Subscriptions boxes are one of the best ways to shop, period. They offer consumers unique experiences curated around products and themes, introduce new brands, and make checking the mail just plain fun.
On the business side, subscription commerce offers a stable financial model rooted in recurring monthly revenue that can be built around almost every niche – from puzzlers to beauty to pets. If there’s an existing community around a product or category online, chances are you can build a subscription box around it.
So, how do you create a subscription box business?
Step 1: Start with a great idea
The bottom line: Identify your niche and find a market fit
The foundation of any strong business is a good idea. And when it comes to subscription commerce, what separates good ideas from great ones is specificity. Being as detailed as possible when analyzing your market fit, competitive analysis, and customer profile are the first steps in building a successful subscription business. Let’s get started!
Questions to answer
1. What is your niche?
A niche is best understood as a specific market for products and services. Think fitness, makeup, or food. When settling on your niche, try to get as specific as possible – for example, you could break down the above mentioned niches into sub-niches like CrossFit, Korean beauty, and international snacks. The more niche your box is, the easier it is to curate products for a specific audience, enabling you to maximize retention and create a great customer experience.
2. Who are your competitors?
The subscription box economy is growing, but that doesn’t mean there isn’t space or demand for your box. When looking for competitors, try searching for keywords related to your niche on the Cratejoy marketplace and see what’s out there. In your research you’ll want to be able to answer questions like, How many boxes are you competing with? What are they offering and at what price? How can you differentiate your box from theirs?
▷ Fun fact: Cratejoy currently is home to boxes in more than 12 categories and 84 subcategories. Find which niche your box falls into on the Cratejoy marketplace.
3. Who is your customer?
Once you’ve found your niche and market fit, spend some time fleshing out your potential customer (pro tip: this may mean researching your competitors’ customers). Get as granular as you can with this exercise – how old is your customer, where do they shop, what is their income level, what is their preferred social platform?
Once you’ve started advertising, refer back to these answers and adjust as necessary – you may find that your idea of the perfect customer was a 20-something west coast city dweller, but in reality they’re a middle age mom in the Midwest. Be open to learning who your true customers are over time and pivoting your marketing strategies accordingly.
Example of a customer profile brainstorm session:
▷ Pro tip: Learn more about customer profiles and 4 more concepts every subscription business owner should know on our sister blog subscriptionschool.com.
Merchant advice on marrying personal interest with market fit
“We approached our idea from two directions: a business opportunity and a personally fulfilling opportunity. We are big fans of nostalgia, and when looking at subscription boxes, we did not find any that were answering the general nostalgia market. We felt that if we married our personal interest with a gap in the market, we could create a box which would become a time capsule of one’s youth.” – Retro Pop Box
Step 2: Price your box
The bottom line: Figure out pricing that will make your business profitable and scalable
One of the biggest mistakes a subscription box owner can make is mispricing their box. Whether you’re pricing too low to stay competitive or pricing too high to secure a hefty profit margin, both ends of the spectrum will threaten the viability of your business.
▷ Pro tip: As a rule of thumb, Cratejoy recommends pricing your box with at least a 40% profit margin to be considered sustainable.
To help you correctly price your subscription box, we created the following calculators:
- Subscription Box Pricing Guide
- Ultimate Subscription Box Business Calculator
- Power Subscription Box Calculator
- Shipping Price Calculator
Other things to consider when pricing your box
- Product cost – the cost of the items in your box
- Box cost – the cost of your box and box accessories (stickers or stamps)
- Packing materials cost – the cost of filler paper, bubble wrap, or inserts
- Postage / shipping costs – the cost of mailing labels, packing tape, etc.
- Fulfillment costs – the cost of physically packing your box
- Transaction and platform fees – fees your payment process and ecomm platform will charge on an order by order basis (Cratejoy charges 1.25% + $0.10 per transaction)
- Fixed monthly costs – ecomm platform fees, Gmail fees, accounting software fees, etc.
- Acquisition costs – the cost of advertising to acquire new customers
▷ Looking for more information on pricing your subscription box? Check out our blog on cost sensitivity, conversion rates, and tiered pricing.
