How to Start a Subscription Box: The First Steps
Running your own subscription box business can be an incredibly rewarding experience. There’s nothing better than generating recurring income from something you love and care about. It’s also easier than ever before to create a lucrative subscription business – the tools are available, consumers are more open to the concept and a wealth of educational resources finally exist. Keep in mind though, creating a successful subscription is still very challenging! I’m a strong believer that the success of your subscription business is greatly influenced by the steps you take in the very beginning from inception to launch (see my post on the right way to launch a subscription box). Too often I see people focusing on the wrong things and getting caught up in details that simply don’t matter yet. In this post, I’ll outline not only how to start a subscription box, but also how to correctly prioritize the first steps involved in creating your new subscription business.
The Idea, Part 1: Selecting a Community/Niche
As I often like to say, it will make everything much easier if you choose a category/niche you’re passionate and knowledgeable about. Knowing how to communicate and relate to your target audience is extremely important. If you don’t know what your potential customers care about, it can be very difficult to create a product they’ll care about. There’s two key characteristics I always look for when determining a good subscription box idea.
- It’s not just a category, it’s a culture. Find categories that people use to actually identify themselves with. Yoga or Veganism are great examples. Yoga isn’t just a form of fitness, it’s an entire way of life for many who practice it. In both of these categories you’ll hear people using phrases like “I am a yogi” or “I am a vegan”. The more someone defines themselves by a certain community, lifestyle or practice the more receptive they’ll be to products that acknowledge who they are in an authentic way.
- Your product is a recurring need (or you can create that perception). If you’ve nailed the category above, creating the perception of a recurring need is a much easier task. The goal is to create a product that complements, supports or enhances the customer’s lifestyle. The best categories for subscription boxes are the ones that already have a good variety of consumer products associated with them. For example, if you’re doing a subscription for vegans, there’s ‘vegan versions’ of almost all consumer categories from beauty, makeup and hair care to snacks, clothing and even beer!
The Idea, Part 2: Building the Product
Once you’ve selected a good community of potential customers the next step is to really flesh out what your subscription product is going to be. This is by far the most important step and where you should spend a substantial amount of time! The following assumes you’ll be creating a physical product that’s mailed to your customers on a recurring basis. I prefer the ‘once a month’ frequency, ‘quarterly’ is also a good option, especially if you’re trying to build a less demanding business (you only have to worry about shipping out once every 3 months versus once a month).
So what is the product? Your product is the entire experience a customer has with your brand. It’s your box, the packaging, the packing list, the products, the way the products are arranged. Strive to deliver an experience rather than just a box filled with products.
Below is a checklist of questions to ask yourself when creating your subscription product.
What is your value proposition(s)? Good subscription boxes have at least 1 of the following: Discovery, Expert Curated, Value, Convenience.
What are you putting in your box? You’ll want a nice mix of items. I always suggest having at least 1 or 2 items that can be consumed right away to allow your customer to experience some instant gratification.
Would you buy it yourself? Seems like a simple question, but many entrepreneurs either never ask themselves this question or aren’t honest with themselves. Ask yourself, is this a product you would purchase yourself AND would you be open to receiving it every month for 10-12 months?
How often will it go out? As I mentioned above, I’m partial to a monthly subscription (any more frequent and the customer could get overwhelmed – any less frequent and you’re likely missing out on revenue). The frequency really depends on your niche and the needs of your customer.
What is the price point? This is an entire topic on it’s own, but my general advice is to make sure you leave yourself at least 40-50% gross profit margin after all costs of goods. See my post on How to Price Your Subscription Box. Build in enough margin to allow yourself to purchase great products month after month. Don’t rely on free sample donations.
Validate your idea with a teaser launch.
Once you’ve nailed your idea and product you’re ready to move on to the first stage of launching your subscription. I call this stage the “teaser launch”. The teaser is a one page website that’s meant to capture interest towards your upcoming subscription product. The idea is to give potential customers just enough information to get them excited so they’ll give you their email address.
