How to Start a Subscription Box Business

Detailed guide with helpful information on fees, costs, requirements, licenses, formation, marketing, and hiring. Also includes tips, FAQs, and a checklist.

Updated on March 31st, 2020

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A subscription box is a business model that relies on monthly or quarterly subscriptions from customers. These subscription boxes typically have a theme, and items within them will match this theme. Some of the most popular subscription boxes send makeup samples, snacks, beauty products, and stationery.

The E-commerce market was worth $2.6 billion in 2016, and curated subscription boxes currently make up 55% of subscription services. There are an estimated 3,500 subscription box services on the market, with Ipsy and Birchbox as frontrunners.

This business model is far more consistent than other retail business models because it is based on a regular purchase from customers. While some subscription boxes are available on a month-to-month basis, most businesses will debit customers monthly unless the subscription is canceled.

If this business model appeals to you, you can find our comprehensive guide to starting a subscription box business below.

How to Start a Subscription Box Business:

1. Do market research.

Market research should try to identify the growth projection of the industry, potential startup costs, your competitors, and your target market.

How to Conduct Market Research
How to Conduct Market Research:
  • Conduct surveys.
  • Read articles or books about the industry.
  • Ask for feedback on samples.
  • Gather statistics about your target market.

Once you have this information, you can begin to form concrete ideas about your specific business model.

2. Find a niche or theme.

Most subscription boxes will focus on particular products like beauty and wellness, novelty items or food. Another option is to have a monthly theme that includes various products. These themes can reflect seasonal changes, a particular ingredient, a specific method of sourcing, or a dietary requirement.

Your market research should reveal what other subscription boxes do for themes and help you identify potential gaps in the market. Cratejoy is a site that lists the most popular subscription boxes with their pricing information. You can search your content ideas here to see who your competitors will be.

Types of subscription boxes
Types of subscription boxes:
  • Snacks from a specific country.
  • Beauty products.
  • Reading material and literary novelty items.
  • Items specific to a hobby or project.
  • Seeds and planters.

3. Create a business plan.

A business plan is of utmost importance if you plan to secure funding from investors. They will need to see your estimated expenses, growth projections, and a detailed description of what the company will do.

In addition to providing investors with a clear picture of your growth strategies, a business plan will help you to map out the steps needed to launch and expand your business. This includes measurable goals like improving subscription numbers or hiring more staff.

A business plan should include the following items:

  • Executive summary.
  • Business description.
  • Market research.
  • Marketing plan.
  • Competition analysis.
  • Financial data.
  • Future goals.
Subscription Box Business Plan

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4. Secure financing.

There are several expenses involved in selling subscription boxes, such as:

  • Packaging material.
  • Domain purchase.
  • Website creation and maintenance.
  • Vendor payments.
  • Shipping costs.
  • Salaries.
  • Office/storage space rental (if you choose not to work from home).

One way to cover these costs is by using your personal savings. However, this may not be viable depending on your financial status. Securing a small business loan from the bank may be required. Failing this, you could fund your business with a credit card, or you could try crowdfunding.

It is also possible to sell equity in your company or apply for local and state small business grants.

5. Choose and register a business name.

Choosing a name is essential, as you will need to create a website to sell your products from. Your name should be easy to remember, relevant to your products, and/or unique compared to your competitors (if your name is too similar to a competitor this can cause confusion).

Check to see if your business name is available as a domain name. Your website will be where all information and purchasing facilities are, and you need to ensure that the name you have in mind is free before working on logo designs and registering with your state.

You can check to see if your desired business name is already registered by visiting the USPTO website or your Secretary of State website.

You can use domains.google to see if your business name is available as a domain name. Simply type in your business name in the domain format you would like to purchase, and the site will display the available variations that can be purchased. The site also provides tips on how you could improve your domain name by making it easier to remember or simpler to hear correctly.

Next, you should create a legal entity. This is essential for tax purposes.

