Everyone likes receiving a gift… even if they sent it themselves. And that simple fact, on its own, could partially explain the massive success of the subscription box industry. After all, it is a business strategy that revolves around periodically receiving a package, often full of delightful surprises… does it really matter who sent it?
We’ve written before about why online retailers need to take the subscription business model seriously and listed the reasons why subscription eCommerce in general is profitable and has recently ripened. Here we’re going to talk specifically about one of the most lucrative versions of subscription-based eCommerce services: the subscription box.
Despite how popular the subscription box business is at the moment, it’s not so easy that you can just jump on board in the middle. The subscription box business has its own unique and particular best practices, distinguished from other eCommerce techniques. There are concerns about packaging, shipping, marketing, and product sourcing that other single-session eCommerce stores don’t need to worry about.
Here, we’re going to talk about the 7 best techniques help your subscription box thrive. For both customer and vendor, a subscription box is the gift that keeps on giving… and giving, and giving, and giving…
1. Branding and Customized Packaging
The first way that subscription boxes differ from traditional eCommerce is the emphasis on branding.
You’re no longer selling individual products, one-by-one. You’re selling the feeling of receiving that box every cycle. The feeling itself varies, from surprise to relief to sheer joy, but regardless, a brand can capitalize on this feeling by associating itself with it strongly. The goal is that the customer has the brand to thank for this feeling, and they know it. That’s the key to moving from one-time service to recurring service.
One of the best ways to do this, according to the co-founder of Conscious Box (now Bestowed) Jesse Richardson, is with the package itself:
“Great brands are personal, they stand out from the crowd, they allow their customers to connect with them and ultimately establish trust. Now that we understand what a brand is, we can apply that to our product, and the place this can be most pronounced is in the packaging. For your subscription service, this is your physical box, the wrapper of your product offering and the visual storyboard of your brand.
It may seem like a stretch goal, but developing custom packaging is one the best ways to make your service iconic, recognizable, and ultimately, more successful. Here, it’s about taking that character we learned about earlier and applying it to an image. It’s about visually infusing personality into your brand.”
Source: Bulu Box
He goes on to list some common ways to infuse your brand’s character into your subscription box:
- The Box — The color, type of material, and even quality, not to mention extras like a shiny gloss or glitter, will communicate what kind of brand you are, and exhibit a visual cue that gets your customers excited when they see their mail.
- Stickers and Stamps — Useful if you don’t have the resources to decorate your box as you want, or even as some extra flair.
- Packing Material — Seemingly small decisions such as the color and amount of tissue paper can have a big impact. Richardson advises to think in terms of “How would your brand package things?”
- Continuity of Products — Of course your type of product reflects the brand identity, but so does consistency. Maintain a continuity among product quality and product features like “healthy” or “organic.”
You want your brand to feel friendly and familiar with your customer, and that involves getting personal. Create a “face” that your customers want to see over and over again.
2. Box Size and Weight
Small reductions to the size and weight of your box can add up to save you a lot. As we mentioned above, box presentation is a significant issue that traditional eCommerce doesn’t have to worry about as much. The point is to send out an abundance of boxes at high frequency, so shaving a little off each one can make a huge difference all together.
Source: Sock Fancy
The most important concern with box size is whether it fits in standard mailboxes. Shippers often have to pay an additional fee for packages that exceed this minimum.
3. Play on Mystery
Recurring services like the subscription box have a separate array of sales techniques than one-time purchases. One of the most effective is mystery. “What will come in the next box? I’ll have to continue subscribing to find out.”
Remember that subscription services are more emotion-driven, and delightful surprises create stronger emotions. Whenever a customer opens a new cycle’s box, they remember for a moment the surprises of past boxes; if these are effective, each new surprise reinforces the bond.
Moreover, mystery products break up the monotony of receiving the same package every cycle. While you’re trying to prolong your customer retention over time, the longer they stay subscribed, the less interesting the same boxes become. Philip Wilkinson, founder of the subscription gourmet coffee service Kopi, cites this as one of the drawbacks of the subscription eCommerce, saying “a lot of subscription businesses just send the same thing each month and then it just becomes a dull commodity item.”
With surprises, though, there’s something new to look forward to every time. For this reason, even regular deliveries should throw in a surprise gift. The customer may have signed up for the same exact product or products every single cycle, but you can throw in a little something extra to keep them intrigued and show your appreciation.
Because subscription services tend to be niche markets, you can more easily narrow down your target customers preferences. Based on the fact that they signed up for your subscription box of a certain type of product, you should be able to guess what other types of products they like — or at least give surprise new variations on the current product.
When done correctly, mystery can be even more alluring that reality. Just look at how many people threw away great deals for the “mystery door” on the classic game show Let’s Make a Deal.
4. Open Communication
At the risk of contradicting ourselves… too much mystery is a bad thing.
The fear of getting scammed is higher for recurring payment services, and this fear is exacerbated by the 2015 scandal from eCommerce subscription service JustFab and the sketchy advertising and billing policies of Adore Me. What this means for eCommerce subscription services is that they have to try a little harder to reassure their customers.
First, subscription box services should outline what their customers can expect in each shipment. These work best when they’re vague, so as not to reveal the mystery, but should still tell the type and quantity of each product. Even if you’re doing a surprise motif, mention the number of products without giving away what they are.
