case study!
That being said, we recommend using an ecommerce website builder, because these platforms offer an important opportunity to strengthen your brand and give your customers a trusted digital destination. Aaron explains the value that a personalized online presence has had for Snack at Franks:
“Our website is a vital, core part of our business model, and not a shop front add-on. We simply could not function without it. Not only does it show what we do and let people know who we are, but it allows them to dig deeper to find the answers they need to know.”
You can see the impact of good branding on the Snack at Franks homepage:
The color scheme is inviting, the product photograph is front-and-center, and the “About Us” page link is readily available – all ingredients for a great customer experience! “The key thing about the website,” says Aaron, “is that although you can sell through various other platforms and mediums online, for a subscription company, it’s your main tool in your armory… that is ultimately where you will acquire customers.”
Rachel describes a similar experience with Rare Birds Book Club:
“We don’t have a brick and mortar store, so our website is critical; it’s where virtually all our sales come from, and the home of our online book club where members return each month to talk about the book they’ve just read. Being online means we have much more reach than we would otherwise – we have customers from over 20 countries, and that’s all possible because of the web.”
Integrating a payment processor
Making it as easy as possible for your customers to purchase their subscription online is vital – users who have a negative experience on a mobile website are 62% less likely to purchase from that business in the future. “The biggest obstacle in getting the subscription box off the ground is the technical element,” says Tanja. “For example, getting an app and a payment gateway that allows repeat payments, without any action needed by the customer.”
The ability to accept recurring payments – in this case, on a monthly basis – is vital to providing a convenient shopping experience, so this is the number one factor to keep in mind while you weigh up different payment processors.
The good news is that both website builders and online marketplaces will support you when it comes to payment processing – but different platforms provide different degrees of support. Shopify offers integrations with over 100 payment providers all over the world, so it’s actually very easy to give your shoppers the best payment experience you can.
Cratejoy supports Stripe for your store. Stripe is a great payment processor, but if you’re using Cratejoy, it’s pretty much your only choice – which can complicate things if you’re setting up your business in a country that doesn’t take Stripe, for example.
Once you have a box and a customer base, you’ll need to think about the logistics of shipping. You can either ship your products from home, or you can outsource to a third party.
Shipping from home
We recommend at least starting out with this model, since it will cut down on costs considerably, and you’ll likely have a very manageable amount of shipping to do during the first few months. Here’s what to consider when shipping from home:
- Are your boxes sealed and protected? You’ll want the inside of your packaging to protect from impact, and the outside of your packaging to protect from weather.
- Are you equipped to print shipping labels from home? All you’ll need for this is a label printer (you can pick up a minimal one for less than $50)
- Are you ready to communicate with customers about their orders? You can use tracking numbers to make sure everything runs smoothly once the box is out of your hands. Be sure to keep a spreadsheet of this information, and give customers updates on their deliveries!
After you’ve been shipping your boxes from home for a few months, you may be exhausted by all of that label printing and order tracking. You may also be shipping out more boxes than you can handle at home – which is a great problem to have! That’s when it’s time to think about shipping through a third party.
Shipping through a third party
When your subscription box company starts to grow, you can send your boxes to a third party logistics company that’s equipped to handle inventory on a large scale. At this point, you’ll have enough customers to be able to accommodate third party shipping in your budget. Some of the things that a third party logistics company will handle for you are:
- Holding your inventory
- Safely packaging your boxes and sending them out
- Keeping track of what’s been sent and delivered
- Keeping you updated on what’s been sent and delivered
Outsourcing is the easiest way to ship as your volume grows. The best part is, there are tons of third party logistics companies to choose from, so you can find the provider that best fits your business model.
It’s important to start promoting your box before you launch it! If you generate interest well in advance, more people will be ready to buy as soon as your box actually goes on sale.
So, how exactly can you start generating that interest? We’ve gathered some of the less obvious tips and tricks below. Then, we’ll talk about the biggest tool in your arsenal – social media – and how to get it right.
How to promote a subscription box
Take great product photos
Put together a prototype of your box, and include on-brand products that are really representative of what customers will be getting each month. Keep in mind that people are partly paying for presentation, so each product should be clearly visible, and the box itself should be decorative! We’ve written a guide on how to take product photos, which you can consult to make sure you get a high-quality shot that compliments your box.
Use email marketing
There are plenty of email marketing services you can use to make this task really easy, from MailChimp to Constant Contact. Once you have a service provider, customers can opt in to receive email updates from you. The emails you send should be a healthy mixture of marketing messages and more personally interesting content, so that readers will actually see their interests represented, and don’t feel bombarded by sales content with every email.
Promote in person
Anything you can do to get the word out in person, whether it be handing out flyers or offering free samples at the mall, will help tremendously – people like to be able to put a face to the brand they’re buying from! Aaron explains how Snack at Franks overcame the obstacle of getting its name out there: “We set up park walks in the city, and invited every dog we knew with their humans to become our taste testers. We asked a lot, learnt a lot, and the snacks themselves were an instant success!”
Subscription boxes have exploded in popularity lately, and that uptick in demand doesn’t seem to be going anywhere – so you’re definitely considering the right type of business venture! Better yet, now you’re armed with all of the basic knowledge you’ll need to get started.
To recap, here are the six steps to take when starting a subscription box company.
How to create a subscription box
- Find your niche
- Price your subscription box
- Set up social media
- Choose a sales platform
- Decide on a shipping solution
- Promote your box
Follow these instructions, and you’ll be well on your way to subscription box success. You might even start calling yourself an entrepreneur at dinner parties… although we wouldn’t recommend that.
Best of luck – and keep us posted in the comments!
If you’re looking for the easiest way to start a subscription box business, you could consider dropshipping. Under the dropshipping model, customers would place their orders on your website, and then you would contact a supplier to ship the product to each customer. We’ve written a guide to starting a dropshipping business if you’d like to learn about this option!
This number will vary a little from month to month, but we recommend between five and 10 items. That’s enough to give your customers great value for money, but not enough to overwhelm people. After all, the beauty of subscription boxes is that they eliminate the burden of choice!
You’ll definitely want to stick to a distinct theme each month. For these purposes, you can think of a theme as an idea that falls under the umbrella of your niche. For example, if you’re starting a subscription candy box, the monthly theme could be candies with the same color, flavor, or country of origin.