If you’ve listened to a podcast, watched television, or opened a magazine in the last year, you’ve almost certainly seen an advertisement for a subscription box business. You may even be one of the 15 percent of online shoppers enrolled in a subscription service.
The proposal is simple: Sign up, and on a regular basis — weekly, monthly, as you order them — the e-tailer will ship a box of products to your home.
In apparel, there are “personalized shopping services” like Stitch Fix, Trunk Club and Le Tote. There is even a clothing subscription box for strictly thrifted clothes called Thredup. In food, there are “meal kits” like Blue Apron, try-a-snack options like Nature Box or Universal Yums, a international snack collection. You can get food subscription boxes shipped from your favorite grocery store to replenish your weekly groceries. There are even alcohol offerings, like Winc. There are subscriptions for pet treats and toys, makeup and beauty items, craft supplies, even vitamins.
Why are subscription boxes blowing up? They sit at the corner of two key e-commerce platform shopping trends: Customization — products that feel like they’re chosen uniquely for the customer, and that everyone else doesn’t own — and quick, hassle-free shipping to customers’ doors.
The Rise of Subscription Box Services
Subscriptions are an increasingly common way to buy products and services online. Streaming media subscriptions, including Netflix and Spotify, are subscription-based. Meal kit services, like Blue Apron, have been commonplace nationwide for several years.
Today, there is a subscription service for almost any product imaginable: beer and wine, baby items, cosmetics and beauty products, groceries, health foods and vitamins, razors, pet food, underwear, apparel, jewelry, and “just fun” materials to geek out on.
By 2018, an estimated 15 percent of online shoppers subscribed to some e-commerce service. Since the vast majority of Americans are online shoppers, that’s likely tens of millions of people in the U.S. alone.
The majority of subscription boxes, about 55 percent, are “curation” subscriptions. These services seek to give customers a highly personalized selection of items. For example, with Stitch Fix, a men and women’s clothing subscription box, customers take a quiz about their clothing tastes and a “personal stylist” chooses items for their box. With Winc, customers input information about their taste profiles, and the company “matches” wines to those tastes. Ipsy, a beauty box service, has been shown as the most popular monthly subscription box business. Customers also take a quiz online to narrow down which beauty products they use most and what goes well with their complexion. The curation subscription model promises subscribers something they know that they want, but with an element of surprise and flattery.
About 32 percent of subscription boxes focus on “replenishment.” These allow customers to automate the purchase of basics, like razors or diapers. Dollar Shave Club and Harry’s both compete in the razor space. Most meal kit services include a set number of meals per week and are refilled routinely.
Finally, about 13 percent of these products are “access” subscriptions, through which subscribers receive members-only perks. These are frequently offered by companies that existed before the subscription box craze that are trying to offer bonuses to their existing customers.
Why You Should Care About Your Unboxing Experience
If you’ve ordered a subscription box, you’ve likely experienced the rush of opening the box to find out what’s inside, just for you. You may even have tracked the shipment in excitement.
“Unboxing” is such a popular activity that millions of people post videos of their “unboxing experiences” on YouTube and other social media channels — sometimes with corporate sponsorship, but sometimes of their own accord.
Key to a good unboxing experience is a good shipping experience. Your shipping process can make or break your subscription box business. And key to a good subscription business model is customer retention. If customers have a bad experience, they’ll be more inclined to cancel, depriving retailers of future profits.
Customers like personalized and customized shipping experiences, like handwritten notes, boxes with imprinted branded materials and gift wrapping. Though these seem like small touches, they make a big impact on how your brand is being represented. Subscription box subscribers are expecting these kind of personal touches for their own unboxing experiences.
The way you ship your products and how they appear is more important than you think. Not only is it a way to leave a great lasting impression with your customers. It’s also an excellent way to show your brand in front of potential customers as well, especially since there are more than 122 million search results on Google for “unboxing.”
Pamela Rutledge, director of the Media Psychology Research Center, says that unboxing “is a different thing. It’s more of an exploratory learning process.” Many teens and adults who are watching unboxing videos are often doing research and want to buy the product for themselves.
What Do Subscription Box Shippers Need To Consider To Save Money?
Depending on your company’s existing business model and if you currently operate out of brick-and-mortar stores, starting a subscription box service could significantly increase your e-commerce platform and shipping volume. These deliveries are almost always to residential customers, which sometimes carriers have a surcharge for. These deliveries may also require bigger boxes, especially if your customers typically order one item but are now receiving five at a time.
Subscription box shippers need to know their shipping profiles in detail to develop reliable, profitable services. That includes everything from the average weight of a subscription box (and any items that cause exceptions), what type of packaging is required, whether your boxes routinely carry surcharges and what you can do to avoid those surcharges. Another consideration is shipping insurance, does your your subscription model involve shipping expensive items like jewelry. Will you need to propose a declared value to your carrier. What will those extra costs consist of?
Resource: Estimate Your Shipping Costs: What Goes Into The Rates You Pay With FedEx and UPS
The price of a subscription box service, usually a monthly fee, hinges on the price of shipping those boxes. To determine that price, it’s essential to know how much shipping will cost.
To predict those costs, consider how much each monthly box will weigh, based on your current product line. Also consider whether you will cap box weights to avoid surcharges. Find packaging small enough that you won’t be hit with additional handling surcharges, even if packages bulge. And, at least during the early phases, see if it makes sense to optimize your shipping locations by launching only in certain markets.
Make sure you review your carrier’s return policy. Many subscription boxes allow for penalty-free returns — remember, someone else is choosing items for customers, so they need recourse if they don’t like the choices. If your carrier isn’t amenable to that need, you may need to seek alternatives.
Additionally, choose a carrier who best meets the needs of your service — and remember that they may not be with one single carrier. After Amazon’s purchase of Whole Foods, the company created a grocery store delivery service with free two-hour shipping in select markets. FedEx and UPS may not have the bandwidth to do that — at least not at a reasonable price — but a new player in the shipping market may be able to serve you.
Consider where your fulfillment locations are geographically. You might want to consider having a more centralized location if you find that you are shipping many subscription boxes to zone 7 or 8. If you’re shipping several subscription boxes internationally, make sure you’re using a carrier that has the best international parcel delivery services for your own shipping needs.
To develop your plan to start a subscription box service, rely on a trusted partner like a Reveel consultant to review your shipping contract and see how well your carrier will support this new venture — and ensure that you save as much money as possible.
The Reveel App uses AI and machine learning to provide an unparalleled look into what’s impacting your bottom line. Through invoice audits, peer benchmarking, and rate modeling/simulations, you can see the health of your operation and assess pricing changes from parcel carriers like FedEx and UPS. Sign up for a free Reveel account today to see how you can leverage automation to synthesize your data, ship more for less, and reduce the time needed to identify issues and action items.
