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Should You Consider Starting a Subscription Box Business?

by
February 20, 2017

 

Photo courtesy of LootCrate.

Do you have a passion for a certain type of product or category? If so, can you think of anything better than generating recurring income from something you love and care about?

If not, maybe you should consider starting a subscription box business.

With today’s technology and tools, it’s easier than ever to start this type of business. And subscription box businesses are booming. A new study found that visits to top subscription box sites have increased by nearly 3,000 percent in the United States over the past three years.

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We were thrilled when we found out that LootCrate, a subscription box for gamers, was #1 on the most recent Inc. 500 list. The company had 2015 revenues of over $100 million and is also a ShipStation customer. They are one of the top five most-visited subscription box sites in the U.S.:

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What’s So Great About Subscription Box Businesses?

There are many advantages that a subscription box business offers over a traditional eCommerce business. Here are a few:

  1. Recurring revenue. This is the most obvious plus. Instead of marketing to your existing customers and hoping they buy from you again, the subscription box model allows those customers to be yours until they leave, or until their subscription ends.
  2. Higher margins. While the big subscription box companies get free products and even get paid to include them, even smaller subscription box providers often get better than wholesale pricing for the products they include. The possibility of exposure to new customers and subscription box companies buying in volume motivates wholesalers to offer lower pricing.
  3. Fun times. Everyone likes (good) surprises, and this business allows you to surprise people every month. You feel good, they feel good. And you make money, too.

What Types of Products are Offered in Subscription Boxes?

The top five subscription sites show the diversity in categories of items. According to Cratejoy, ShipStation partner and the leading subscription commerce platform, the top five most popular categories of subscription boxes are:

  • Fashion
  • Beauty samples
  • Organic food
  • Eco products
  • Kids’ crafts & activities

Of course, at this point there are subscription boxes for almost every type of product or category, so don’t let this list stop you if your idea isn’t in the top five.

Who Are Typical Buyers?

Before starting a subscription box service, it’s important to know the types of folks interested in them.

Buyers who came of age in the digital era are familiar with subscriptions models, for items such as Netflix and Spotify. It’s not surprising, then, that according to the same study, subscription box consumers tend to have above average income and education levels, and are generally ages 25 to 39 years old. Buyers of subscription boxes are more likely to be female than the average online shopper. Further, these shoppers tend to live in multicultural urban neighborhoods in larger cities or the surrounding suburbs, are culturally-minded and are active and health-conscious.

Next Steps

Excited to get started? Stay tuned for more posts on the nuts and bolts of starting a subscription box business.





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