It’s at the teaser stage that you’re able to gauge how well you’ve nailed product market fit. If your teaser page performs well (10-20% traffic to email conversion rate) then you have good justification to invest the time and resources needed to move forward with launching the business! See my post on how to launch your subscription business.
Now build your business!
Did your teaser page perform well? If so, now you can confidently move forward with the other parts of your business that require a little more commitment. It’s at this time you’ll want to get your custom packaging lined up, start building your website, line up vendors for your first month and prepare your website for the 2nd part of your launch, the “pre-launch”.
If you follow these first steps and spend the time needed to nail your niche and product, your chances of success increase dramatically. Too often, I see people rush to launch only to hear crickets. If you can prioritize the creation and launch of your subscription business in the right order it is entirely possible to build a multi-million dollar subscription box business with less than $1,000 in upfront costs!
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Hey Jameson – great article! Just wondering how you managed to offer Yoga Retreats as part of your service? Did you partner with a retreats company? It’s really intriguing.
Thanks
Hi Aj, we were originally partnering with various retreats and negotiating special deals, but that became really time consuming – especially coordinating with the winners and helping them book. We recently changed the format to simply a $1000 credit to use towards the retreat of their choice :)
Hi Jameson,
Firstly, congratulations on all your success as an entrepreneur, it’s truly inspirational.
I wanted to get more information on the types of costs you incurred when dealing with the various brands you chose you include in the boxes you have so far launched. Was there any fee arrangement which allowed you to include these brands in your boxes, bought at wholesale prices, or provided for free in return for customer exposure?
Look forward to hearing from you!
Thanks,
Shammi
Hi Shammi!
Thank you for the kind words! As far as product sourcing – it’s just a matter of negotiations. My bulk orders are usually welcomed with open arms and I’m able to get significantly better than wholesale. Check out my product sourcing guide here: http://jamesonmorris.com/guide-to-subscription-box-product-sourcing/
Hi! This website has got me so motivated to start my own business. Thank you so much for the information you are providing!
Couple of questions, how long did you have your teaser launch page before you decided to start your business? Also when you’re first starting off product sourcing, did you receive a lot of responses still when purchasing smaller units? My startup budget is kind of low.
Thanks,
Shanail
Hi Shanail!
I’m glad! I ran the ‘teaser phase’ for about 1.5 months and waited till we had about 10,000 email leads before moving on to the next phase. Most of the vendors I reach out to on a monthly basis respond :) if you work with larger brands it may be difficult to get special ‘bulk’ pricing, but if you work with smaller ‘etsy artisan types’ in the beginning, they’ll welcome your 50-100 units order with open arms!
Even after growing my social media, giving away promo boxes, keeping up my blog and news letter I’m still struggling to aquire customers. I know I have high quality products I think I’m just not reaching enough people. Any ideas on how this can be improved?
With the teaser phase, do you have any kind of lead magnet giveaway as incentive (bribe) to sign up, or is it just a tease of what’s to come?
And does your model work for just physical box product subscriptions or would it work as well for digital only products, eg. a digital magazine subscription?
Thanks.
Hi Rich! Check out this post “The Right Way To Launch a Subscription Business” You’ll see an example of my teaser page. One of the incentives was a chance to win a lifetime membership. I think this model would be effective for ANY type of product launch.
Hi Jameson,
Thank you for sharing all your tips-they’ve really helped me out. I’m at the very initial stages of starting my subscription business and one thing I’m having trouble with is creating my email address domain. Any advice on how to do this? Looking forward to your response.
Thanks
Hi Joy, I recommend Google Apps for your email. You can configure it with a custom domain:
https://apps.google.com/
Hello Jameson,
I’m still in the beginning phase of my subscription box business. I ‘ve already found my niche. YAY!!! I’ve also made some decisions, such as fulfilling the boxes myself out of my apartment, going with USPS shipping, and free shipping to my future customers. The problem I’m having is how to obtain the product. I made a list of companies products I’d like to carry. But I’m not sure if I should reach out to those vendors and buy directly from them or just purchase out the store.
