As a growing e-commerce brand, you’re no stranger to the hype around subscription boxes. But maximizing their results is another beast entirely.
Offering subscription boxes can be a savvy way to generate recurring revenue, create personalized customer experiences, and help shoppers save time and money.
In Q4 2020, subscription-based businesses saw revenue grow at a rate of 21%. An impressive seven times faster than companies on the S&P 500.
But the days of peak pandemic shopping are largely over. And adding subscription boxes to your business model may or may not be feasible for your unique brand.
From product alignment to fulfillment to meeting customer needs, creating a subscription channel takes careful thought and consideration.
We’ve already covered the best types of subscription boxes for Amazon sellers. Today, we’re going to break down the subscription box best practices for multichannel DTC brands.
Let’s tackle the biggest question first. As with any business strategy, subscription boxes may increase revenue if they address unmet consumer needs and deliver real value.
According to McKinsey, it’s crucial to make sure your new subscription boxes are part of a sustainable model that:
To address your target customer’s needs head-on, start by identifying pain points in the consumer journey, conducting market research, and testing your concept.
Send out polls, questionnaires, and surveys to your most loyal fans. You can also interview a few of your VIP customers and start a focus group to gather deeper insights.
Once you’ve proven your concept, ask your customer cohort to detail the types of experiences they’d like to have when they enroll in your subscription service.
By integrating customer research and machine learning to spot purchase predictors, you can create subscription boxes tailored to your audience’s shopping preferences and get one step closer to meeting your recurring revenue goals.
E-commerce businesses make money from subscriptions when their customers pay a set amount for a service or bundle of goods every month. The longer a customer subscribes, the higher their customer lifetime value (CLV or CLTV) is, and the more money the business makes.
But there’s a caveat.
To make money from subscriptions, experts and analysts like those at McKinsey are quick to stress the importance of nourishing your subscription business rather than treating it as an experiment. A committed approach is vital if you want your new subscription channel to win and keep subscribers.
Subscriptions also come with a full host of data straight from customers, which lets you in on their key buying habits and patterns. If they sign up for an annual subscription, you’ll have a year’s worth of insights to help you predict what they buy and when — just imagine what that could mean for your marketing campaigns, inventory, and logistics.
The short answer is generally yes. One apparel brand even reported that its subscribers spend 2.5 times more than their traditional (non-subscription) customers do.
Here are some other subscription box monetization insights you may find helpful:
Younger generations have adopted subscription boxes the most. According to research by Emarsys, 32% of 16-24-year-olds in the US have a subscription, whereas only 7% of those aged 55+ have one.
Putting yourself in your customers’ shoes is key to designing a subscription box that meets their needs and (when orchestrated with care and creativity) exceeds their expectations.
Here’s a quick checklist you can run through to ensure you’re creating a subscription box with your audience in mind:
Ease of Use: Shoppers expect zero barriers to entry when enrolling in a subscription. They’re looking for easy signup and cancellation processes, the ability to reorder items automatically, and zero complications receiving their boxes every month.
Now that we’re clear on what consumers expect, let’s see what two of the top minds have to say on the subject.
“We are a tech company that happens to sell coffee,” says Bean Box Founder Matthew Berk.
Optimizing what needs to be outsourced versus what the company can do on its own is essential to Bean Box’s success.
Rated the best overall coffee subscription by RollingStone, Bean Box has a growing newsletter community of 300,000 coffee lovers, with nearly 40% of Bean Box customers coming from email.
And it’s not hard to see why.
With deals that smash barriers to entry, such as $5 coffee cash when you sign up for the newsletter and a free tasting flight when you subscribe, Bean Box puts the purchasing power back in consumers’ hands.
Top Reasons Customers Love Bean Box:
According to Matthew Berk, the key to a profitable e-commerce subscription business is being both well-funded and in the right place at the right time.
He also emphasizes how important it is to think from a consumer standpoint and sell products your customers want to keep buying regularly. “Don’t get into this business because you like the idea of a subscription business — do it because of the consumer use case.”
“There’s no benefit for us to sell a bottle and someone not be successful with the product,” says Nutrafol CEO Giorgos Tsetis.
Giorgos, an engineer (and model!) turned subscription-based business owner, developed hair wellness supplement company, Nutrafol, to solve the very real problem of hair loss.
Founded in 2016, Giorgos started the brand after suffering from hair loss and experiencing a slew of negative side effects when attempting to regain hair growth with prescribed meds.
Just a year later, Giorgos was featured in Forbes sharing their ultimate business dream: Helping 80 million Americans avoid hair loss.
Giorgos’ plan took off and by 2021, Nutrafol’s subscriber count increased 102% YoY.
Today, an amazing 90% of Nutrafol’s DTC revenue comes from subscriptions.
Not too shabby for a brand that expects today’s price-sensitive consumers to spend $79 a month for the product.
So what is it that encourages Nutrafol’s customers to continue their subscriptions? Giorgos says encouraging customers to “create a habit” is key. Demonstrating how and why to integrate products into customers’ daily routines may inspire your product to become a household staple.
Nutrafol subscribers also trust they’ll receive the same high-quality product every month. The brand takes customer feedback and cancellations extremely seriously and customers feel cared for.
“We want to understand why people cancel so we can improve the consumer experience,” Giorgos says. If a subscriber cancels, Nutrafol asks the customer to fill out a questionnaire to understand why they’re leaving — and then actually uses that data to improve the product and brand.
By setting up repeatable cancellation workflows on the backend, Nutrafol can segment past customers and automate win-back campaigns and retargeting strategies.
One thing Nutrafol doesn’t do? Make it difficult for consumers to stop their subscriptions.
With Nutrafol, customers can stop their subscriptions quickly and easily.
Retailers interested in growing their businesses with subscription boxes need to focus on remaining customer-centric and striking the right balance between novelty, convenience, and value.
Those that nail it, have a lot to gain.
At SellersFunding, we’re committed to helping e-commerce entrepreneurs achieve their goals no matter how big or small. Whether you need funding solutions or growth-maximizing tools, we’ve got you covered.
With our Working Capital solution, merchants can access a flexible line of credit to invest in the inventory, tech, and human resources you’ll need to fund your new subscription box venture.
Find out how SellersFunding can help you scale with ease.
