In this business Analysis article we look at the subscription box. A trend that’s growing in popularity day by day and branching out into multiple opportunities. Subscription boxes come in all shapes and sizes, and here we look at whether they’re tenable in the long term as a business solution or opportunity.
Boxes can be aimed at people of a certain age, sex, or simply a hobby time. Food and drink boxes have become popular too, such as a Tea Subscription Box. Gourmet type boxes promise to offer different and exotic food stuffs, or drinks. For example in the tea subscription box, upon each delivery, you’d receive a different flavour or type of tea. Some of these boxes can come at a pretty significant cost, too. Watch Gang offers watches in three different plans, the topmost costing around $350 a month. So there really is something for everyone as far as consumers are concerned. How do you make it work? If you’re thinking of launching a subscription box business, whether a tea box or another watch box, read on.
Why Are These Boxes Rising In Popularity?
You’re reading this because you’re interested in how these kinds of businesses operate and how they’re doing, or because you want to set your own up. The key question to ask is why they’re doing so well at the moment, and following that, will they continue.
The quick and simple answer is Coronavirus. People are, in a lot of countries, stuck at home. If they’re not stuck at home, their ability to socialise and spend money on what they’d usually spend money on is heavily diluted. It means people have money to spend on things they usually wouldn’t. Subscription boxes are one of these luxuries. Luxury purchases historically go up during times of prosperity. While this isn’t that, people do have more money and are willing to spend it. But is it tenable long term?
It’s up to the subscription box company. It all depends on what they’re offering and whether they provide good value. They’re in a brilliant place at the moment because more people are buying their products. However, if they fail to live up to the expectation people will cancel. If they provide an excellent service and product, people might be more willed to continue the subscription when things go back to normal and they’re spending more money again. It all depends on what kind of value a business provides.
Take a tea subscription box for example. What do you want from it? Quantity and quality, something different each month and maybe a little extra or two thrown in. It allows you to try new flavours out on a sample basis, which can inform future purchasing decisions. The market is already picking up and again, focusing on Tea Subscription Boxes, there are already multiple businesses offering the service:
…Just to name a few.
As you can see, even by picking a smaller niche in the subscription business model, there are multiple businesses trying to make a go of it so the demand is truly there. Will they stand the test of time? It depends on how they drive their brand, secure loyalty, and keep people happy. But again, businesses in this niche, at the moment, have an unprecedented opportunity to garner custom and drive success.
How Do They Make Money
Buy in bulk so they get a discount, and then sell on to the customers. Think about Costco, and how they can provide value to their customers. This is how subscription boxes do the same. This is certainly a pull to the subscription box because it means, as a subscriber, you’re getting more for your money. However, it doesn’t mean you’ll get more for your money on every single box.
Take Watch Gang for example. They approach the watchmaker or retailer directly and bulk buy a certain amount of watches at discount to offer to their subscribers. They also claim that each and every watch will be worth more than what the subscriber pays. Sounds brilliant. They also offer three different tiers of watch type, under three different subscription plans. Its rise has been metric but only caters to men. Here’s an example of one of the many reviews:
There are potential problems though. There have been allegations that some of the watches are inflated price wise. Meaning that if you check the makers website, the price will be pretty high. However, realistically, it’s not worth anywhere near that and potentially even less than the subscriber price. Again, sometimes you’ll get value, sometimes you won’t.
But remember, there’s a lot more that goes into the package. Primarily, you’ve got the actual content of the subscription box, which is what you’re paying for. They’ve had to buy the content, of course. Then they also pay for the packaging, the posting (if they don’t pass the cost on to you), and warehouse storage, staff wages, etc. As you can see, it’s hard to pass a saving on to you. It’s also quite clear that as a business owner, there’s a lot to think about.
With that said, they clearly do make money otherwise they wouldn’t be in business.
Getting Off The Ground
The hardest part is getting known. It means your first offerings have to be damn good. You offer prominent bloggers, magazines and reviews a free couple of months, send them the box, they love it (hopefully), and write up brilliant reviews read by all. Then people start subscribing.
Of course, you need a top draw website, a social media presence and a little bit of luck on your side too. One of the best ways subscription boxes lure people in is by offering a discount on the first box. Sometimes this can be nominal like 10%, other times, places offer the first box free. You usually see these on lower cost items like food boxes etc. Businesses might also offer free shipping on the first order, or a referral system. It’s all about making the most of their opportunity and getting the customer signed up and in their ecosystem. When they’re in, it’s hard to get out. Especially if what the customer is getting is a great product.
You will have customers who leave right after the free trial. It is a trial after all and people like to get something for nothing. This has to be absorbed in your cost. The trick is ensuring they stay. It’s a hard one to manage, but many seem to do it. Like Watch Gang, or many of the tea subscription boxes above. The more expensive the subscription box is, the harder it is to keep people interested and involved.
The Subscription Lead
Some businesses might use a subscription box as a sales lead. Think about a subscription box and most items in one will involve smaller samples. The beauty business box is a key example here. Boxes like GlossyBox or Birchbox have dominated the beauty brand. They offer smaller samples of some of the best products you can buy. If someone likes the product, they might go out and buy the full sized version. Now, this won’t always happen. Sometimes, if the box is big enough in scope, leading companies will pay the company to include samples in the box. It’s another huge income stream for boxes, but it’s something a lot further down the line for many start out subscription based companies.
One of the best tricks here is to offer the product on your website. Imagine you got a tea subscription box with some brilliant Assam Tea in there. You love it. So you go onto the website, and buy a box of Assam Tea. That’s how the subscription lead works. There’s a bit more work involved for the business of course because it means having to create the right product pages etc., but it’s certainly worth doing if you have the money to invest from the off. Of course, this lead doesn’t apply to certain businesses just by nature.
Food For Thought
Subscription boxes are most popular, arguably, for food boxes. Tea subscription boxes come under this, of course. Not only are they a nice treat for the customer and family, but a time saver. Sites like Gousto will send out a recipe for the customer to make at home, making life a little easier because they don’t have to think about what they want to eat, nor do they need to go out shopping as often. Starting a food subscription box means going into one of the more popular areas, but it also means having to comply with many rules and regulations which govern proper food handling and hygiene, so make sure you get it right especially if you’re offering fresh products like meat.
A Trend Or Forever More
Trends do tend to ebb and flow and change with the seasons. It’s hard to say whether this is the same. Will subscription boxes be around forever, or are they simply popular because people are stuck at home with less to spend money on. One can look at the OnlyFans trend for parity. There are a lot of people out of work looking to make some money in other ways and utilising content on OnlyFans is a way to do this. Whether they’re offering pictures, or are a professional showcasing certain artwork or writing to their loyal followers who pay using OnlyFans to see the extra content.
A key component of the trend is scalability. Can you scale it upwards and outwards and how. It might be offering your product to overseas markets.
There certainly is scope for the trend to continue. However, it isn’t guaranteed. The window for pulling in early custom is closing too as the vaccine programmes are kicking off with the promise to bring things back to normal. Not that you can’t get custom during normal circumstances, of course. But getting them now would be beneficial. It’s always easier to keep existing customers than it is to get new ones. It’s certainly a trend, but one which, with a good business head and proper forethought, can be made into a lasting business. Time will tell. But good businesses always last a long time. If you can package value, a good, exciting product delivered in a reliable way then you’re well on your way. A word of advice, though, don’t rush. You might want to make the most of the current situation, but rushing won’t get you there. Take your time first for the best chance of success.