Monthly Subscription Boxes May Be the Next Big Business Boom

Our online lives are drawing a curtain over the real world. We’re rapidly moving away from real-life experiences in favor of digital fulfillment, and at our fingertips is a world wide open with uninhibited possibility. But for most of us, that’s an incredible prospect. Having whatever we want available whenever we want it, especially with the help of monthly subscription boxes, can be overwhelming and confusing.

The online business world is feeling the effects of a limitless marketplace. Products and services abound, and even with filters such as internet search and B2C marketing, it’s a challenge to find interesting products that align with consumer interests. In that ether between what we want and how we find it, subscription boxes have come to life.

What Is a Subscription Box?

The subscription box is a regularly scheduled, curated, and specially packaged goods delivery that caters to a specific market or interest. The concept borrows from the business model of the milkman, in which fresh deliveries of milk came to customers’ doorsteps carried by a friendly delivery expert. Customers could touch, taste, smell, and experience the product before them in real life, which contrasts rigidly with the intangible nature of our culture of online consumption.

That delivery model may be on its way back. Already, subscription boxes such as Birchbox, a monthly makeup and beauty product box, and Naturebox, an all-natural organic snack box, are reaching the size of traditionally successful enterprises such as corporations and chain stores. Small-time business owners are finding just-right-sized success with small customer bases and continuously creative offerings. The entire system is still remarkably new, and its shape will be molded just as much by customers as it will by subscription box creators.

What Makes Subscription Boxes Successful?

The pioneers of subscription boxes, including Birchbox co-founders Katia Beauchamp and Hayley Barna, have made the beginner’s mistakes and grown from them. They and others like them have learned what will stick with customers and what will push them toward the unsubscribe button. Together, these brave business heroes have created a blueprint for a successful subscription box company, and sites such as Cratejoy have built software systems that facilitate building from that blueprint.

Subscription box companies that grow their subscription base, profits, and influence share four characteristics:

1. Earned Loyalty – Subscription box crafters need to have an honest inclination to curate box contents. Customers want to feel that the products they receive come from a company that shares their love, and the products that company provides have to fulfill actual needs. Boxes based on novelty tend to nosedive after the charm wears away.
2. Consistent Change – Consumers are likely to scoff at even an item or two that is repeatedly delivered in a box over which they have no control. Duplicate items represent a lack of interest in dazzling the customer and are a concrete way to trim the number of subscribers to your box. Build a box concept around an interest with a wealth of competing products and make sure there’s freshness in every box.
3. Multiple Revenue Streams – Don’t stop at subscription boxes unless you aren’t looking for growth. The most prolific monthly subscription box companies have set up e-commerce shops on their websites where customers can buy more of the products they love most from their monthly boxes. Storefronts work two-fold for your business: they will market to customers who are less in touch with e-commerce and provide immediate satisfaction to loyal subscribers.
4. Sustainable Business Models – don’t go overboard with software development and overmanned sales teams. Stick to the script until you find your niche, then focus on growing that specific customer base through multiple channels. Keep overhead low by enticing vendors with free advertising if they provide free or discounted samples and full products for you to include in your boxes.

Consumer Benefits

At the forefront of the subscription box is the consumer – the beloved, fastidious, fickle consumer. The monthly subscription box business model relies on a steady monthly stream of subscriber money to maintain profit, and while the predictable income is a boon to business owners, it also means that customers are in strict control of growth potential.

That’s why clever business owners recognize and worship the benefits of subscription boxes to consumers:

They rekindle the elements of surprise and discovery

You’ve likely heard the comparison to an eternal Christmas with monthly boxes. When you get a new package of surprises every month, the delight of tearing open the package that you may remember as a child returns when your box arrives. Buying things you want is fun, but getting things you didn’t know you wanted is powerful.

They bring to light curiosities that are tough to find in a limitless marketplace

Customers can be blinded quickly by the most influential and well-known brands that cater to their interests. Exploration of new and exciting items is intimidating when products designed to please are available everywhere at all times. Well-curated subscription boxes provide a source for the lesser-known items that may cater to more individual wants and needs to reach target audiences.

They save consumers time when searching for new and interesting products

Streaming music services such as Spotify boast an intensely large library of available music on-demand. But Spotify customers don’t always know what to listen to when faced with such an array of choices, so the company provides playlists, searches, and filters to help guide customers to the music they want to hear. Monthly subscription boxes do the same in the consumer goods market – they provide a preset filter through which customers can discover what’s available without having to make guesses.

Business Benefits

Behind the scenes of the subscription box are the men and women who make each box magical. The monthly subscription box business model is still in its infancy, which allows potential business owners to shape it to their needs and goals without the added pressure of the grow-or-go traditional business model.

