How to Start a Subscription Box on Shopify
Convenient. Reliable. Recurring. Subscription boxes are a win for both customers and businesses.
And with 15% of Americans having signed up for a subscription box, the market is big, and booming. The subscription ecommerce market is estimated to reach a whopping $473 billion by 2025, a huge leap from the $15 billion market in 2019.
Are you a Shopify seller scratching your head and wondering how you get in on this growing market? Read on and learn about how subscription boxes work, items you’ll need to consider, and some tips and tricks to optimize your Shopify subscription service (psst, keep an eye out for information about Upscribe, an industry leader in subscription ecommerce).
What is a Shopify Subscription Box?
A subscription box is a collection of products that are sent directly to the consumer. The subscription operates on a schedule, and when the time comes, a new box arrives without the customer having to do a thing! Each subscription box has its own schedule, ranging from weekly, to monthly, to quarterly fulfillment schedules.
There are hundreds of different kinds of subscription boxes that cover dozens of different markets, lifestyles, and price ranges. Whether you’re looking for a subscription box for clothing, dog treats, or craft supplies, you’ll be sure to find one. Many boxes focus on beauty and consumables, as customers will need to regularly replenish their items.
Subscriptions can be broken down into three categories: Curation, Replenishment, and Access.
Curation: Tailored products or experiences often based on questionnaires completed by the customer.
- Pro: High-profit potential
- Con: High churn
Example: Wantable takes your style and sizing preferences to create a curated package of 7 items from a variety of clothing brands.
Replenishment: Items that are frequently used up and need to be restocked.
- Pro: High conversion rate of 65% compared to 50% for other categories
- Con: Thin margins
Example: Eco-friendly brand Blueland sends a regular replenishment box of cleaning products for several of their starter kits.
Access: Membership-based subscription that gives access to deals and exclusive items.
- Pro: Bundling opportunity
- Con: Greater time investment
Example: NatureBox is a membership-required subscription box that offers discounted healthy snacks.
Should You Start a Subscription Box?
With subscription ecommerce market growth projected to skyrocket, it’s tempting to jump into the Shopify subscription box game without a second thought. Yes, it is an opportunity to gain recurring customers, but you have to make sure that you have a product that will have customers clambering to return.
Some of the many benefits of operating a Shopify subscription box are:
- Customer Retention: Did you know that attracting a new customer can cost five times more than keeping a current one? Quality products and services make customers want to come back, keeping customer acquisition costs low.
- Predictable Revenue: With orders set to be filled on a regular basis, you aren’t playing the guessing game with how many orders will come in each month. This helps with procurement, sales forecasting, and operational planning.
- Consistent Cash Flow: Most subscription boxes require full payment at the time of order, which means no more chasing down overdue invoices. You’ll be able to gauge what your guaranteed cash flow will be and let you plan accordingly.
Potential challenges of running a Shopify subscription box:
- Product Viability: With a focus on consumables and collectibles, not all products will generate recurring purchases when in a subscription box. Customers will want to keep your product consistently stocked, and not see it as a one-off item.
- Staying Relevant: Products in the box must either be consistently required, otherwise you will be required to provide updated products to keep customers’ interest.
- Competitive Market: Trying to break into an oversaturated market is challenging, and sometimes impossible, particularly when dominated by market leaders.
What Should You Consider When Starting a Shopify Subscription Box?
You’re psyched, you think that a Shopify subscription box might be just what the doctor ordered for your business… but how to start? After all, you don’t know what you don’t know! Thankfully Shopify gives some great tips on how to get started, what to consider as you first start out, and how to reduce the dreaded churn (aka when customers choose to consciously uncouple from your business).
Keep Pricing Conservative
With customers quick to churn, there needs to be a demonstrated pay back prior to the offering of free trials or deep discounts. There are other ways to entice customers without taking a dive on a reduced selling point.
Win Personalization Points
Up to 28% of curation subscribers valued a personalized experience as the primary reason to continue their subscription. They expect a more detailed level of personalization the longer they subscribe and their preferences are known.