Types of Legal Entities

  1. Sole proprietorship: Includes only one person who is the owner/operator of the business. There are no employees and all profits are the proprietor's personal income. The sole proprietor personally assumes all liability for the business. You'll likely need to use a schedule C form to report profits and losses.
  2. Partnership: A business relationship between two or more people who share costs and revenues. Partnerships do not pay income tax but must file an annual return. Taxes are passed on to the individual members of the partnership.
  3. Corporation: A corporation is a standalone entity with shareholders. A corporation must file an annual tax return and is required to pay corporate taxes.
  4. S Corporation: S corporations are corporations that pass all profits, losses, deductions, and credits on to shareholders. This is done for tax purposes so that the shareholders and not the corporation end up being responsible for the tax burden. Corporate income is still taxable.
  5. Limited Liability Company (LLC): LLCs are regulated by State laws. An LLC can be owned by a person, persons, or a corporation. Depending on the size and location of the LLC, it may be treated as a partnership or corporation for tax purposes. Check your State's laws for more information.

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How to Sell Subscription Boxes (Checklist)

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6. Hire employees.

Initially, you may choose to handle most operations yourself until you can afford staff members. There are, however, several roles that would best be fulfilled by other staff members.

Job Descriptions and Interview Questions for Subscription Box Staff:

Job Description

Interview Questions

Social Media Manager

Social Media Manager

Copywriter

Copywriter

Website Manager

Website Manager

Web Designer

Web Designer

7. Create a website.

Your website is where all of your sales will take place, so it is important to ensure that it functions correctly and looks appealing. If you don't have experience with building a website, it is worth the fee to hire a website designer. A professional designer will also be able to suggest useful plugins and tools to improve functionality.

Tech Tools for Online Businesses:

  1. Website Builder Services. Online businesses need attractive and functional websites to grant clients access to products or services. Most website builders are user-friendly, allowing you to create a professional-looking site without coding knowledge. We recommend Squarespace or Weebly.

  2. Inventory Management Software. If you plan to sell products, having inventory management software is essential for keeping track of sales and stock levels. Our top choices are EZOfficeInventory and Loyverse Advanced inventory.

  3. Accounting Software. Accounting software is an excellent tool for keeping track of expenses and paying any staff members you may choose to hire. QuickBooks and Gusto are both good options for accounting services.

  4. Online Credit Card Processing Solutions. An important aspect of your website is having a functioning payment system. PayPal is a good third-party payment method to use as it accepts most currencies and is available worldwide.

8. Create social media profiles.

Social media advertising has been proven to be highly effective with a wide range of audiences. Your market research should include information about which social media platforms your target market frequents.

Instagram would be a great platform for subscription box advertisements because of the emphasis on high-quality images and videos. Instagram also has an advertising feature where promoted posts have direct links to your website. Followers can also tag your business in stories, which can then be shared by your own page.

Facebook allows you to create a page for your business and share content from there. Facebook users are more likely to read the information on a post, as opposed to Instagram where users prioritize images. Links are easier to include in captions and advertisements can have call to action buttons to streamline the purchasing process.

YouTube is also a good place to post videos about your subscription box to show contents, behind the scenes, interviews with suppliers, and other content that viewers may request. Many subscription boxes approach YouTubers to review their products, so you could be advertising on YouTube without posting your own videos.

9. Find a location.

You may not need an office space if you choose to fulfill your orders with dropshipping. However, if you plan on ordering products and packaging them, you will need space for these operations.

One benefit of selling your subscription boxes online is that your location does not need to have frequent foot traffic or retail facilities. Your office will mainly function as a storing and packaging space, and/or a place for staff to work. Your location requirements will mostly be space.

10. Find vendors and suppliers.

Unless you plan on creating your own products, you will need to source your box items from external vendors. One way to find vendors would be to do a Google search with keywords relating to items you are interested in. You can include area-specific keywords if your box will focus on locally-sourced products.

You can also reach out to your community on social media to ask for reliable vendor suggestions. Small business Facebook groups could also be a great source of vendors.

Aside from the content inside the box, you will need packaging materials to house your items. You will need to find a wholesaler for boxes, packing material, and box design or printing.

11. Choose a reliable shipping service.

If you plan to sell products online, they will need to be shipped. Decide on which areas you will be shipping to, and choose a courier that offers a competitive fee for their services.

You could also make use of an order fulfillment service like the one provided by Amazon Seller Central. This service allows merchants to store their inventory in an Amazon warehouse and have Amazon manage deliveries when items are purchased online. Amazon Seller Central charges $0.99 per item or $39.99 per month with their Pro service.

An alternative to the above process is dropshipping, which refers to when sellers order their stock directly from suppliers, and the suppliers deliver to the client's door. This minimizes delivery fees for online business owners and ensures that there is no surplus of unpurchased stock. Ordoro is a company that offers dropshipping services with positive reviews from clients.

