Updated: August 2019
The number of curated subscription services is growing every month. Alongside that rapid growth, interest in subscription box fulfillment has inevitably increased as well.
Here’s a selection of stats that show just how quickly the business model has moved in recent years:
- There are more than 3,500 subscription box services in operation according to the Subscription Trade Association.
- One of the most prominent names in the industry, Birchbox, started in 2010 and now has more than one million subscribers. At the peak of its recent growth, the subscriber count surged by 1,777% in a little over two years. (Data via Shorr)
- The eCommerce subscription market has at least doubled in annual sales revenue over a five-year period, according to McKinsey. For perspective, 2016 sales among the sector’s largest services generated more than $2.6 billion, rising from $57 million in the industry’s early days five years prior.
- China is the most lucrative market likely to see rapid growth next, as 53% of respondents told sub service platform Zuora that they expect to use more subscription services by 2020. More than one-third of U.S. respondents also said the same thing.
That’s enough to attract any prospective retail entrepreneur to the party. However, the subscription box sector is not without its challenges.
Challenges of the Subscription Box Business Model
Like other forms of online retail, subscription boxes can appear simple on the surface: choose a product category, plan a monthly selection of items that compliment each other, then ramp up the marketing to attract subscribers.
However, the difference between a painstakingly curated set of desirable items and a hastily assembled box of disposable junk is enormous.
When carefully selected, a subscription box fulfillment provider can bridge that gap and build a brand that customers trust. The subscriber needs to feel that they are benefiting from the expertise of someone who knows the product category inside out. That makes it harder for generalists to simply dive in and out of the business.
To build a successful box brand, owners need to develop a reputation for expertise and excellence in their niche.
There is also the broader concern of longevity: will subscribers remain interested after the initial excitement of a box arriving has worn off?
Issues arising from this include:
- Customers expect an instant online cancellation option, which means that subscriber numbers can be volatile if something goes wrong, or that month’s selection doesn’t quite connect with them.
- There are several competitors in most subscription niches, many of which were created by similarly driven founders with expertise in the field. When a subscriber wants to change, it’s easy for them to switch services.
- It can be difficult to distinguish one service from another in a specific product category. Assuming the product choice is of a reliably high quality for the top names in each sector, it falls to less obvious elements like packaging, presentation, and customer service to set the best subscription services apart from the rest.
If all goes well and subscriber numbers surge, the time comes to consider outsourcing subscription box fulfillment to a third party.
Taking this step has many benefits, but the additional cost makes pricing all the more important. This needs to be built into any service’s business plan from day one.
Successful Subscription Box Fulfillment
When timed correctly, the move to a third-party fulfillment provider will take a subscription box company to the next level of success.
Handing off everyday operational decisions to an outsider might feel like leaving your baby with a stranger, but it frees owners up to focus on strategy and growth (rather than picking and packing!)
Consider the following qualities you need to find in a fulfillment provider to take full advantage of this extra time:
- Knowledge of your product category (or a strong desire to learn about it, quickly!)
- The right equipment and experience to achieve the quality of packaging your subscribers expect.
- Flexibility to ramp up activity quickly if your subscriber count surges.
- A location – or multiple locations – that minimizes transit time to your primary markets.
- Sufficient labor and storage space for not only your current subscriber levels but also, at a minimum, enough to accommodate your forecasted growth over the next 2-3 years.
As well as operational considerations, you should consider the ways in which a third party can help to build brand awareness and improve your reputation.
The most effective service providers work to form a partnership that brings in more business for both parties. You know what your customers want and your fulfillment team should have the experience and expertise to deliver that experience.
Some of the areas an external fulfillment partner can help develop your brand include:
- Leverage better equipment to improve packaging and develop more appealing presentation for that all-important first impression.
- Cost management initiatives that can help reduce shipping costs and improve packing/processing efficiency.
- Offer customized management systems that give you and your subscribers greater visibility of shipments.
- Improve reputation with greater reliability and better customer service (on-time delivery rates, order tracking etc.)
Running a successful subscription business is harder than it looks, but the potential rewards are enormous for founders who are passionate about the products they ship.
Planning and expanding your subscription box fulfillment solution plays a key role in that success and is something that every owner should consider as they start out in this exciting sector of the business.