Keep Your Marketing Fresh
With each subscription category having different benefits, the marketing associated with each one will vary. Affiliate marketing is effective with curation subscriptions while access subscriptions will have success with influencer marketing. All will benefit from email marketing to generate consistent customer engagement.
Keep Your Eye on Churn
As annoying, painful and frustrating as churn is, it will help you identify opportunity gaps in your service, and how to improve it. Involuntary churn can make up to 20-40% of total churn, so an understanding of its cause will give you a better understanding of your customer retention practices. Curious about the best way to stay on top of churn? Upscribe’s easy-to-read dashboard updates Subscriber Churn on the front page and goes into more depth in Analytics.
How to Take Your First Steps Towards Launching a Shopify Subscription Box
You’ve thought about it. You’ve assessed your products. You’re going for it. Shopify subscription box, here you come. Let’s save you some Googling, know now that there will be logistical and technical items to consider.
How exactly are you going to get items to sell to your customers? Vendors come in a variety of sizes and styles. Wholesale suppliers, Amazon, crowdfunding sites and trade shows are all popular venues to find products that will meet your procurement needs.
Ah, the almighty pricing component. Replenishment and access subscriptions offer discounts on the total retail price of the box’s contents. Replenishment box customers typically enjoy a 5-15% discount that is sufficient to keep them as subscribers. Curated boxes differ, primarily due to varying costs of goods sold, operating expenses, and fulfillment costs. Roy Morejon, President and Co-Founder of Enventys Partners, explains that you should aim to have a 30% profit margin on your box.
The people are buying, win! Now it’s time to get those boxes to their front door. It’s time to choose either a DIY approach, or sourcing a third-party fulfillment partner. Taking care of packaging and shipping yourself can cut down on costs, but it does bring up other challenges like warehouse management, the frequency of shipments, and packaging supplies. A third-party option can take care of everything, from kitting to shipping, but will cut into your bottom line. Regardless of how your products get out the door, make sure to have a quality inventory management program to keep track of all of your items.
Set Up a Subscription Box App
Designed to support the unique intricacies of a subscription box, your app will help you scale as your subscription business grows. Upscribe’s offerings include seamless onboarding, leveraging the Shopify checkout process and powerful customer and merchant portals.
Add Your Products, Set Up the Subscription Box, and Create Rulesets
You managed to procure your items, now make sure they can get to your customers! Once the products are uploaded, finalize the settings of your subscription box. Rulesets will break down the functionality of your subscription like cut-off windows, how often the product will be shipped, and how often a customer is charged.
Onboarding processes can be sluggish and complicated. Get your subscription box ready to launch with Upscribe’s Seamless Onboarding without having to create products and plans from scratch.
Maximize Your Subscription Page
Make your subscription page as alluring and enticing as possible. After all, subscription boxes are often luxuries; customers need to know what they’re getting, and why they should get it from you. Quality images, engaging CTAs and strategic upsell items are all must-haves on a subscription page. Upscribe lets you easily customize your customer portal branding and style to emulate your company’s brand.
Shopify Subscription Box Best Practices
Shopify subscription boxes are a great way to generate recurring revenue, build customer loyalty, and offer a convenient and personalized shopping experience. Here are some best practices for running a successful Shopify subscription box business:
Shopify subscription boxes are a great way to generate recurring revenue, build customer loyalty, and offer a convenient and personalized shopping experience.
Here are some best practices for running a successful Shopify subscription box business:
Employ a subscription box pricing strategy
Subscription box businesses work by charging you regularly and sending you products at a particular frequency.
There are four main ways they set their prices:
- Flat rate
Each subscription pricing model has benefits and considerations. A flat rate is straightforward but not the most practical for renewing subscribers. Tiered pricing can cater to various needs and budgets, although it can be pretty complex for new subscribers. Per-user is more cost-effective and tailored, yet it can be costly for distributors. Usage-based pricing is efficient for lighter users but can be a hassle for frequent customers.
