How to Start a Subscription Box Business in Seven Easy Steps 

Hrishikesh Jobanputra
written by

Hrishikesh Jobanputra

Hrishikesh Jobanputra is a marketing strategist, copywriter, and co-founder at 39shops.com. He helps small business owners boost revenue with razor-sharp marketing strategies and conversion copywriting.
He can be reached at his twitter handle @hrishikeshj

posted on

August 31, 2020

How to Start a Subscription Box Business in Seven Easy Steps 

Does the idea of a subscription box business bring a sparkle in your eyes?

If so, sit tight because you are about to discover a step by step plan to launch your subscription box business from scratch.

Subscription businesses have become a favorite of the world’s most successful companies.

The promise of a recurring revenue stream and high lifetime value has attracted the interest of online entrepreneurs.

It’s worth mentioning that the idea of subscription box business isn’t new.

The first subscription business model dates back in the mid-20th century when the ‘book of the month club’ rose in popularity.

However, the renaissance of the modern subscription box business model was led by Birch Box. Launched in 2010, BirchBox gobbled up 45,000 paying subscribers in just one year.

BirchBox

The remarkable success of BirchBox brought back the subscription box business model to the mainstream. To a point where every e-commerce giant out there started introducing some form of subscription to their offerings.

According to Clutch , in a span of just four years between 2014-2018, the subscription box industry grew by an astounding 890%.

This goes on to suggest when it comes to the subscription boxes business we have just scratched the surface.

There is a lot more potential left to be uncovered.

Those who grab this opportunity are set to succeed and gain an early mover advantage.

So let us dive into launching your subscription box business in seven easy steps.

And let me tell you something.

It’s going to be a thrill ride - the one filled with action, learning and loads of fun.

Besides...who knows..the next one on the cover of the entrepreneur magazine could be you?

Table of continents:

  1. Picking your subscription box idea
  2. Nailing down your niche
  3. Knowing your customers up close
  4. Prototyping your subscription box
  5. Pricing your subscription box
  6. The fail-safe launch Adjusting and scaling

1. Picking Your Subscription Box Idea

Picking your subscription box idea

One of my favorite aspects of a subscription box business is the recurring revenue stream without having to hunt for new customers every month.

It just changes everything - from your lifestyle to the way you serve your customers.

In a way, a subscription box business simply elevates us as human beings. It is a liberating feeling.

And it all begins with an idea.

After speaking with many successful subscription box entrepreneurs, I noticed one thing in common.

The entrepreneur is usually the first customer of his/her subscription box.

For instance, if you are passionate about dogs, you would be in the best position to understand the likes, dislikes, and preferences of a dog owner.

In short, your subscription box idea needs to be something you are passionate about. And even if you aren’t incredibly passionate about the idea in the beginning, it must sound interesting to you overall.

That being said - it’s one thing to be passionate about something, a whole nother ball game to build a business around it.

And perhaps, this is the point where too many entrepreneurs get mentally hold up with ‘their’ idea of the business.

Never get attached to your idea. Always be attached to your customers because they are the ones who will ultimately take out their wallet.

So having a great idea is half the story. The other half is your customer. You need to go to your market and validate your idea before you go too far.

The best way to validate your idea is to narrow it down to a niche.

2. Narrowing Down Your Niche

‘Millionaire maker’ Dan Kennedy once said - “Niches make riches”. This is even truer for a subscription box business.

Here is why.

With the rising popularity of social media, every market is becoming more and more fragmented. That means, we have far greater number niches than it was a decade ago. In fact, going one step further, there are micro-niches within a niche.

For instance, people who eat vegan belong to the big broad vegan market niche. But women who love vegan accessories are a micro-niche. The most successful subscription boxes are built around micro-niches.

Try to narrow down to a very specific niche market.

Take, for example, the fitness market.

Fitness is a broad market but Crossfit is a niche. People who do Crossfit have a set of unique characteristics, desires, and wants.

Even in the crossfit market, new moms in the age group of 35 to 45 can be considered a micro-niche.

The more specific you become about your niche, the better you can speak to their desires, wants, and emotions.

How do you identify your niche?

An obvious place to start is Facebook groups. Look for Facebook groups belonging to your subscription box keyword.

For instance, if you are starting a subscription box for amateur motocross bikers, you can search the keyword on Facebook and become a member of the most active groups.

Another way to validate your idea is to Google your subscription box keyword. And find out if there are sites selling something similar to your idea. Don’t worry if you find a competition. Having competition is a good thing. It shows that there is a demand for your subscription box.

