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If there is one type of eCommerce business that defines the last ten years, it may well be the subscription model.

Why buy a DVD when you have a whole film library on Netflix? Why pay to download one album when you can listen to hundreds on Spotify? Why pay delivery on every order when you can save with Amazon Prime?

It’s a strategy that is appealing for both consumers and businesses alike.

But, despite the market’s boom in recent years, it takes serious work and planning to make a success of a subscription box business.

Find out how in this week’s article…

Why is the subscription business model so successful?

The idea of a subscription service is nothing new. Magazines, newspapers, software – even the milk round – are types of subscriptions that have been around for decades.

But, a more recent phenomenon is the explosion of the eCommerce subscription box.

Over the last ten years, subscription boxes have boomed, with the market expected to be worth over £1 billion by 2022.

Yes, this model has revolutionised the way we buy everything, from daily essentials to luxury items. We can have everything delivered straight to our door, whether that’s our evening meals, books, beauty products or pet food.

It’s not just product based subscriptions, either. We will pay monthly fees to access better services, experiences or lifestyles. Gym memberships, e-learning, travel – the subscription model can be fit to suit it all.

But, every subscription business model has one thing in common. They make life more convenient.

Subscription boxes and services are currently most popular with 18 – 34 years olds, leading many to the conclusion that they are a ‘Millenial’ phenomenon.

What’s more, a YouGov survey revealed that the top 3 reasons for buying subscription boxes are:

  • It’s convenient (37%)
  • I want to treat myself (33%)
  • I want to try new products (31%)

Subscription boxes have managed to toe that line between things we need and things we want. Tedious supermarket trips can be replaced by exciting boxes of fresh food. We no longer have to pay a big sum for that one-off luxurious treat – we can fit it into our monthly budget and enjoy something new every four weeks.

Yes, subscription boxes tick all the boxes for today’s online consumer. But, what about the subscription box seller? How do you make sure your business is profitable and successful?

What does a subscription box need to be successful?

There are unique challenges that subscription boxes face to be successful in an increasingly crowded marketplace. Unlike traditional eCommerce, the goalposts have shifted more significantly.

1. Understand your customer through and through

The success of the subscription box model has made the market extremely competitive. The result is a lot of noise that you will have to cut through to make your box stand out.

But, the key to making a success of your business is to focus on your key persona. Don’t try to be something for everyone. Instead, get a steadfast idea of who your target customer is, what they want and how to deliver it to them.

Along with curating the perfect product offering for them, go beyond the box itself with content marketing, social media, influencers and email marketing. Use all of these things to connect with your customers, build a strong relationship with them and remind them why they love their box and the value they get from it.

2. Prioritise customer retention

There is another essential reason why you need a deep understanding of who your customer is to make a success of your subscription box business.

The better you know your customers, the longer you can retain them for.

And, the longer you retain them for, the more money you will make.

Subscription businesses are a recurring revenue model. This means that you rely on stable and predictable payments from your customer base every month. Losing subscribers can have a huge financial impact, so you need to put just as much focus on keeping your current customers happy as you do acquiring new ones.

It’s not just about the money they give you, either. Long term customers provide you with valuable information on why they subscribe. You can gather insights on what products they like best, how they use your service and the ways they interact with you.

You can then use this to inform future product selections, branding, marketing campaigns and pricing structures to make yourself as appealing as possible to both new and existing customers.

3. Seamless online experience

Subscription boxes are very much a product of the eCommerce boom. So, make sure your online presence does you justice.

Ensure your sign-up process is smooth and glitch-free. There is nothing more frustrating than losing out on customers because of technical errors, so ensure it works across all devices.

Make sure your website sells the value of your subscription box and keep an eye on conversions coming in from social media and other digital marketing channels. If you aren’t making those sales, try and figure out where you are going wrong.

For existing customers, a good log-in area is essential. Provide somewhere they can easily manage their own account and update their preferences or details without having to contact you.

4. Optimised pricing structure

Getting the price right for your subscription box can be a tricky task.

The average price for a subscription box in the UK is £14. But, price points can have a huge effect on how customers perceive your service, as they don’t know what items they are actually buying in advance.

If you price yourself lower than your competitors, it will likely be assumed that you have lower quality products. If you go higher, expectations will be higher, too, with subscribers expecting more expensive items.

So, it’s important to ensure you maintain a healthy margin, while still delivering on that all important perceived value of your box.

Another pitfall with subscription models is keeping hold of a static pricing structure for too long. When you first start out, you probably kept things simple, with perhaps only a couple of price options.

But, you will need to review your pricing structure as you grow and learn more about your audience. Many boxes offer different ‘tiers’ and ways to spread the cost. You can pay monthly, for example, or save money by signing up annually.

Changing pricing can be scary for subscription services. You don’t want to put your existing customers off, but you also need to ensure you are generating enough revenue to provide them with the best possible experience. Make sure customers feel rewarded for their long-term loyalty.

Of course, if you have different boxes for different tiers of customers, you need to make sure your fulfilment process can deal with this, too….

5. Make sure you can fulfil your orders

No eCommerce business can sustain itself without a smooth fulfilment process.

For subscription box models, this is even more important.

When a customer first signs up, first impressions can make or break you. You need to get that first box to their door on time, with the right items inside and an unboxing experience that wows them.

If this first order doesn’t go according to plan, you could have a cancellation on your hands, And, if they head off to one of your competitors, it will be extremely hard to win them back!

As your subscription box business gows, consider partnering with a 3PL company with dedicated subscription box fulfilment services. They will ensure every box is packed to exact requirements, minimising mistakes that can cost you long term customer relationships.

As for stock storage, the size, requirements and amount of your inventory is likely to change frequently. With a fulfilment company, you can use cutting edge inventory management software to ensure you never run out of the stock you need.

Don’t forget about the weight of your boxes, either. As you change your box’s contents, this could have an impact on your shipping charges. Your fulfilment company should ensure they always keep these costs at a minimum for you.

PS, if you’d like some expert advice on growing your subscription box business, contact 3PL for a chat about how we could help.

More eCommerce advice from the 3PL blog

5 Ways to Improve Your Order Fulfilment Process | What is the Best Way to Manage and Keep Control of My Inventory? | How Do I Choose the Right Order Fulfilment Partner

Barry Ryan

Barry Ryan is Marketing Manager at 3PL. He researches and writes everything you need to know about eCommerce fulfilment and logistics.