While working on this subscription box, another one was born. I would like to launch both boxes together.
I took notice to what you stated at the end of this article, “If you can prioritize the creation and launch of your subscription business in the right order it is entirely possible to build a multi-million dollar subscription box business with less than $1,000 in upfront costs!”
I’d like to keep my cost down. Any advice?
Hi Mia! Well for starters, absolutely do not buy your product from a store. Vendor’s are more than happy to hear from you and negotiate bulk pricing for your subscription. It would be very difficult to make your business work by paying retail prices. In fact, I almost always pay below wholesale price, vendor’s will often agree to cost pricing or a ‘cost share’ because they like the idea of moving larger amounts of product and getting it in front of a niche audience – often times, subscription boxes will use this pitch to try to secure free product, but I prefer to use it to simply negotiate better pricing – it’s a win -win for both parties no matter what. Also, check out my procurement guide! http://jamesonmorris.com/guide-to-subscription-box-product-sourcing/
Hi there! First, thank you so much for sharing so much valuable info. I have a question about generating interest and incentive for the pre-launch phase.
Was it enough to just say what the box was going to contain? Or did you have another landing page that listed exact items that could be found inside? I’m concerned my pre-launch will be too vague…
Hi Sara! If you take a look at my post The Right Way to Launch a Subscription Business, you’ll notice my teaser landing page doesn’t even specify what will be in our box. The goal is to build anticipation and interest (while also offering some form of incentive, but that doesn’t necessarily mean you need to spell out all the details. We created a teaser page that was ultra compelling to yogis, but left out just enough details to spark some curiosity. With that said, be careful not to be too vague, as you might not spark interest with anyone – it’s a balance for sure. Copywriting for marketing and landing pages is definitely an art!
Hello,
Great article, very helpful. One thing I am left wondering about when starting up is about licensing and permits. Do I need to have a business license? A seller’s permit?
Is buying in bulk/wholesale and then passing on the product to a client count as re-selling?
TIA for any info you can provide.
Thank you for all your tips & advice. I find it extremely helpful.
Forgive me b/c i know this is gonna sound like a dumb question, but do you help people step by step with starting a subscription box company.. Like name , niche, helping contact & helping negotiate with vendors for product?
Hi Jameson –
I keep getting confused on the launch page concept. When you are generating interest, sending potential customers to a one-page launch page instead of your website where they could both sign up for your email list as well as learn more about your company seems like a missed opportunity.
That being said, all of the blogs and info say to use a launch page, what am I missing?
I am currently building my website and, when I start my marketing campaign, am trying to figure out where to direct leads.
Thanks for any direction you can give!
Thanks so much for the detailed step-by-step information! I haven’t started yet, but doing research. I want to know how to acquire the boxes. Where do they come from and are there companies that can customize them? Thanks so much!
Hello! Thank you so much for sharing your experience and all of this helpful information, it is greatly appreciated!! The biggest question I have is for book subscriptions, how are they making contracts with authors? Are they paying royalties, are they buying a pre-fixed number of books from the author that has been agreed upon, or are they having the authors buy a spot in the box? The last option seems to me that this wouldn’t create a lasting or strong relationship with the artists but what do I know. Any advice or insight would be amazing.
Hi James,
I am just curious as to how your protected your idea from the start. Did you have Yogis trademarked .
I have a niche and idea for two products, one subscription and another a one off box. I feel I have been so focused on the keeping it safe ‘the idea that is’ that I’m not moving forward as I would like too.
If this makes sense, then any advice would be welcomed.
Thanks you in advance
Candice
Hello Jameson! Thanks for all the tips you are sharing with us. I am still on my planning phase and I was wondering if I should contact vendors before the teaser launch or should I approach them after when I have more data to back up my idea?
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