If you are slightly techy, you can look for the traffic using the Google Keyword tool. In order to use the Google Keyword tool, you need to sign up for a free Google Ad account.

All in all, you need to pay close attention to your market and the competition. You can even become a customer and buy from your competitor just to see how they are doing it.

The idea is not to copy them but to ensure that you learn as much as possible from them.

Researching at this stage will save you a lot of pain and heartburn in the future. So don’t skip the research step no matter how confident you are.

What kind of information do you need to collect?

Here are a few ideas:

  1. Who else is selling something similar to your idea?
  2. What kind of subscription boxes are they offering?
  3. What are their price points?
  4. Who are they selling to?
  5. What does their messaging look like?

One of the fatal mistakes online entrepreneurs make is jumping into the idea without researching enough and investing in building the product too early.

Don't make that mistake.

Instead, know your customers as much as you can right at the start. That’s what the next step is all about.

3. Getting to Know Your Customer up Close

Know Your Customer up close

Customer Persona is a fancy name that collectively represents the key characteristics of your customer.

It is really helpful to know your customer up close because unless you know what they are interested in, you can’t create the subscription box they will instantly fall in love with.

Isn’t that advanced common sense?

Remember, it’s not about you. It is about your customer and their choices. And you can’t afford to make any assumptions about their likes and dislikes. You need to go out there, speak with them and know them like the neighbor next door.

For example, years ago, I came across a business owner who taught motocross biking to middle-aged men.

Now if you are aware of motocross biking it is one hell of a sport. The rate of injury is astoundingly high and it is common for people to break their back and legs.

Shockingly enough, these brave bikers have a pair of legs that can take any kind of injury and still return to biking once they recover.

Upon studying the customer person and interviewing their best customers, I discovered that their ideal clients were veterans. And playing risky sports was in their DNA.

Likewise, your market will have a set of unique traits and behaviors. If you know those things in advance, it will make your marketing so much easier.

It might be a good idea to eavesdrop on discussion forums and arrange phone/skype calls to speak with them.

Here what you need to know about your customer:

  1. What age group do they belong to?
  2. What are they interested in?
  3. What are their buying habits?
  4. What are their motivations for purchasing?
  5. Which income group do they belong to?
  6. What’s their gender?
  7. Where do they congregate?
  8. What are their strongest desires (and emotions)?
  9. What are their beliefs?

Once you have zeroed down on your idea and you have a decent understanding of your market, you need to take one step further and validate your subscription box.

Hence, the next logical step is to create your subscription box prototype.

4. Creating Your Subscription Box Prototype

subscription box prototype

When you are just starting out, keep in mind that perfection is the enemy of progress.

You don’t have to get the ‘perfect product of your dream’ to your market.

All you need to do is - give your market a clear and convincing understanding of the value proposition in your subscription box.

You need to give them a fair idea about the kind of products that they’ll receive every month and the price they will pay for it.

So the first thing you need to do is decide on the type and number of products in each subscription box.

It is also worth noting that your pricing and packaging will greatly depend on the type of subscription box business model you choose.

Accordingly Mckinsey, subscription businesses broadly fall into three types:

  1. Curation: A service sends collections of new items for customers at regular intervals. For example BirchBox.
  2. Replenishment: A subscription service that sends the same types of products every month. For example DollarShaveClub.
  3. Access: A service allows members to access perks and discounts on items. For example Amazon Prime.

Okay, coming back to prototyping your subscription box. The idea behind the subscription box prototype is to match the quantity, quality, and value that reflects the actual subscription box you’ll ultimately send.

Think of your subscription box prototype as a marketing and business validation tool that closely matches the actual box you’ll deliver.

In doing so, you will save an inordinate amount of time in looking for suppliers for your subscription box before you have actually validated the idea.

Besides, during the pre-launch period, you will have plenty of time to do that research and establish the supplier relationships anyways.

Here are a few good sources to find your product inventory for your subscription box prototype:

  1. Amazon.com - Quite obviously, Amazon has one of the biggest collections of products anywhere in the world.
  2. IndiaMart.com - India Mart has thousands of manufacturers in all sorts of categories. You can contact sellers, build relationships, and even start getting samples to see they comply with your product quality standards.
  3. Etsy.com - Etsy is a great source of quality products. You can get in touch with the seller and engage with them to find out if they can be a long-term partner.
  4. Local Retail shops - I know this one is obvious but if you are just looking to test/validate your idea, you can quickly create your subscription box.
  5. Wholesale: You can also google your product name + wholesaler to find suppliers.

Once you have sourced products for your prototype box, it’s time to package them and make it enticing for your customer.