Merchant advice on find a price that resonates with customers
“If you’ve established a price, but feel something may be wrong with it, don’t hesitate to provide questionnaires or special offers to customers. Try to pry out details – which price points seem to resonate best with your audience? When you practice diligence in pricing, you set your business up with a foundation for a strong, sustainable stream of revenue.” – Yogi Surprise
Step 3: Put together a prototype box
The bottom line: Create a prototype box you can market to potential subscribers
A common misconception when launching a subscription box is that you need to have your first shipment ready to go before you start marketing. This mindset is simply not true and acting on it can slow you down in preparing for your prelaunch (don’t worry, we’ll cover those next!).
The point of a prototype box is to introduce potential subscribers to the types of products they will receive month after month.
A prototype box doesn’t need the exact items you plan to ship in your first month – but it should match the quantity, quality, and value of products you plan to deliver to customers once you launch.
▷Pro tip: Use your protype box to start building an image library that you can later use for building buzz on your website, landing page, and social media accounts.
Check out this example from STEM Reads Book Club, a merchant that prelaunched with Cratejoy in the fall of 2016:
Here’s what you’ll need to do when creating your prototype box
1. Choose your products
Again, this can be your first month’s selection of goods, but it doesn’t have to be. If you plan to ship 5-7 wellness items at a $100 value each month, round up just that – 5-7 items that represent the kinds of products your customers can expect to receive once they subscribe. The key here is to not mislead with your protype box – people will immediately cancel if they feel they’ve been duped by your marketing efforts.
2. Choose your box
Depending on how far you are in the process, you may or may not have your box completed. This is perhaps the biggest component of your overall unboxing experience and is worth taking the time to figure it out. The good news is that once you’ve figured out your size and design, you don’t have to order 2,000 boxes to start.
▷ Get your boxes cheaper: Cratejoy is happily partnered with BoxUp, a DIY box design platform that lets you customize and order boxes in quantities as low as 12. Bonus points? Cratejoy users get 5% off BoxUp’s already low prices. See all of BoxUp’s current promotions here.
Sample box – Not ready to order your own boxes yet? For prototyping purposes, Cratejoy offers two standard size options in teal and grey. From our STEM Reads Book Club example, you can see that the merchant prelaunched with a teal Cratejoy box but ultimately launched with their own custom orange box.
Custom box – The main things you’ll need to consider here are your branding, design, and size. As mentioned, your box is the presentation of your business, and no matter how good the products inside may be, a subpar box can negatively affect the subscriber experience. For tips on getting your box just right, see our comprehensive guide on subscription box packaging which covers everything from manufacturing, to price, order volume, design, and more.
3. Choose your packing materials
This could be crinkle paper, tissue paper, or simply wrapping your products. For marketing purposes, we recommend starting with crinkle paper as it won’t block or shield your products when photographed.
4. Start taking photos
Try to get a mix of flatlays, unboxing experiences, and lifestyle photos for your first shoot. Need help getting started? Check out our guide on subscription box photography for tips and tricks on these photo types.
Step 4: Begin your prelaunch phase
The bottom line: Build buzz to generate leads
A prelaunch is the process of marketing your box before launch in order to gauge interest, collect email sign-ups, and build buzz around your upcoming launch. Most prelaunches are hosted on email signup landing pages, and for Cratejoy users we recommend using our prelaunch website theme. It easily connects to your mailchimp account and allows users to customize the page with their personal branding.
There are several things you’ll need to tackle during your prelaunch – we’ll cover the big ones here, but for a step by step walkthrough make sure to check out our guide on setting up a prelaunch for your subscription business.
1. Decide the length of your prelaunch
This could be anywhere from 15 to 60 days. You don’t want a prelaunch to extend too long, lest you lose the interest of people who signed up for your email list on day one. More importantly, if you haven’t reached your signup goals in two months, it may be an indication that there’s not a good market fit for your offering.
2. Set an email signup goal
Do you want to launch with 20 customers? 50? 1,000? Each of these numbers will be subject to the conversion rate of your list. We recommend a 10-20% conversion goal, which with the subscriber counts listed above would require at minimum 200, 500, and 1,000 sign ups respectively.
3. Create a prelaunch page and connect your email tool
As mentioned, a prelaunch page can be fairly simple. At this point in your launch journey your goal is to simply collect email addresses and nurture your list in preparation for your launch. For this, we recommend using Cratejoy’s prelaunch template from our website designer. Once you create your page you’ll need to connect it to your preferred email service provider (we recommend Mailchimp) to start collecting email addresses. To do this, simply install the free Mailchimp app under “Apps” in the Cratejoy platform and connect it to your count.
