The subscription box industry is exploding right now! It seems like there’s a subscription box for everything from cocktails to hiking trails and everything in between.
But don’t be fooled there is still a lot of opportunity to start a new one. Why? Many of these businesses fail because they don’t know what they’re doing and you can do better! There are a few common obstacles that subscription box entrepreneurs run into that can seriously trip them up. The two biggest are pricing and fulfillment.
Don’t worry though, you can sidestep these pitfalls to find success. Here’s how…
Getting the Price Right
One of the biggest mistakes that subscription box entrepreneurs make is pricing. Without proper pricing your growing business could be doomed from the get go. What most people get wrong is that they pick a price that they think customers will like and try to make it work with the products they’re putting in their boxes.
Or even worse they base their pricing off of another subscription box assuming that they did their research. Never assume. If you didn’t do your research properly, what makes you think your competitor did?
You want your box to be profitable. This is a business after all, not just a giveaway. That means really doing your research and running the numbers. There are many expenses that often go overlooked and this can mean certain doom. If you realize at some point that you need to raise the price of your box to meet your customers demands while staying profitable, you’ll lose quite a few customers and it will take time to rebuild. Why not get it right from the start?
Many people assume that they can simply fill their box with free products or samples and that they won’t need to buy product or that they’ll have to buy very little. While this might work for some, it’s not a very stable model.
In this case you’re beholden to companies agreeing to give you stuff in exchange for potential exposure and promotion. If you don’t deliver the type of ROI they were hoping for they’re not going to be very likely to work with you again. Also keep in mind that your competitors might be doing this same thing, potentially creating a couple problems for you:
The brand you want to work with is already working with another box and doesn’t have the budget to work with you.
The brand you want to work with had a bad experience with another box and now doesn’t want to work with you.
Either way this isn’t sustainable so don’t price your boxes based on your dream of selling someone else’s free stuff for pure profit. Instead figure out what types of products you want to include in your box and get some quotes on pricing. This should give you a good idea of cost of goods sold (COGS) per box. This number is super important but it’s not the only cost to keep in mind.
Other costs that you need to consider are:
- Packaging – box, tissue paper, etc.
- Warehousing
- Kitting
- Fulfillment
- Shipping
- Marketing
All of these costs can add up very quickly especially if your company grows. When you first start out you might only be selling a hundred or so boxes a month, which you can easily handle on your own from your own home. But if things go well, that won’t always be the case and you don’t want your profits to evaporate when you finally find success.
Scalable Order Fulfillment
After pricing the biggest issue facing subscription box startups is fulfillment. According to subscription box pioneer Jameson Morris, “In-house fulfillment starts out a challenge. But scaling it up is harder.”
Like I mentioned above in the pricing section, you might be able to handle a few hundred boxes on your own from your own home but when you start to grow that’s just not possible, you need more space and more people to get the job done.
While Jameson does admit you can grow your fulfillment and keep it in house, it’s a lot of work. You have to find and pay for:
- Warehouse space
- Packing equipment
- WMS & OMS software
- Warehouse manager
- Warehouse employees
Jameson used an army (ok closer to 40) of part-time employees to work in the warehouse of the first subscription box he started. Keeping this many part-time employees can be difficult because of high-turnover rates in addition to that the monthly cycle of subscription boxes make managing a workforce difficult.
So then what does subscription box expert Jameson suggest? Outsourcing to a fulfillment company.
The benefits of outsourcing fulfillment are massive, especially for a subscription box business. You get to hand over a very stressful, involved part of your business to another company who can handle all of it for you. You’ll be able to save:
- Time
- Money
- Stress
- Sleep
A fulfillment company can help you to kit and ship all of your subscription boxes to your customers. All you have to do is get your products and packaging to them and they can take care of the rest.
Not sure who can help? At Ship Central Fulfillment we offer kitting and fulfillment services to help businesses like yours grow and succeed.
The Takeaway
Starting your own subscription box can be fun and rewarding but you just have to watch out for some of the major pitfalls that can sideline your business. Pricing and fulfillment each present their own challenges but with proper planning they can easily be overcome.
With the right research pricing is easy to figure out and set up to ensure great profit margins. And when it comes to fulfillment, partnering with a fulfillment company, like Ship Central Fulfillment, can help your boxes get shipped properly without the headache.