12. Launch your business.

Unlike brick and mortar stores, an online business needs to be launched on multiple online platforms to gain exposure.

Make your website go live. Once you have designed your website, you will be able to make it 'live', meaning that it will become visible through internet searches.

Advertise through social media. Platforms including Facebook, Twitter, and Instagram have paid advertisement services that may be useful for reaching a wider audience.

Reach out to niche forums, social media groups and/or newsletters. If your target market is a specific group of hobbyists or professionals, there should be several dedicated news hubs and social media groups that you can approach for advertising opportunities.

Encourage new followers to join your mailing list. This provides your online business with a network of consumers that you can reach through email marketing.

Final Thoughts:

A subscription box business model is an excellent way to ensure a consistent monthly purchase from customers. The benefit of online marketing is that most people are learning about businesses through social media already, and your rental fee for retail space will be reduced or erased. There is also room for expansion with more niche boxes or several themes being offered.

Our steps above provide a comprehensive guide to launching your subscription box business. There are also a number of business podcasts you can listen to for more information.

FAQs:

How do you market a subscription box?

  • Reach out to YouTubers and negotiate for them to provide a review in exchange for a free box.
  • Develop an affiliate program for influencers to offer discounts to their followers.
  • Create social media profiles and acquire followers.
  • List your subscription box on Cratejoy and use their marketplace platform.

How much does it cost to make a subscription box?

The cost of your subscription box is dependent on the items you choose to sell, as well as the frequency of box deliveries. Some subscription boxes are sent out monthly, while others are sent out quarterly.

The type of packaging you use also determines the cost, as bigger and sturdier boxes will be more expensive.

Can you sell subscription boxes on Amazon?

Yes, qualified sellers can list and sell their subscription boxes on Amazon. You can also manage your box items on their site.

What is Cratejoy?

Cratejoy lists information about the most popular subscription boxes and allows subscription box sellers to advertise their products.

How do I create a successful subscription box?

Market research will help you to develop a subscription box that consumers want. Doing adequate research is one of the best ways to lay a foundation for success.

The next aspect to focus on is marketing. Try to reach out to YouTubers and influencers and ask them to review your subscription box in exchange for a free sample. This way, you reach more potential customers and gain more followers.

What is a subscription box business?

A subscription box business sells a box of items on a monthly or quarterly basis. These boxes are usually themed, including items such as skin care products, snacks, accessories, and fragrances.

Subscription boxes will debit customers monthly unless it is canceled, offering business owners a regular source of income.

Why do subscription models work?

Businesses will spend more of their marketing budget on customer acquisition compared to customer retention thanks to the nature of a subscription. This also means that there is a somewhat reliable estimate of how much inventory is needed and how much revenue will be earned.

  • Birchbox.
  • FabFitFun.
  • Causebox.
  • Dollar Shave Club.
  • Tea Box.
  • Ozone Socks.
  • Ipsy.
  • Loot Crate.
  • BarkBox.

How much does Cratejoy charge to sell subscription boxes?

Cratejoy charges $39.00 /mo. for hosting, and 1.25% + $0.10 per transaction.

How many people subscribe to subscription boxes?

Birchbox, one of the largest subscription box services, has 2.5 million active users.

What kind of subscription boxes are there?

  • Make-up.
  • Skincare products.
  • Snacks.
  • Tea and tea accessories.
  • Coffee and coffee accessories.
  • Gin samples.
  • Clothing items.
  • Seedlings.

How do I start a subscription business?

Your first step to starting a subscription business is to conduct market research. Next, you should write up a business plan to map out your marketing plan, plans for expansion, and predicted expenses.

What is a curated box?

A curated box reveals the content before a box is shipped, unlike traditional subscription boxes that keep all content a surprise.

What is the difference between a subscription and a membership?

Memberships grant customers access to special discounts on items but is not a commitment to purchase a box each month. Subscriptions refer to the fixed regular boxes that customers pay for each month.

How do I promote my subscription service?

You can list your subscription service on Cratejoy, Subscription Box Addict or Urban Tastebuds. Another way to gain exposure is to approach influencers and YouTubers, offering them a free box or discount for reviewing your box.

How much is the average subscription box?

Subscription boxes typically cost between $10.00 and $40.00 per month.