Here are some things to keep in mind when choosing a subscription pricing strategy for your own business:
Factor in your margin
The price you set for your subscription box should take your expenses into account.
There are two types of margins that you should factor into your subscription box pricing strategy:
- Gross Margin: Gross margin refers to your net profit before factoring in non-product expenses. This type of margin only accounts for product costs.
- Net Margin: Net margin refers to your total profit after accounting for all expenses incurred in running your business. It’s the amount of money that goes into your pocket at the end of the day.
It’s common knowledge that your subscription box price should be able to cover all expenses related to running your operations while providing you with enough profit to expand and grow your business.
When considering adding an expensive or exclusive item to your subscription box, consider whether your customers will appreciate it. On the flip side, before you decide to take out a pricey item, think about how your customers might react and whether it’ll make your box less valuable.
Understand your brand’s perceived quality
When setting your price, it’s important to factor in the value of your product (independent of your actual margins).
What sets your box apart from your competitors? Do you offer something else that no other provider offers? Is your product delivering a high-end experience?
Think of it this way—it’s difficult to charge a premium if you’re just offering what everyone else is. To increase your subscription box profit margin through pricing, you must find ways to stand out and create value that your customers will recognize.
There are tons of ways to do this, including:
- Product Quality
- Gifts & Extras
- Great subscription box order fulfillment
Adopt a tiered pricing model
Different customers will perceive the value of your subscription boxes differently.
With this in mind, your pricing plans should be able to reflect this difference in customer expectations. To maximize your earning potential, adopt a tiered pricing model. This will help your subscription box to cater to a diverse customer base.
Offer multiple subscription levels and pricing plans at various price points and with different perks. Start by segmenting your customer base and identifying the number of customer groups you want to target. Then track what these customers spend and purchase to develop boxes that will appeal to them.
Note: Don’t go crazy here—too many options can be overwhelming. Many business consultants recommend three tiers (i.e., Good, Better, and Best pricing) since it’s simple to understand while still offering enough tier variation.
Offer free trials and promotions
Free trials and promotions are an effective way to entice customers to purchase your subscription box. Additionally, it could encourage other customers to buy the next level of your subscription due to the additional benefits your promotions provide them.
Offering free trials and introductory discounts also helps build trust and showcase the value of your subscription box, which could then translate to higher conversion rates in the long run.
Provide annual subscription plans
Having annual subscription plans encourages your existing subscribers to commit to your subscription box for longer, saving you the need to find new customers regularly and reducing administrative overhead costs. By having a dedicated and loyal base of subscribers, your box establishes itself as a credible and reliable product worth investing in, leading to a decreased churn rate.
Annual subscription plans also provide you with a steady cash flow that allows you to enhance your subscription box services, marketing efforts, and operational efficiency. However, it is crucial to strike the right balance between tiered pricing models and annual subscription plans to ensure that your subscribers still have the flexibility to explore and switch between plans depending on their needs.
Monitor competitor pricing
It is not enough to identify your value proposition and what differentiates you from the competition; you must also react and adapt to your competitors’ actions. Pricing should be purposeful and flexible because it is a powerful tool to drive company growth. It’s critical to reevaluate how you’re pricing your subscription box and analyze its performance compared to your competitors’ pricing strategies.
Remember, monitoring your competitors’ pricing doesn’t mean you must match their prices directly. This allows you to position your subscription box in the market appropriately and set reasonable prices. Focus on differentiating your value proposition rather than engaging in a price war.
Seek feedback from early subscribers
When figuring out how to further improve your subscription box services and perks, your early subscribers are the best person to ask. Understand their perception of your box’s quality and the value they receive from your subscription box at your current price points. By doing this, you also communicate to your subscribers that you’re committed to consistently improving your services and value their feedback.
You may also use their feedback to gain valuable insights into their preferences and needs. This enables you to optimize your subscription box strategy accordingly and increase customer satisfaction. By seeking input from early subscribers, you can stay ahead of the competition and better serve your customers.
Regardless of how effective your subscription pricing strategy is, it will all fall apart when your subscribers need help setting up their payments.