4. Set up social media accounts and start marketing your page
Get ready to put on your marketing hat, because this is the make or break portion of your prelaunch. After all, it doesn’t matter how amazing your product offering is if no one knows about it. To start building buzz, make sure to set up social media accounts (facebook and instagram are a good start) and consider running ads or giveaways to attract signups. Need a crash course in marketing? Here are a few of our guides on the most popular subscription box marketing platforms:
▷Pro tip: On social media, consider doing a countdown partnered with giveaways and prizes for sharing notices that your launch is coming. This can provide some last minute traction in advance of your launch date.
Other logistics to work out while prelaunching
Once your marketing efforts are automated and underway, it’s time to get back to some of the foundational business decisions you need to make in order to launch. Tasks like product sourcing, ordering boxes, and choosing your shipping schedule are all great items to tackle during your prelaunch.
1. Product sourcing
Product sourcing can seem intimidating, but once you start it can easily become the most exciting part of your business cycle every month. From pitching, to negotiation, to forecasting, there are several major topics that fall under procurement that we’ve covered in the following videos and guides:
- Strategies for Product Sourcing for Subscription Boxes [Video]
- Building the perfect box: a guide to product procurement
- Resources for subscription box procurement”
- Places to source products for subscription boxes
▷Pro tip: If you plan to integrate themes into your monthly shipments, try mapping out your ideas 6 months in advance. It’s a good exercise to see if your idea as a whole can remain fresh and exciting, and will give you a good idea of the items you’ll want to work on procuring down the line.
Merchant advice on developing vendor relationships
“What helped me a lot was reaching out to vendors in the two months I was in my pre-launch phase. Almost all of them got back to me and we negotiated pricing. I definitely suggest starting to at least make a list of vendors you might be interested in carrying, and contacting them as early as possible- this will give you much less work to do on a monthly basis once you get the ball rolling.” – Sunday Mood
When merchants and subscribers fully understand a box’s shipping cycle, everyone wins. (Seriously, merchants who communicate shipping details make $70 more per subscriber). The downside? The opposite is also true.
The most commonly asked question for both sub box owners and Cratejoy support is “where is my box?”, and when subscribers don’t know the answer to this question, they’re much more likely to churn.
For our recommended shipping schedule and information on cutoff dates, shipping windows, and renewal dates, check out our recurring billing and fulfillment best practices guide.
Step 5: Set up your website, marketplace listing, or both
The bottom line: Set up your store to start taking orders
Building your website can be daunting for many reasons – maybe you don’t know exactly which tools to use or don’t know how to code. Luckily, you have tons of user-friendly ecommerce platforms to choose from, most of which have code-free designers to get you started.
▷Pro tip: The big difference you’ll want to look at when choosing your subscription box platform is recurring billing and shipping.
Cratejoy was designed specifically for subscription box owners and as such we’ve built a platform that not only tackles this issue, but comes included with other subscription-focused features like a website designer, subscriber CRM, referral campaigns, analytics, a sales-ready marketplace, and more. Interested in learning more? Check out our full list of Cratejoy features or our competitive analysis on why thousands of merchants choose Cratejoy.
Once you’ve made your platform choice, it’s time to start working on your storefront or marketplace listing. If you’re currently using Cratejoy’s prelaunch theme, no worries, you can work on your website theme as a draft in the background.
Creating your website or marketplace listing
1. Design your website
Cratejoy’s designer is built with subscription box websites in mind. As such, our theme library comes equipped with several subscription-friendly templates that are easy to customize regardless of your experience with code. Simply upload your imagery, draft your site copy, and user test the check out flow. Have more experience with HTML, CSS, or Java? Feel free to edit your site in our code editor and bring your storefront to life.
Recommended reading: How to create and customize your subscription box website
2. Create your marketplace listing
Cratejoy’s marketplace is the premier destination for subscription box enthusiasts. With in house marketing efforts, it’s one of the absolute best way to get your box in front of subscription box fans. Marketplace listings are free with a Cratejoy account and are incredibly easy to set up. Once your store is live and you submit your Marketplace listing for approval, you’ll immediately be eligible for Marketplace marketing efforts like sponsored content, email inclusion, Facebook prospecting, radio and print ads, and more.
