Subscription boxes have become increasingly popular but managing them is not as simple as it seems. Diamond, who has worked with numerous subscription boxes in the past five years, has valuable advice to offer. Apart from keeping up with the logistics of your subscription box, it’s crucial to stay on top of your business as well.
1. Pay your suppliers in full
To have a clear picture of your financial status right from the start, it’s advisable to pay your suppliers in full as soon as you receive payment for your boxes.
We’ve had many subscription box companies pocketing their first month’s profits and never getting ahead of the game cash flow wise. This looks fine whilst you’re growing but if you have an off month or must postpone a build for any kind of supply issues then you get into all sorts of trouble. Your suppliers cannot be used as your bank. The problem with this is that the cash you’ve had subscribed up front should cover all your logistics contents and consumables otherwise it’s not a very sound business. What’s not on and what we’ve seen before is when subscription box owners run up the bills prior to the box build and then when they received the cash don’t pay their suppliers. This is improper trading and ultimately speaking this poor administration will cost you your company. If you get into the habit right from the start of making sure all your suppliers are paid at the point where you get paid up front, then you will be running a liquid business straight away.
2. When to outsource
Consider outsourcing only if you have more than 200 consignments to dispatch each month.
Outsourcing fulfilment too soon can mean that you’ve got too much risk and too much cost. There is no guarantee that subscription boxes will be successful. Once you have succeeded in acquiring 200 or more subscribers, fulfilling their orders can become a significant responsibility, but at this point, you may have the means to justify the expense. Any outsourced solution will be looking for 3 months commitment. So, for your own sake get yourself a little bit established.
3. Attrition aims
To achieve growth, aim for an attrition rate of more than 30%, which implies that you need to add 40% more subscribers each year.
From the customer data we manage on behalf of our subscription boxes we notice that there is statistically overall of our clients about a 30% attrition rate year on year. That means in order for subscription boxes to grow they need to grow their user base by 40% just to keep in line with inflation. That’s quite a lot of sales and marketing activity so build that into your work time budget.
4. Be mindful of product curves
Keep in mind the product curves, which typically span over 2 to 3 years if you’re fortunate.
However, if you fail to consistently engage with your audience, the lifespan of your product could be significantly shorter.
As fascinating as you may find your subscription box, I know that I have rarely stayed subscribed to one for much longer than two years and often less than six months. There are only so many bottles of gin or cosmetic products that you can use and after a while you end up with consumer overwhelm. By the time I stopped subscribing to my Glossybox I had enough cosmetics to start my own beauty counter!
The people that are good at innovation and keeping customers interested are food subscription boxes where they change the menu regularly and are effectively replacing your weekly grocery shop. Even the most unique subscription clubs, such as those centred around gin, whisky, or cheese, can’t maintain a sense of novelty indefinitely. It’s important to realise that your audience won’t remain interested forever. Like the conventional product curve in business studies, your subscription box will likely experience a surge in popularity, followed by a plateau and eventual decline unless you can continuously introduce new and unique contents to keep it fresh.
5. Automation
Consider implementing reliable technology to automate your subscription management process. Shopify is a great option for website development, while Recharge can effectively manage your subscription services. This has multiple benefits including running your business efficiently and keeping your headcount low. For people adding the subscription business model to their classic eCommerce retail business i.e., supplements clients, they can run a traditional eCommerce marketplace such as Shopify and integrate it with someone such as Recharge for regular purchases of vitamins or supplements. Our logistics software integrates seamlessly with these platforms, allowing for effortless operational management even when you’re not actively monitoring it. Investing in these technologies during the initial stages can save you a considerable amount of time and effort in the long run.
If you’re looking for a logistics partner that knows how subscription boxes work, understands your business, and can support you in your growth then please get in touch. Call us on 0333 567 5888, email sales@diamondlogistics.co.uk or simple complete the form below.
