The subscription box industry has exploded over the past few years. Consumers love the novelty of receiving a handpicked box of high-quality products. With over 2,000 options in the US, you can find a subscription box for just about anything.
Subscription commerce, a business model where customers pay for goods or services on a subscription basis, is paying off for online sellers in the industry. Over the past three years, popular subscription box sites have grown almost 3,000%, with subscription box website visits going from 722,000 in 2013 to 21.4 million in 2016. From beauty supplies to pet toys to meal prep services, the sky is the limit for the subscription box industry. If you’re on the fence about starting a subscription box business, here is a list of pros and cons to help you decide:
Subscription Box Model Pros
- Increased Predictability: Selling subscription boxes allows for better forecasting and planning for your business. You will have a better idea of how much stock is needed and easily predict the monthly revenue.
- Increased LTV: When a customer signs up for a subscription box, they are committing to a long-term relationship with the company, resulting in a higher LifeTime Value (LTV). With automated monthly deliveries, you can spend less money on targeted advertising to retain customers.
- Targeted Customer Base: Subscription boxes are usually created for a particular type of person or group of people, essentially for a niche. For example, Ipsy is designed for those individuals interested in the latest beauty trends and Plated is intended for people with limited time who want healthy, easy meals. With a target market, designing the perfect niche product and marketing strategy is a much more straightforward process.
- Better Customer Communication: With monthly boxes going out to customers, you have more opportunities to receive feedback and collect data. This data allows you to create better business strategies to quickly identify any part of the business your customer is unhappy with and improve it.
Subscription Box Model Cons
- Customer Retention: Retention will be a new aspect of your marketing strategy. For example, subscription boxes typically have a product category or theme, creating limitations for varying types of products to include each month. Customers may become bored with their deliveries leading them to unsubscribe. You may deal with more customer interactions than with a standard ecommerce business model. You will also need to spend money on market research and email marketing to help retain your customers. When creating your business strategy, properly plan for these resources.
- Smaller Audience: This business model targets a specific type of customer, one who likes the novelty of receiving a surprise each month and, inevitably, alienating others. If someone is looking for a product immediately, or only once, they will not be interested in subscribing for a monthly delivery. You could diversify and offer stand-alone items to overcome this issue.
- Decreased Value of Box: Subscription boxes gain value from selling a bundle of products at a discounted price. Over time, it can be difficult to maintain the level of value you began with while diversifying the products you include from month to month. Product sourcing will be extremely important to ensure you stay profitable.
- Competition: Selling subscription boxes is very competitive. Many niches, such as beauty and food, are already overly saturated markets. Creating a box in a saturated market will result in high competition for your product. Combat this by entering into a less saturated niche and producing a creative product offering.
If you are looking for a unique business opportunity that has the potential to yield high results, selling subscription boxes might be the venture for you. As the industry continues to branch out and grow, subscription boxes aren’t going anywhere anytime soon. If you have a great idea for a box, weigh the pros and cons for your business and don’t be afraid to take the plunge into selling subscription boxes.