A Guide to Making Money with Subscription Boxes
A decade ago, the term “subscription box” wouldn’t have held as much significance as it does today. With its element of surprise, cost-effectiveness, convenience, and customization, the subscription box has become a consumer favorite that is here to stay.
Subscription boxes have become attractive to brands big and small who’ve seen the pros of offering such a product. High retention rates, predictable income streams, and quick user feedback are just some of the reasons more than 3,500 subscription boxes exist in the United States alone.
Yet, many brands fear that the initial novelty of subscription boxes has diminished, leaving behind the question of whether or not offering such a product is profitable. Today, I’m here to reveal the value of this service, and most importantly, how your brand can make money from subscription boxes.
To Pay or to Partner
When considering the products you’re going to place in your subscription boxes, you have two options: pay for the products or partner with companies to get the products for free. Of course, there are pros and cons to each!
By choosing to pay for your products, how much you charge for your box should be your biggest concern. You want your box to be priced high enough to be profitable, but not so high that consumers are unwilling to pay.
You have the flexibility in deciding what you will include in your box, and most importantly, how much you’re going to spend on products.
Paying for your products means making money off of 3- and 6-month prepay plans rather than month-to-month users. This can result in a small margin where significant profit won’t be seen until at least a year into the service being offered.
If paying for your own products isn’t for you, then partnerships are a good option. Partnering with other brands means getting free samples that you can include in your box.
You see a much larger margin given you aren’t paying for your product, meaning you don’t have to rely as heavily on consumers purchasing your subscription boxes consistently throughout the year.
By becoming dependent on partners for products, you don’t have as much freedom in terms of what you put in your boxes. Additionally, significant effort has to be placed into cultivating and maintaining partnerships in order to consistently receive a variety of new products.
Make Use of Budgeting Calculators
When creating or adding subscription boxes to your brand, budgeting must be considered. One of the biggest mistakes new subscription businesses make is not considering all costs involved, resulting in boxes being priced too low. This means keeping factors such as products, shipping, credit card fees, packaging materials, custom box design, and marketing costs in mind when deciding on a final box price.
Budgeting spreadsheets can be overwhelming, so we’ve broken down each category to help guide you:
The shipping carrier category of the budgeting tool refers to the cost of shipping a box. This involves estimating the weight of every single box. Because shipping carriers price shipments based on weight and shipping distance, you can determine the price based on box weight and whether the majority of your boxes will be shipped close to home (minimum), far from home (maximum), or a mixture of the two (average).
When it comes to your actual box, it’s crucial to estimate all the factors that are involved including the box material, size, total cost of products, packaging materials, processing fees, and customer charges per box.
Xceed offers custom subscription boxes and mailers perfect for all your subscription box needs. Once you’ve selected the product right for you, you can calculate your price per box based on your custom selections including dimensions (L x W x D), material options (gloss, kraft, white), and print options (inside and outside, no print, outside) right on the website. Xceed prides itself in offering no minimums, print-on-demand technology, flexibility, and high-quality graphics! With such values, we’re confident we can help you customize the perfect subscription box.
Based on your current social media audience, you can calculate how many consumers you can expect to plan for. Growth rates are based on market averages and include conversion rates and monthly churn estimation.
Here is the place to calculate and consider all expenses that may arise throughout the year from building insurance to traveling. A chargeback percentage is also provided based on market averages for e-commerce transactions.
By looking ahead at the first three years, you’ll be able to determine how your subscription box profit is expected to grow.
Playing around with a startup costs calculator can also help you effectively determine the launch of your business.
Beyond budgeting, there are several other key principles to keep in mind in order to ensure your subscription boxes are profitable.
1. Ensure Product Quality
Subscription boxes are favored by consumers because of the experience that they create. In today’s world of social media and unboxing culture, showing off subscription boxes online has grown exponentially. Consumers want to share their unboxing experience with their friends, family, and followers – especially when they find it appealing. This is why quality is crucial – from the packaging to the products you place inside.
Through quality custom packaging, you can enhance the personal experience consumers have with your subscription boxes that plain, brown boxes can’t. Customization as little as placing your brand’s logo on the box can make a huge difference in creating brand loyalty and ensuring customer retention.
Read more about investing in custom packaging here.
2. Fulfill Consumer Needs
When it comes to the products you’re placing in your subscription boxes, whether you’ve bought them yourself or gotten them from a partner, quality continues to be important. The selection of products you include should help fulfill your consumers’ needs.
For example, if you offer a skincare subscription box, you want to provide good-sized, quality skincare products that meet a range of needs from moisturizing the skin to fighting against wrinkles.
While choosing lower-quality, small-sized products may help you increase your net profit in the short term, such products don’t help ensure customer retention. Customers want to feel that your subscription box is and will continue to help them meet their needs far into the future.
3. Pay Attention to Customer Feedback
When offering subscription box services, taking care of your customers and keeping their feedback in mind is critical. If you notice consistent complaints about box quality, negative reviews about product selection, or concerns over pricing, it’s important to keep that feedback in mind.
Ensuring customer satisfaction is a surefire way to enhance loyalty and ensure retention. This means going the extra mile to send replacements, make changes, offer coupons, and most importantly, apologize.
There are many customer service platforms available online to help fine-tune and streamline your customer service efforts such as Zendesk.
Time to Start Making Money
Subscription boxes offer a stable, financial opportunity rooted in recurring monthly revenue. Because of their tremendous growth and popularity, subscription boxes have become increasingly competitive. Lucky for you, subscription commerce can come from any niche your business may be in from pets to coffee, meaning making money with subscription boxes is possible.
By choosing the best place to get your products from, pricing your subscription boxes profitably, considering all costs through budget tools and calculators, ensuring product quality, fulfilling consumer needs, and paying attention to customer feedback, you can ensure quality subscription boxes that keep your customers and margins growing.
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