Online subscription businesses are booming. There are all kinds of subscriptions, from pet supplies (BarkBox) to personal grooming products (Dollar Shave) to underwear (MeUndies). Members sign up for a subscription, select their product, and receive monthly automated deliveries of everything from fruit to cosmetics to entire meals.
There are several reasons why these business models thrive:
- They eliminate a chore or errand. Shopping for razors, socks and/or underwear isn’t fun for all. For those individuals who prefer not to deal with this shopping necessity, subscriptions provide a perfect solution.
- They create a surprise factor. Many subscriptions incorporate the element of surprise by selecting products for their subscribers. This makes recipients feel like they are receiving a monthly gift. Everyone likes presents.
- They are set-and-forget. Monthly subscriptions are often successful because subscribers forget about them even when they intend to cancel them. This enables the service to squeeze out several additional months of revenue from their members.
- Repeat customers come standard. Businesses often struggle to obtain repeat sales from their current customers. Not so with subscription-based businesses, which enjoy repeat business all year long.
- No eBay and/or Amazon commissions. Many businesses are getting fed up with the increasing commissions of selling platforms such as eBay or Amazon. Instead, these businesses are opting to sell their products directly to the consumer via a website (or sometimes just a sales page).
How do you start your own subscription-based business?
Pick an interesting yet sustainable niche.
Think of a product or product set that you can offer to others that is unique and not typically found in stores. Maybe it’s homemade deodorant, or LED pet collars, or ultra organic granola. Whatever the item may be, it should be either a consumable (i.e., it is used up) or collectible (e.g., collect-them-all figurines). For shipping purposes, it should also be light and non-perishable.
Find cheap/overseas sources of your product(s).
To create and ship subscriptions at competitive prices, you’ll need to source your items in bulk and as cheaply as possible. You might look at sources overseas using sites such as Alibaba or eBay, or you may wish to contact manufacturers directly and order from them in bulk. You might also locate cheap items by super-couponing or hitting store clearance sales.
It takes some time and effort to find cheap items that can be turned around for a significant profit; however, it’s not impossible. As an example, these LED dog collars sell for pennies on the dollar via certain Chinese exporters:
And yet, some very similar-looking collars are being sold on sites like Groupon and Etsy- though for significantly more money.
It doesn’t take much gumption to buy such collars en masse and add them to a monthly subscription box for pet owners.
Create a subscription service website.
You’ll need to showcase your products and their prices using some kind of ecommerce platform. To enhance the user experience, you’ll also want to feature your products on their own pages and maybe even publish periodic blog posts. To this end, you could build your own website, complete with some kind of payment gateway…or you could subscribe to one and avoid all this legwork. One such service is Subbly, but there are others too, like Recurly and Stripe.
Ensure cost-effective shipping.
Most subscription businesses advertise free shipping; to remain competitive, you’ll need to do the same. However, you can cover the costs of shipping by pricing it into your products. You should also purchase a postal scale and weigh your bundled products to the ounce, making sure that you can pack your items in such a way that they “look” like a lot but don’t weigh a lot.
To this end, you will need to get creative with your packaging and items. For example, if you ship out a monthly snack subscription, you’ll have to creatively alternate between a light but bulky bag of potato chips versus a small yet heavy chocolate bar.
Advertise your business.
You can opt for Google AdWords ads, Facebook Ads, or something else entirely (paper flyers, anyone?) to advertise your subscription products. If you announce that your first shipment is free, freebie and coupon websites are bound to pick up your promotion and do the advertising for you. Just make sure that your business model can sustain a bunch of free products being shipped to individuals who may never actually subscribe to your service.
Build your email list.
Write blog posts, post cute videos, and feature product reviews all in the global effort to win over email list subscribers. Consider offering a small freebie, coupon or product discount in exchange for a name and email address. Why? Because, in the long run, your email list will not only generate extra revenue, it’ll save you money too.
With your email subscribers in hand, you’ll be able to advertise more directly and for free via your periodic email newsletters. Eventually, you may even be able to replace all your third party advertising venues with just the promotions you push through your email list.
Consider offering free returns/refunds.
As much as you hate hearing about this, you should at least consider some level of refund and/or return of your products from unhappy customers. If you don’t wish to deal with the hassle and cost of product returns, you could just credit your customers or replace their products with different ones. Alternately, you could credit customers who return your products and even credit the shipping charge to them; such costs would need to be written off as “the cost(s) of doing business.”
However, if you don’t offer at least some level of a refund, your customers could eventually unsubscribe.
Get a piece of the subscription service pie.
Subscription-based services provide you with a sustainable business model that grows over time. As your subscription numbers grow, you’ll be able to expand your product line(s) and buy in bulk, thus improving your profit margins over time. Such a business can also (eventually) be sold, enabling you to retire or pursue other income-generating opportunities.