Another common tactic is to show past boxes. This shows potential customers what to expect without ruin the upcoming surprise.
Source: Loot Crate
Next, be forthright about your billing and cancellation policies. If you allow cancellation any time or the option to skip a month, mention it boldly as a feature. Customers appreciate both the honesty and the freedom. If the customer has questions or concerns, have a customer service line open 24 hours if possible.
Last, send notifications about charges, shipments, and deliveries. This extends the conversation you have with your customer, which is always good, but particularly in subscription eCommerce where branding is so important. Echoing what we said above, you want your customer to think of your brand as their friend.
These notifications also alleviate some of the fears that come with subscription services (“it’s been a month and I haven’t heard from them,”), but also build on the anticipation. If they know their subscription box is waiting for them at home after work, it gives them something to look forward to.
5. Anticipate Scaling
Part of the allure of subscription boxes is the quick upstart. The focus on niche markets narrows in on a clearly defined group of customers, so marketing and advertising efforts are more efficient. Subscription box companies tend to “take off” quickly, furthering the rumors that anyone can make it big in subscription eCommerce. The truth is a little different.
As reported by Digiday, in the early stages, the cost of acquiring new subscribers is relatively low. “When you start to scale is when these businesses are so punishing,” says Alex Lutz, the head of the business strategy group at Huge. The cost of customer acquisition continues to grow as the businesses get larger, running out of their initial niche market. To put a number on it, business starts to change after 3,000 subscribers or so.
In order to ensure a successful — and sustainable — subscription box business, you have to plan ahead. You need a long-term strategy to see you through the lean stages after the initial boom. Perhaps offer new products, additional products, or roll out a multiple, entirely new subscription boxes. For example, Kiwi Crate offers educational toys, with different boxes for different age groups, with a new age 0-2 on the way.
Source: Kiwi Crate
Of course, whatever strategy you use, it helps to simply manage your money to have a nest egg. Don’t assume your assume income will remain consistent after the first phase of your business. Learn to budget and employ cost-cutting maneuvers, and beware of costly mistakes like free samples, which we’ll explain now.
6. No Free Samples
Because scaling can be a killer, suppliers can’t afford to send free samples to subscription box companies after a certain amount of customers. And what happens to those long-time customers when you either increase the price or cut out one of your products?
Free samples may be a tempting way to attract new or more customers, but the model falls short in the long run. In the end you’re left with a supplier who’s not making enough profit or a high rate of customer churn due to pricing changes or less products.
The free-sample model originated in a different landscape, when subscription boxes were not so popular. “Discovery boxes” allowed customers to sample new products for a reduced cost and permitted suppliers to get their name out… but they only worked when the competition was slim and the idea was unique. Nowadays, discovery boxes are everywhere, and customer focus veered from abstracts like expert curation and professional recommendations to more quantifiable traits like retail value.
Even with box variations — offering different sample products in different boxes — the room for error is too high at larger levels. Even ignoring the effort it takes to manage and organize variant curations on a large level, the sheer statistics of it mean some people are receiving boxes stacked with high-quality products while others unfairly receive boxes full of low-quality ones.
Brands that use the variation model suffer 20-40% churn month to month. In an industry built on customer retention, this is a death sentence.
Source: Allure Beauty Box
The one exception are niche markets with large mark-ups on the manufacturing cost. The beauty industry, for example: considering the cost of production against the retail value, beauty brands can afford to give up large quantities of free samples on the promise of more sales due to exposure.
7. Negotiate with Suppliers
Selling subscription boxes is still a business, and no business is immune from the power of negotiation. Use it to your advantage by striking the best deals from product suppliers.
Jameson Morris, a serial subscription box entrepreneur and ex-partner of Jesse Richardson (mentioned above), offers some firsthard and directly applicable advice on negotiating with suppliers:
- Suppliers will often quote the wholesale price as a starting point, but you should always argue lower. Some sellers even have a secondary price below wholesale, known as “distributor pricing.”
- Being transparent about your own budget invites them to do the same. If you’re upfront about how much you can and can’t spend — namely your price cap per unit — suppliers may be more willing to compromise rather than lose the sale.
- Maintain good relations with your suppliers, so you can remain partners for the long-term and hopefully grow together. You’ll also get a better sense of how much products in your market are truly worth the longer you do business.
- Don’t be afraid to offer a cost-share agreement if negotiations threaten to run aground.
- Remember the promotional value you’re offering them. As we mentioned, one of the advantages of subscription boxes is discoverability, both for customers and product manufacturers. If your box is teaming up a little-known supplier with well-known brands, then the bigger brands have a built-in customer base with or without the smaller brand. You’re doing small suppliers a service by including their products in with more successful ones, and you can leverage that in negotiations.
Morris warns against over-valuing promotion, however; your suppliers may come to expect more than you can deliver. As the veteran in subscription boxes puts it, “Personally, I prefer to drive the price down as far as I can without promising anything.”
Source: Kawaii Box
Subscription boxes are a peculiar new market that seem to have a timely rise, but offer more substance and staying-power than a mere trend. The industry itself is lucrative, with a eager customer-base and benefits for providers (predictable, recurring revenue, to name one). That makes it more than worth it to learn its equally peculiar sales tactics.
Do you have any questions on the subscription box industry? Any personal advice that helped your business? Share your thoughts in the comments section now.