Packaging Your Subscription Box

In the e-commerce world, the packaging is what sells the product first. Your customer can’t touch, feel, or smell your product during their shopping. All they can do is see the packaging and make an informed decision on buying or giving it a pass.

So make sure even with the prototype subscription box, you are paying attention packaging which includes:

  1. The organization of products in your subscription box
  2. The safety of the products within the box
  3. Usage instructions (when applicable)
  4. Marketing message
  5. And so on...

At the same time, you need to be frugal and pragmatic with your packaging.

Certain packaging material will increase your cost. If you are sending fragile items, it makes sense to take that extra care and use bubble wrap and thermocol.

You also need to take into account the shipping cost. The larger your package, the more will be the cost of shipping.

A quick and inexpensive way to source your box is to go for a standard cardboard box. You can go for custom sizes once your subscription box idea is validated. Also, you can use Crinkle paper, a standard cardboard box with stamps and stickers to get started.

Content and packaging information

You can create a special experience for your customers by crafting unique messaging with your packaging. You may want to include a special thank you message with your box. Also, do you want to include “how-to” instructions with your box? Make sure you consider these things while packaging your box.

Box Photography

When you are selling your subscription box, the customers are going to see the photos first. So you need to get the photography nailed out in first place. Having proper lighting and angles for your subscription box photography will ensure that your products come out in full light. Also, get individual product angles to ensure that the customer exactly knows what they are getting.

5. Pricing Your Subscription Box

Pricing your subscription box

Pricing can make or break your subscription box business.

Ironically, this is also an area where most mistakes are made. Price your subscription box too low and you will stretch yourself too thin and ultimately impact your customer experience. Price your subscription box too high and it might turn off customers or they’ll cancel soon.

That being said, here are a few things you need to taken into account while pricing your subscription box:

  1. Average Cost of Products: This one is obvious. Isn’t it? You just calculate the total cost of products you are going to ship every month. The truth is - it isn’t. You also need to include shipping and packaging costs that your supplier will charge you.
  2. Box & Packaging Materials (per box): Include the cost of all kinds of little things used in packaging such as bubble wrap, the box, crinkle paper, and printed material included in the box.
  3. Outsourced Fulfilment: Most probably, you will need to use an outsource fulfillment service to ensure that you don’t have to worry about negative shipping rates or worry about storing your subscription boxes. Fulfillment services such as ShipStation will not only collect the box from your location, but they have pre-negotiate the best shipping rates.
  4. 39shops charge a 2% transaction fee. On top of it, the payment gateway will charge credit card processing fees which depend on your payment processor.

You can also take into consideration indirect costs which are broadly divided into two categories:

  1. Your Cost of Acquiring customers - This includes your marketing and advertising cost.
  2. Fixed Overheads - This includes the software subscriptions you’ll buy, accounting software, cost of incorporating the business and keeping it operational

Once you have considered all costs, it is recommended that you add 40% as profit margin over and above your direct + indirect cost.

As an example, if you are selling a subscription box for vegan food lovers and the total cost comes down to $50 per box, the price of the subscription box will turn out to be $70.

We’ve compiled a simple Subscription Box Price Calculator that will help you come up with the right pricing.

So far so good.

Up until this point we have accomplished so much:

  • We’ve identified the subscription box idea
  • We’ve narrowed to a niche market
  • We’ve defined customer persona and precisely know their likes/dislikes
  • We’ve sourced products and created a subscription box prototype
  • We’ve put a price tag for the subscription box

Now comes the fun part.

Most of what we have done so far is an educated guess.

Even after going through the entire process, it doesn’t necessarily mean your market will stand in a queue to buy your coveted subscription box.

In the next step, we are going to not only validate your subscription box idea but we are creating a demand for it beforehand.

The best part is when you do this well you’ll have customers waiting for the subscription box before you invest a ton of money in creating the actual subscription box.

6. The Fail-safe Launch

Product Launch

In all fighter jets, there is an emergency evacuation button located below the pilot’s seat. So, in case something unpleasant happens, the pilot can safely eject out of the plane.

Our fail-safe launch strategy is something along the same line.

It will ensure that even if your subscription box doesn’t find enough takers, you can come back with even more learning and enthusiasm.

On top of it, you will be validating your idea with a tiny investment.

Isn’t that smart?

The goal of the fail-safe launch is two-fold:

To ensure that enough people are interested in your subscription box

To build a list of prospects who are ready to take the plunge when your subscription box is ready to be shipped

To pre-launch your subscription box, you’ll need three key assets:

Your pre-launch website

Your own Facebook group

An account with email service provider (ESP)

Your Pre-launch website

Your pre-launch website doesn’t need to be an elaborate e-commerce site with fancy design. It can be something simple and clear for customers.