Recommended reading: How to create your Marketplace listing
3. Set up billing and attach payment processors
There’s nothing sexy about this step, but setting up your payment processor is a must-do before you’re able to start accepting orders. Cratejoy recommends Strip, but we also offer Paypal payment processing and a variety of other providers. As a reminder, all orders you receive will be subject to transaction fees and should be factored into your business plan and box pricing. Check out our how-to blog for guidance on connecting your payment processor.
Recommended reading: How to set up your payment processor
▷Pro tip: Try not to get stuck in the weeds of building the perfect website. Perfectionism paralysis can and will stop you from moving forward in the process of launching your box. Need more time to launch your site? Try starting with a marketplace listing and getting subscribers from Cratejoy’s audience while building your website – that way you’re able to grow your business while continuing to make progress on your storefront.
Step 6: Start taking orders and ship your boxes
Congratulations, you made it to launch day! Over the course of your prelaunch period, you’ve been procuring products, finalizing your box design, and organizing all your inserts. As the weeks come to a close, now’s the time to bring it all together.
In this step, you should notify customers of the first ship date, make sure tracking emails are ready, and try your hand at last minute promotions and sneak peeks to encourage more subscribers.
▷Pro tip: t’s paramount you make the first shipment date clear. If you’re not shipping until 45 days after you first bill customers, then make sure customers know it. This reduces confusion, lowers customer service requests, and helps keep expectation in line.
Merchant advice on fulfillment and shipping
“The number one tip we have is to plan your fulfillment process and make sure that you have a smooth and orderly assembly process planned, staged, and ready. When we first started out and had smaller numbers we could get away with boxes being staged here and there. But as we added more people to the fulfillment process, our inefficiencies became glaring. We had to break down the process and build it back up, which is very hard to do when you have to gear up immediately after getting the previous month out the door. Had we clearly defined the process from the start, we could have scaled it without any hiccups.” – Retro Pop Box
Step 7: Success! (And getting the hang of operations)
The bottom line: Monthly recurring revenue means less worrying and more stability
Once your first boxes hit, take a moment to sit back and reflect on your accomplishment – you just shipped your first subscription box! Now’s a good time to analyze the operations for the first month and examine how your assumptions about niche, customer, and product experience have panned out.
Questions to answer before your second shipment
- Is my customer profile still accurate?
- Which marketing channels are working, which need help, and which should I abandon?
- What about my fulfillment process slowed me down last month?
- Were there any vendors I should no longer work with or order from again?
- Were my subscribers happy? (And did I ask for their feedback?)
- Which support questions did I answer the most that I can communicate better up front?
▷Pro tip: Customer feedback is invaluable. Whether it’s sending out surveys to find out what products they loved or simply getting reviews on your site or the Cratejoy marketplace, feedback is the best way ti improve your business, keep your subscribers happy, and even win back customers you might have lost.
Step 8: Grow your subscriber base
The bottom line: Continue marketing and encourage word of mouth referrals and sharing
Going forward, the goal is to continue to scale your business. One of the most cost effective ways of doing this is through word of mouth referrals: customers referring other customers. Numerous studies have shown that referred customers are often higher value and more likely to evangelize on behalf of your brand.
Consider implementing a customer referral program, like the one provided by Cratejoy, that rewards customers based on the number of referrals they produce, ie. Every 3 referrals = 1 free box. You can learn more in our guide on How to Get to 1,000 Subscribers from Subscription School.
In addition to referrals, you can dig deep into other tried and true marketing efforts we covered in the prelaunch section that are proven to work for the subscription box industry: Facebook marketing, Pinterest, Instagram, and influencer marketing.
Merchant advice on social sharing and establishing trust
“Consistent interactions on all social media platforms have allowed us a greater level of exposure to reach and communicate with people that are interested in our baking box. It has also played a huge part in helping us stay connected with our subscribers.” – SoBakeable
Moving forward, there are tons of possibilities with your subscription box business. You can continue to work on gaining subscribers for your box, or you can diversify your offering, and launch new boxes or offer one-time products. For tips on all of this, be sure to visit Subscription School – home to dozens of guides, videos, and expert advice on building the best subscription box possible.
Cratejoy is the the ultimate platform for running your subscription box business. Start your free trial to see how it works.