A simplified payment process makes it easier and more convenient for your subscribers to settle their transactions. Reduce the number of steps, eliminate unnecessary fields, and provide multiple payment options (especially one-click payment options like Google Pay and PayPal) to make the process as effortless as possible.
This can enhance user experience and increase your box’s value proposition. Customers associate a hassle-free checkout experience with reliability and professionalism. At the same time, simplifying payments can help prevent customers from deferring their purchases, leading to increased revenue and higher conversion rates.
Choose the right products.
- High-quality: The products you sell in your subscription box should be high-quality. This means that they should be well-made and durable. You don’t want to send your subscribers products that are going to fall apart after a few uses.
- Unique: When we say unique, that means your products should be something that your subscribers can’t find anywhere else. If you’re selling the same products as everyone else, you’re not going to stand out from the competition.
- In demand: There should be a market for the products you’re selling. If you’re selling products that no one wants, you’re not going to be able to attract subscribers.
Set a clear value proposition
Your value proposition is what makes your subscription box different from the competition. It’s what you’re offering your subscribers that they can’t get anywhere else. Your value proposition should be clear and concise, and it should be something that your target audience will find appealing.
For example, if you’re selling a subscription box of beauty products, your value proposition could be that you’re offering high-quality, unique, and hard-to-find beauty products that are curated by a team of experts.
Price your subscription boxes competitively
You don’t want to price your subscription boxes too high, or you’ll risk losing customers. However, you also don’t want to price them too low, or you won’t be able to make a profit. Do some research to see what other subscription boxes in your niche are charging, and then set your prices accordingly.
It’s also important to consider the value of your products when setting your prices. If your products are high-quality and unique, you can charge a premium price. However, if your products are more generic, you’ll need to price them more competitively.
Offer a variety of subscription plans
When launching a subscription service, you’ll need to remember that not everyone is looking for the same thing in a subscription box. Some people might want a box that’s full of surprise products, while others might prefer to have more control over what they receive. Offer a variety of subscription plans to give your customers the option to choose the plan that’s right for them.
For example, you could offer a monthly subscription plan, a quarterly subscription plan, or a yearly subscription plan. You could also offer different levels of subscription plans, such as a basic plan and a premium plan.
Personalize your subscription boxes
One of the best ways to keep your subscribers engaged is to personalize their subscription boxes. This could mean including products that are tailored to their interests or sending them a welcome message with their first box. Whatever you do, make sure your subscribers feel like they’re getting a special experience.
For example, you could send your subscribers a survey to ask them about their interests. Then, you could use this information to personalize the products you send them in their subscription boxes.
Invest in great subscription box order fulfillment
Subscription boxes are supposed to arrive on time—reliability and convenience are two reasons people turn to this model. Investing in excellent subscription box order fulfillment is the only way to guarantee customers see these benefits.
Look for a partner who understands the needs of subscription boxes, such as specialized packaging and fast shipping times. And if you’re going the DIY route, make sure you can scale with your business as demand grows without sacrificing quality.
Provide excellent customer service
Customer service is essential for any business, but it’s especially important for subscription box businesses. Your subscribers are trusting you to deliver a great product on a regular basis, so you need to be there to help them if they have any problems. Make sure you have a clear and easy-to-use customer service policy and that you’re responsive to your customer’s inquiries.
For example, you could offer a 100% satisfaction guarantee. This means that your subscribers can return any products they’re not happy with for a full refund.
Are Shopify subscription boxes a great way to consistently grow your revenue? Yes. Are they for every type of product? No. Will Upscribe help you scale your ecommerce subscription offering? Again, yes.
With the projected explosive growth of the ecommerce subscription market, businesses of all kinds need to evaluate if a subscription box is a viable option for their growth strategy. With easy integration of Upscribe and Shopify, businesses can be confident that their LTV will increase, while reducing churn.
Take your business to the next level with a Shopify subscription box service, and let Upscribe help you scale as you shift into a fast-growing ecommerce brand. Schedule a demo today and see how we can help your subscription revenue grow!