How to Start a Subscription Box Company

1 Find Your Niche

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Funnily enough, the trick to maximizing engagement is narrowing down your audience. Research shows 80% of customers are more likely to buy from a company that offers personalized experiences. Find your niche, and you’ll find your customers.

Step 1: Pick a Business Model

When it comes to starting a subscription box company,  there are three main business models to choose from: discovery, convenience, and access. Check out our comparison table below for more information on each model:

Step 2: Choose Popular Products to Sell

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, that is), but it can be more difficult to tell whether your idea will have enough traction.

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.

And if you’re stuck in the brainstorming process, you can always use your own personal interests as a reference.

That’s exactly what Tanja Quinn, Marketing Director at the subscription drinks service Popaball, advises any would-be subscription entrepreneurs:

Step 3: Build Customer Profiles

Creating a subscription box that your customers love is only possible if, well, you  know your customers. 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.” 

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 having to scour the internet in search of 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 into 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.

2 Source Your Products

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Now you know what you want to sell, but how do you get your hands on those products? In this section, we’ll show you three ways to source your products: using a wholesaler, searching online marketplaces, and visiting local stores.

We’d recommend being flexible and dabbling in more than one method. This will help you to piece together a truly unique subscription box of products that stands out from the competition.

Using a wholesaler is best for cutting costs, but you risk sourcing ordinary items. Searching online marketplaces might give you unique products, but at a high price. Finally, visiting local shops might reward you with free items, but it’s more time consuming than the other methods.

Option 1: Use a Wholesaler

You can keep your cost of goods sold 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.

Let’s say you’re running a coffee subscription service. To find a wholesale supplier, all you have to do is Google search [coffee + wholesale supplier], and you’ll find a list of potential suppliers.  Then, do some research to see which supplier would suit your needs best.

Option 2: Search Online Marketplaces

The beauty of starting a subscription box means that you can piece your products together from different sources, if you please.  The bulk of your box could be made up of wholesale products, but you could then splash out on one or two unique items to make your boxes more 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, acting 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 the perfect fit for you is definitely in there somewhere!

Option 3: Visit Local Brick-and-Mortar Stores

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 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.

Option 4: Make Your Own Items

Keen eye for creativity? Don’t waste it! You can also add your very own creations to your subscription boxes. This technique would work particularly well for craft boxes, such as embroidery or knitting material subscription boxes, where you can add your own handmade trinkets to help put together a truly unique subscription box.

3 Price Your Subscription Box

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The next move is to think about the logistics of starting a subscription box company – specifically, how much it will cost. Learning how to price a product can be tricky if you’re not sure where to start, but we’re here to help guide you through.

When you’re first starting out, you don’t need to worry too much about calculating your customer churn rate (how often people unsubscribe) and customer lifetime value (the total amount a customer spends between sign-up and deactivation). This is data that you’ll be able to collect over time.

However, there are two components of budgeting that you must pay attention to: cost of goods sold, and the customer acquisition cost.

Step 1: Calculate 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.

We’ve created some simple formulas that will help you calculate your overall cost of goods sold:

* If you’re using a fulfillment center, you should anticipate spending approximately $1 on filling each box, since that’s the usual rate. If you’re filling the boxes yourself, then take the hourly rate of an employee’s salary and multiply it by the time spent filling out the boxes, then divide that by the total number of boxes filled.

Step 2: Calculate 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 when you’re just starting a 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 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!

4 Set up Social Media

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Engaging with customers on social media is the best way to get your company some invaluable social proof from regular, unsponsored people. Instagram ads can reach up to 928.5 million people – a huge percentage of its 1 billion active monthly users.

By advertising on social media, you can also encourage users to share your content with the click of a button. If you want to know how to start a subscription box company that blows up online, then you must get on social media.

Step 1: Research Content Inspiration

In order to create engaging content, you have to know what the people in your niche are currently talking, tweeting, and posting 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.

