9 Undisputable Benefits of Starting an Automated Subscription Box Business




  • — May 28, 2017

    Image Source: Pixabay


    The subscription box business has reached 2.0 mode, which allows founders to focus on things that matter to the bottom line, like customer acquisition and revenue generation. They no longer need to create an Excel spreadsheet of new members and pack the items into boxes by themselves. Instead, they can have an automated and, almost, hands-off approach to managing the business from member acquisition stage to the delivery of the boxes to subscribers’ addresses.


    Combined with the latest business management and shipping automation tools, the subscription box model can take an existing business to the next level or, even, start a new one from scratch. This being said, if you have an existing business or a social media account with tons of followers, you are already a few steps ahead. If you do not have one, you can strategically start a blog or a YouTube channel that would appeal to your target audience, while at the same time launching the subscription box business.


    Other than the convenience and the obvious benefit of this type of business, which is the monthly revenue stream, there are at least nine other undisputable advantages.


    1. Low barrier of entry, low startup cost, and fast cash.


    With many domain web hosting providers offering free for the first month and low-cost monthly packages, this model has almost zero startup cost. Customers pay cash in advance via a payment gateway, such as PayPal or Stripe, which provides capital for purchasing the boxed items. Moreover, if the box offers sample items, then the most important “capital” needed is the good relationship with the products’ marketing directors, not the cash in the bank.


    2. Low customer retention cost.


    Most businesses take a lot of money to acquire a new customer, roughly 5 to 7 times more than keeping an existing customer. Subscription box business is one of the rarest business models that doesn’t require tons of money acquiring new customers. Instead, you can focus on serving your existing customers by ensuring their satisfaction.


    3. Less volatile during the slow time of the year.


    Every business has its slow times in a year. Summer months, for instance, are often pretty slow for certain retail businesses. However, the subscription model provides steady cash flow, even during the slowest months. This alone is a very attractive trait of this revenue model, as it is not seasonal.


    4. Capitalize an existing blog or social media account with a strong following.


    YouTube star Michelle Phan started a beauty box Ipsy offering every subscriber 4 to 5 high-end beauty products customized to their skin tone in a stylish cosmetics bag for merely $ 10 per month. Consider collaborating with social media and other online influencers to promote your subscription business, just like Phan did.


    5. Easy to integrate with an existing business site or personal blog.


    With subscription management providers, like Cratejoy and Subbly, you can easily create a membership site seamlessly from managing payments and orders, notifications, emails, storefront, discounts, and reporting analytics. Technical knowledge required is minimum, and the monthly fee is affordable starting from $ 19. Complicated plugins are no longer needed, you simply need to access their dashboard.


    6. Hands-off shipping and delivery.


    With an automated shipping and delivery service, like ShipMonk and Amazon FBA, you can have a peace of mind that the items are properly packed in a box and delivered on time. No need to hire tens of extra pairs of hands to pack the items into hundreds or thousands of boxes. Such logistics and fulfillment company would even take care of the API integration with your chosen software, so all you need is signing up. Orders will be automatically imported into its system as well.


    7. Capitalize on most profitable product mixes.


    The founder of a subscription box business gets to decide what items to include in the boxes, as the customers have no say. This is a strong advantage for entrepreneurs because it means there wouldn’t be any problems related due to low inventory. You can purchase items that are on “sale” and low priced.


    8. Manageable churn rate.


    Churn rate is also known as attrition rate, which is the percentage of subscribers that discontinue subscriptions. If your churn rate is 10 percent or lower, you’re good. Churn rate is the opposite of the so-called retention rate, which is the percentage of subscribers that stay in the subscription program. Based on research, most people cancel due to financial reasons, thus providing several package options, package add-ons, and welcome back discounts would be helpful. Churn rate is manageable with a well-trained customer service division whose job is ensuring every subscriber feels at home.


    9. Higher margin as subscribers increase.


    As subscriber number increases, subscription box business has various options, including inviting more suppliers for “sample marketing.” In the cosmetics industry, for instance, it is common to give out samples to customers. Owning a huge following gives you the upper hand in offering “sample marketing.” Instead of spending money, the business receives revenue from both sides (customers and suppliers). According to an article in Forbes, subscription sample boxes are so effective due to the attractiveness of new products.


    In conclusion, starting a subscription box business has never been this seamless, thanks to technology and automated support services. It is an ideal source of steady revenue for those with strong marketing presence and business development skills. The time to capitalize an existing following has arrived. Now.

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    Author: Jennifer Xue


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