4 Things to Decide Before Starting Your Subscription Box Business

There is a common response when myself or my co-workers tell other people about Cratejoy – if the person we’re talking to has not started their own subscription box company already they respond with a “Oh I have a great box of the month idea!”

Every. Time.

It’s awesome. Without fail people not only see subscription boxes as a need but they want to make one too! Some of the best subscription box business ideas I’ve heard have come from these casual conversations. So this is for all those people who have a great idea and no idea how to actually implement it. These are 4 things to decide before you start your own subscription box company. There are many more decisions to make along the way (like website design, platform options, credit card processors, and a bunch more), but before you go crazy and spend 3 months designing the perfect logo, you’ll want to focus on these questions first.

1. What do you want to sell?

Beauty Products! Dog Stuff! Snacks!

Figure out what your passionate about or where there’s a specific need. Plated figured out a way to help non-chefs feel like a professional without having to go to the store and pick out the ingredients or take a class on how to use the broiler. Taste Guru knows how hard it is to find delicious gluten-free snacks without having to go through the painful (and expensive) process of taste testing.

Before you choose what you want to sell it is a really good idea to see if someone else is already doing it (or how many people are already doing it). ‘Well Aly, I used Google so can I get started?’ – that’s a good start, you should also check out http://boxes.mysubscriptionaddiction.com. The list is much more involved and Liz updates it regularly.

(Bonus: Once you’ve figured out what you want to sell we’ve created a guide for you that has some great subscription box name ideas.)

2. How are you going to make money?

Seems like a crazy question to ask, customers pay you for your box of the month club so that’s how you make money! Well, not always. In fact a common thing subcom founders say is that they wished they had charged more for their box. What you have to decide is: will you pay for the products in your box or will you partner with companies to get products for free?

You Pay For Your Product: This is the way you were probably thinking. You buy stuff to put in the box and customers pay you for the box. The biggest thing to keep in mind if you choose this model is how much to charge for your box. We built this pricing guide calculator to help you figure this out.

Pros: You have more flexibility in what you include in your box, so you are in control of what your customers are getting.

Cons: This model means that you make money off of 3 month and 6 month prepay plans, not really month to month users. It also means that your margin is small so you won’t really start making money until at least year in.

You Don’t Pay For Your Product: So what if you don’t want to pay for the product? Then partnerships are the way to go. You can partner with companies and have them provide you with free samples (and sometimes full sized products) to include in your box.

Pros: You aren’t paying for your product so your making money almost immediately and since your margin is larger you’re less dependent on customers staying with you for longer.

Cons: You’re going to have to focus hard on partnerships to get a variety of products in your box and avoid giving out repeat items. You’re also dependent on what the company gives you which means you have less freedom to include whatever you want in your box.

3. Who is your ideal customer?

Barkbox recently said in an interview that their ideal customers are 20-somethings without kids and empty nesters (basically anyone who isn’t already spending money on kids). This doesn’t mean that people with kids aren’t buying Barkbox but they’ve recognized where they can get the most traction and highest retention. So who is your ideal customer? Don’t say everyone…don’t be that person.

4. How will you ship your boxes?

Will you ship them from your garage? Use a third party company? Ship straight from your partner? There really is no right or wrong answer here it just depends on what your box includes. Some boxes like El Hombre Salsa send you salsa from one partner every month so they ship directly from the partner without having to worry about packaging and shipping themselves. Other companies like Yumvelope are curating the products that go into each and every box so they ship out themselves (although I don’t know if it’s from a garage exactly, but you get what I mean).

So go! Get started! Tell everyone your idea and get going.