Step 2: Set up Social Media Accounts

You’ll need to create accounts on suitable social media platforms. By this, we mean you won’t need to create accounts on every single channel out there. Facebook and Twitter are brilliant tools for engaging with customers and social media users, while Instagram and Pinterest are more visual, ideal for displaying your products and encouraging users to share images of your subscription boxes.

First off, we’d recommend setting up a Facebook Store. It only takes a few minutes to do so, and you’ll have access to the millions of active monthly Facebook users. Similarly, we’d suggest creating a Twitter Business account, which will make it easier for you to connect and chat with customers on a regular basis.

You can also make money on Instagram really easily by selling your boxes directly from the platform. Like Pinterest, you should use Instagram to show off your artistic flair through imagery and video.

Once you’ve created your accounts, you can start posting relevant content about your topic, whether it’s engaging videos and images, or competitions and quizzes that will help generate a buzz about your future venture. Just make sure that you explain your boxes are ‘coming soon’  if you’re still developing them!

And once you’ve started sending out your boxes, you should repost images of customers with their own orders, which will help you add social proof.

Step 3: Set up Analytics

If you’re managing multiple social accounts, there are plenty of “social media management” tools that can help keep your content plan 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

5 Choose a Sales Platform

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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 two types of platforms that we’d recommend for starting a subscription box business: ecommerce website builders (e.g. Shopify or BigCommerce), and online marketplaces (e.g. Etsy or CrateJoy). We’ll cover both in-depth, but first, here’s how they differ:

Now, let’s break it down so you can pick your favorite platform.

Option 1: Use an Ecommerce Website Builder

Ecommerce website builders, like Shopify, 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.

We recommend Shopify because it’s easy to use and has powerful features. That’s what makes it one of the very  best ecommerce platforms around. And you can trust our advice here – we’ve tested over 50 website builders, and put in hours of in-depth research to inform our decisions.

Shopify at a glance…

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.

To start charging for your subscription boxes on Shopify, on a subscription basis, you’ll need to install an app (we recommend the aptly named Recurring Order & Subscription App).

Option 2: Use an Online Marketplace

Online marketplaces, such as Cratejoy and Etsy, are the fastest way to start selling online. After signing up for an account on an existing website, you can simply start listing your items, with no setup necessary.  For a quick overview, here’s how Etsy differs from Shopify at a glance:

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.

You’ll also have a lot of options if you decide to sell through an online marketplace. We recommend Cratejoy, because it’s dedicated solely to selling subscription boxes; Etsy is a great platform, but your box might get lost in the crowd of other types of products.

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 Option is Right for me?

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 do 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. 

Still undecided? No worries. You can actually use both platforms if you create a Shopify account and then add the Etsy integration.

How to Accept Payments Online

Both website builders and online marketplaces 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.

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 ability to accept payments online on a monthly basis – in other words, on a subscription basis – is vital to providing a convenient shopping experience, so you must keep this in mind when picking a payment processor.

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.

6 Decide on a Shipping Solution

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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.

Option 1: Ship 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 basic 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.

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.

Option 2: Ship 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 include:

• 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.

7 Promote Your Box

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It’s time to boast about your boxes.  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.

Step 1: 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.

Step 2: 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.

Step 3: 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!

Step 4: Reach out to Micro Influencers

Through a Google search, compile a list of micro influencers (influencers, usually focussed on a niche topic, with only a few thousand followers) who are relevant to your industry, and send them an email saying you’d love to offer them a free box in exchange for a review on their social media accounts.

We’d strongly recommend visiting micro influencer community pages, such as Stack Influence, to get connected with the right influencers for your subscription box.

By building relationships with reputable influencers, you can have your brand exposed to a new, relevant audience.

8 How to Start a Subscription Box: Recap

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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, you’re now armed with all of the basic knowledge you’ll need to get started. However, if you want to learn more, we have a handy subscription ecommerce guide too.

To recap, here are the seven steps to take when starting a subscription box company.

How to create a subscription box

1. Find your niche
2. Price your subscription box
3. Source your products
4. Set up social media
5. Choose a sales platform
6. Decide on a shipping solution
7. 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!