There’s no doubt that these are trying times for US-based small businesses, as rising inflation and employee shortages, among other factors, are clouding their future cash flows – especially in the retail and eCommerce spaces. One of the sure ways to pad your future cash flow, increase customer loyalty and increase your database of repeat and lifetime customers is to offer subscription box services.
Although people often think of video streaming services or publications when they hear the word ‘subscription,’ this service has become popular among retailers selling physical products. In short, more retailers are offering groups of products to customers who agree to pre-pay for and receive on a weekly or monthly basis for a predetermined time frame.
According to tech consulting firm NCR, subscription services among eCommerce and retailers rose 23% during the COVID-19 pandemic, and have increased 17% on a year-over-year basis for the last five years.
In fact, the pre-pandemic years saw the rise of the most popular retail subscriptions services such as Birchbox (beauty supplies), Blue Apron (homemade meal kits) and Dollar Shave Club (men’s shaving products).
Should You Offer a Subscription Service?
Whether you should offer subscription services depends on the products you sell, as they aren’t for every small business. For example, such a service probably wouldn’t be a good fit for construction companies and business services firms such as accounting and law firms. If you sell physical products, however, a subscription service can bolster your bottom line and ensure future sales, and the best part – if you set it up correctly, you don’t need to be a major retailer to offer such a service.
No matter what physical products you sell, subscription services have skyrocketed during the pandemic. Consumers have shown that they enjoy receiving a surprise box of products tailor-made that fit their personal or professional lifestyles on a weekly or monthly basis for an automatically recurring fee, especially now as more consumers are working from home.
If you’re unsure whether the products you offer would work in a subscription plan, you should first determine who your target customers are and what niche you are seeking to fill. The first thing you should do is check out other successful, small- to medium-sized businesses that have made it work for inspiration. Examine how companies such as The Honest Co. (environmentally safe baby products) and KiwiCo (homemade science projects for kids) have successfully built their businesses around subscription services.
Granted, those are now large companies. If you believe your business is too small to offer this service, you’d be wrong – consider the success of these small business subscription services created at the height of the pandemic that are still going strong today:
- Business Book Monthly. Business Book Monthly is a small business that has built a successful model by getting customers to subscribe to a service in which they receive a new business advice book as well as an assortment of office products every month.
- GlobeIn. GlobeIn sends exclusive artisan products for the home or office monthly and offers a
three- or six-month or annual subscription with prices ranging from $35 to $40 per month. Notice how its site features positive business reviews and colorful graphics highlighting its various products.
- CrateJoy. CrateJoy offers several unique subscription boxes containing products such as flower arrangements, monthly earrings and food and snacks. Its most popular subscription is its Fair Trade Fridays boxes, which contain artisan trinkets from various independent artists.
- Sitti. Sitti partners with women-owned businesses and sends monthly boxes containing nine ethnically diverse artisan products.
- Each Peach Market. Each Peach Market sends boxes of gourmet cheeses with recipes, handmade chocolates and wines on a quarterly basis for a few hundred dollars per year.
Where do you Begin?
If you have products that you know your customers will love to receive at various intervals, it’s time to set up a service – but, where do you begin? Once you’ve figured out your niche and determined who your target customers are, here are some steps you can take to launch your subscription box enterprise:
#1 Create a Prototype Box
The first question to ask yourself is: what do my customers want? Whether you sell gourmet snacks, clothing or beauty and fashion products, put a list of products together that your target audience would want. Advertise that product on social media, on your website or in your physical store to see customer reactions to it.
It may take a few tries, but once you’ve come up with the perfect box, you must be creative in how you’re going to update and personalize those boxes at the intervals you want – be it weekly, monthly or quarterly. This sounds like a chore, but it’s something you can have fun with as a business owner.
If you sell gourmet snacks, for example, you may want your boxes to contain food items that correspond to the different holidays during the year. If you’re a home goods store, you may want to sell boxes that contain small items for gardening in the spring.
#2 Price it Accordingly
Obviously, your ultimate goal as a small business owner is to be profitable, but you don’t want to charge so much that it will drive away customers. Like with any product, you need to take into account the cost of the materials, marketing costs, transaction fees and packaging and shipping costs when pricing your boxes.
With inflation currently skyrocketing, you should also consider that consumers are seeking bargains now more than ever before, so a key component of your success will be to market your subscription boxes in a way that lets customers know that they will be saving money by pre-purchasing your subscription boxes than if they simply purchased the products separately.
#3 Personalize Your Boxes
One of the allures of a subscription box is that the subscriber sees it as a present to him or herself every month. Every customer has their own tastes, so it’s important to give them choices as to the style of boxes that they want based on their age, gender, income level, etc..
For example, subscription box company BespokePost, which sells retail items from clothing to hardware tools, takes into account each customer’s age, color preference, grooming habits and size before personalizing boxes for them, ensuring that they deliver boxes that individual consumers will enjoy. Personalizing your boxes will bring you greater customer loyalty and ensure future subscriptions.
#4 Figure out Inventory and Shipping
Everyone knows the economic challenges businesses are facing right now, especially small businesses. For this reason, small businesses need to figure out the best way to keep inventory flowing and shipping costs down. The rules of inventory management have changed for small businesses over the past year as supply chain disruptions continue.
eCommerce and physical retail stores seeking to offer subscription boxes should set up a system in which inventory can be pre-ordered. Your list of suppliers should be diversified, and it may be best to partner with other small businesses to offer unique products and to make sure you have products in stock for your customers.
As far as shipping goes, examine the best and most cost-effective shipping fulfillment companies for your subscription service, especially if you’re engaging in direct-to-consumer shipping practices. There are also a variety of ways you can reduce shipping costs so that you don’t have to pass those costs along to your customers.
Enhance Your Business
In all, subscription boxes are a great way to ensure future sales, increase cash flow and customer loyalty. The past three years has witnessed skyrocketing growth in the popularity of subscription box services from retailers, as customers like to feel special with personalized boxes and want to feel like they’re getting a bargain. If a subscription box service is right for your business, don’t find yourself left in the dust in this growing trend.