Business models are flexible for small and large businesses

Your subscriber limit and the ability to reach it will direct the scope of your subscription box business. Some of Cratejoy’s box curators sell just enough boxes to pay the bills and are not looking for additional growth. On the other hand, Birchbox’s owners are seeking prolific expansion. (Edit: Previously, we had mentioned that Birchbox bought Glossybox from European entrepreneur Charles von Abercon, but a kind reader pointed out that Birchbox had bought Joliebox, not Glossybox, as a part of their global expansion.)  Subscription box businesses can splash in the shallow end or dive into the deep end shame-free.

Structure allows low barriers to entry for hopeful entrepreneurs

Since most box businesses are low-overhead operations with few employees, it only takes the classic characteristics of hard work and dedication to make a subscription success. There’s no golden profit line and relatively few competitors. The landscape is open to creative ideas from just a few go-getters who want to create a business without the hassle of creating a business.

Creates opportunities where they may not exist otherwise

To launch a full-fledged enterprise is a gigantic undertaking. You need a solid business plan, a team of investors, and the will to sacrifice personal time to get things running. Or, you could create a solid product that stands out in its market and let your customers decide whether or not you should succeed by creating a subscription box specifically for your product. The small-scale business opportunity affords a chance of success to those without the startup capital or time to build an empire.

Marketer Benefits

Marketers who work in tandem with monthly subscription box companies receive something of a dream assignment when they sign on for services. Traffic for subscription-based companies tends to outpace funding in almost every scenario, which means marketers have plenty of resources with which they can work.

Target audiences are hand-picked

The success of most subscription boxes depends on the depth of the niche through which it is trying to delight customers. LootCrate has an easily researchable and well-targeted demographic to which it sends boxes. The target audience will be the only consumers of the product, and the marketing practically writes itself.

Subscriber bases are smaller

Even the largest companies in the industry tend to have fewer than 1 million subscribers at a time. Where traditional businesses may deal with millions of unknown customers every year, box companies nurture a loyal base of interested men and women who rotate much more sparingly than customers at a storefront or e-commerce shop. Marketing for these solid, smaller customer bases tends to be much more focused.

Content creation is more interesting and personal

Excitement is part of the allure of subscription boxes, and it doesn’t have to begin and end when the package arrives at the door. Getting audiences electrified about the company’s next offering affords magnificent opportunities to wow audiences with creative copy, illustrations, videos, and whatever else your marketing team can dream up.

Organic growth is indispensable

Low-cost production and the need to earn customer support leads naturally into healthy, organic growth. Marketers can take advantage and sharpen their approaches to inbound marketing through showing customers what their clients’ subscription boxes can offer in the realm of new and interesting consumer goods, and will relish the times when business is flourishing organically.

Will the Monthly Subscription Box Model Last?

Numbers look promising for growth in the subscription box industry. When profits began to rise enough for boxes to be a reliable business in the first quarter of 2013, it would have been difficult to guess that growth would explode by nearly 3,000% in the next 3 years. With about 11 million subscribers in 2016 in hundreds of different product categories, the demand is certainly scaling with the supply.

However, Forrester analyst Sucharita Mulpuru-Kodali asserts that these businesses may be at the bursting point of a huge bubble. “The energy has already died down,” she says, and she may be right. Despite the shocking appearance of the growth charts, the entire industry is terrifyingly new. There’s no long-term reference to the possibility of success, and the joy of receiving monthly gifts could wane when something newer arrives.

Large-scale companies already threaten the smaller markets as well. Sephora uses advanced loyalty data analytics to determine what customers want most in a box and send their Play! box monthly to subscribers for $10. Starbucks started the Reserve Roastery that offers artisan coffees to enthusiasts at a paltry $19 a month. Established businesses may well take over the open marketplace before new box services reach their ultimate potential.

Until we see the ultimate rise or fall of monthly subscription boxes, however, the potential still exists to turn classic charm into gold. If subscriptions take off, we could see an unprecedented quake in business, marketing and the way that customers consume goods – perhaps permanently.

TL;DR – Starting with a handful of remarkable successes, subscription box companies have grown exponentially in just a few years. Consumers, business owners, and marketers all get something out of the business model, but consumer benefits may decrease as the novelty of monthly surprises wears off. Major, well-established companies are also eager to take a large share of the market before new business owners have a chance to succeed with ventures from Starbucks and Sephora already in the works.

To some market researchers, the trend seems like just a fad, but the monthly subscription box model is too new to make a sound judgment. Either way, it would be wise for consumers and business owners to heed their current popularity.

The marketing team at Leverage Marketing is adaptable to all kinds of markets. Talk to us about your subscription box service and find out how our marketing experience can help you achieve your dreams. Don’t forget to sign up for our newsletter for up-to-date marketing news and invaluable tips you won’t get anywhere else!