Why Start A Subscription Box Business?

Subscription boxes are one of the hottest trends in e-commerce right now.

Consumers love discovering new products recommended by influencers and brands, and they are increasingly willing to commit to receiving products delivered regularly each month.

One of the key drivers for this recent rise in popularity of subscription boxes is the value it offers both sides in the relationship.

For consumers, the ability to discover new products, save time and automatically receive consumables direct, without the hassle of shopping, is key. Signing up to a flexible subscription provides them with a greater sense of freedom, as well as the opportunity to connect to products and brands on a deeper level through an ongoing relationship.

- Recurring revenue - Predictable, forecastable monthly income allows businesses to develop more efficient processes, manage cash flow and progressively scale up.

- Customer retention - The longer a customer subscribes, the higher their overall spend and lifetime value.

- Stronger customer relationships - The ability to develop deeper connections with ongoing customers creates more trust and opportunities for upselling.

- Fairly low start-up costs - A simple website signup allows a concept to be tested with a niche community and requires a fairly low initial investment.

- Attractive to investors - A fast growing subscriber base from a disruptive startup can attract huge attention from both investors and larger companies looking to acquire new businesses.

Some question if the bubble could burst on the subscription box craze? Has the market already been saturated and now become overpopulated? Are consumers already growing tired of the concept?

The answer is a resounding ‘No!’

Reports from Hitwise show searches related to subscription boxes in the UK grew by 30% between 2016 and 2017, from 59 million to 76.9 million. So it’s clear that the UK market’s appetite is still growing. In a similar vein, a recent report from Forbes shows the US subscription box market has grown by more than 100% percent a year over the past five years, with 15% of all online shoppers now subscribing to at least 1 box on a recurring basis. Similar growth is also being seen in Australia and across Europe too.

Popular subscription services such as Amazon Prime, Graze and Birchbox have created consumer confidence in the flexible subscription model, and consumers are eager to discover more services matched to their tastes and preferences.

This is a key reason for the launch of uOpen as a centralised marketplace, it allows consumers to discover all manner of subscription boxes and services, and choose the right one for them. Similarly, for box sellers, it provides the opportunity to easily reach the rapidly growing audience of consumers interested in subscription boxes.

Not surprisingly, the big online retailers are starting to make their own moves in the subscription retail industry too. Amazon Prime may soon dominate the field for everyday consumables through its Subscribe & Save initiative.

However, this shouldn't be seen as a deterrent for startups looking to enter the market. Amazon’s strategy only validates that consumer shopping habits are clearly moving towards subscriptions.

Whilst the ability for consumers to automate purchases for regular consumables is now effortless, customers will also yearn for an element of product discovery from brands and influencers they trust. Hand-picked, curated products, the sense of being part of a like-minded community and the sheer feel-good factor of the unboxing and discovery experience are all areas where independent subscription boxes will have the upper-hand over the large e-commerce giants.

The opportunity for newcomers looking to start a subscription box will be matched in the growing number of consumers wanting to discover particular products that match their highly targeted tastes and preferences. Now that the big brands have provided consumer confidence in the model, whole new sub-categories and verticals across different niche markets are opening up for startups to explore.

Like any business, it takes hard work, focus and dedication to take an idea and grow it into a scalable business. Although the subscription box model offers a number of advantages, there are still challenges that need to be considered:

- Maintaining a high level of consistency - Behind every successful subscription business is a highly-tuned process that takes its subscribers through a positive monthly experience. If any part of the customer journey slips, subscribers will soon leave. This is one of the key challenges for a subscription service over a traditional single purchase retailer, and is why as much energy should be focused on retaining existing subscribers as attracting new ones.

- Sourcing products - Good relationships with suppliers to ensure stock is received in a timely manner are essential in ensuring boxes are fulfilled and despatched as expected and promised. Product sourcing around seasonal events or themes can also be a challenge, as you may need to predict potential subscriber volumes in, say, six month’s time.

- Spinning many plates - Be prepared to handle a number of elements simultaneously including marketing, subscriber engagement, product sourcing, delivery, packaging, stock control, brand collaborations, influencer partnerships and managing cash flow to name but a few. Organisation and planning is paramount to ensure a well-oiled machine.

If you're in the process of launching a new subscription box business - or perhaps already have - then we'd love to hear from you!

Here at uOpen, we're always on the hunt for the biggest and best subscription boxes for our ever-growing marketplace. If you're interested in listing your box on uOpen you can apply online today here and one of our marketplace team will be in touch.