In the one page pre-launch website, all you have is your product in full display, a description of your subscription box, and a little bit about you (and your story).

[Screenshot of pre-launch page goes here]

You’ll also have a big email address collection box so people can join the waiting list.

The next thing you need to do is drive your target audience to this pre-launch waitlist page.

Engaging with your audience on your Facebook group

The best way to do this is to start a Facebook group and begin a conversation with your market.

You want to start quality conversations, ask questions, and educate your audience about the subscription box (and why it is important).

Remember, you are not in the “selling” mode yet. Your goal is to learn about how your market responds. You want to engage with them and give value with content.

As a result, people who engage with you will eventually visit your website to check out your offering. And some of them will eventually enter the waiting list.

The moment you see enough people entering your waiting list, you’ll know your idea has legs.

Getting people inside your email list

People who enter your waiting list will essentially get added to your email list. And you need to sign-up with an ESP (email service provider) in order to capture people in your list.

Mailchimp is an easy choice for startups. They offer unlimited sends for up to 2000 subscribers for free.

Once you connect your pre-sell page with the email list, you need to keep in touch with your list every once in a while with news and updates about your products and upcoming launch.

What does success look like?

You must be clear about what would be considered a successful pre-launch.

Do you want to get 20, 50, or 100 paying subscribers during the pre-launch?

If so, you need to generate at least 200, 500, or 1000 leads respectively, and aim for a 10% conversion rate.

You need to start somewhere and track the actual numbers so you precisely know what it takes to get the first few customers.

Pre-launch Timeline

The number one question your subscription box customers are going to have is “Where is my subscription box?” and the clearer you are about your shipping and delivery schedule, the higher will be your conversions.

Hence, your pre-launch timeline is super important.

You need to have your pre-launch date and the actual shipping date of the first subscription box spaced anywhere between 15 to 45 days. Anything longer than 45 days and your customers will lose interest and feel duped with your marketing.

In case your launch gets extended, clearly communicate that to your customers. It makes sense to offer a pre-launch promotional discount. Make sure it is communicated clearly with the availability and deadline.

Remember, your goal with the first few customers is to not earn profit but win their business.

That’s our fail-safe launch strategy in a nut-shell. In case you want full guidance and hanholding for your pre-launch, please get in touch with us and we’ll help guide you through everything.

The fail-safe pre-launch strategy isn’t about avoiding failure. Instead it is about failing fast without wasting time and money.

Because the faster you fail, the quicker you'll know your mistakes, make necessary adjustments and bounce back with vengeance.

7. Adjusting and Scaling

scale your business

At the beginning of this article, I had emphasized that your idea is only half the story. The story will be complete when your customer embraces your subscription box idea at a price point that fetches you enough profits.

When you pre-launch your subscription box business - only two things can happen:

  1. Customers are not only raving about it but they have purchased your subscription box during the pre-launch for an early bird price.
  2. Or your market didn’t show much interest. You saw a few sign ups but nothing much exciting happened.

If your idea didn’t work out well, don’t be upset about it. Every successful business is a result of countless small failures. It isn’t the end of the road. It’s the beginning of a new road.

You need to take detailed feedback from your customers and make necessary adjustments in your target market, product, messaging, or pricing strategy. In some cases, everything starts from scratch.

Instead of being judgmental about your idea, be inquisitive. Be curious about what customers are looking for.

I’ll repeat this - it’s not just about the idea. It’s about the customer.

And if you are one of those very few businesses who got lucky in the first attempt, congratulations, you are ready to move to the next step - which is growing your subscription business and turning it into a scalable venture.

Even if your pre-launch is successful, here is what you need to do next:

Find out the exact customer person who bought the subscription box. Learn more about them.

Schedule a time to speak with them and discover “why” they bought it. Their reasons for buying might be different from your reasons for selling.

Adjust your pricing, product, and packaging based on customer feedback

Next Step

Subscription box business is a numbers game.

Even if you have validated your market and successfully collected enough subscribers during the pre-launch, never stop learning about the market.

Continue having conversations and ensure that your back-end system is ready to handle the fresh influx of business.

Hrishikesh Jobanputra
written by

Hrishikesh Jobanputra

Hrishikesh Jobanputra is a marketing strategist, copywriter, and co-founder at 39shops.com. He helps small business owners boost revenue with razor-sharp marketing strategies and conversion copywriting.
He can be reached at his twitter handle @hrishikeshj

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