subscription business

How To Start and Grow Your Subscription Business

How familiar are you with the concept of subscription businesses? Many entrepreneurs are unaware of this intriguing lifestyle business example, that has experienced some significant growth as well. This perfect tongue twister (if you don’t believe me, try repeating the words “subscription business” as fast as possible for 4-5 times) also represents a rapidly growing market. My firm belief is that every entrepreneur should be informed on its lucrative possibilities.

What Subscription Business Really Is?

Anyone who says that a subscription business is a business based on the ongoing business from a single customer would be quite right. Most of us will initially think of magazine subscriptions, as the most common and one of the oldest forms. But, subscription business offers much more than that. In time, with the rise of the Internet, this purchasing model has evolved into subscription eCommerce. People can now order just about anything imaginable and get it delivered regularly to the comfort of their home. Consider products such as:

  • Cosmetics and makeup
  • Pet supplies and accessories
  • Clothes and jewelry
  • Movies and games
  • Organic products of all kinds
  • Toys and the variety products for children
  • DIY and craft materials... The list stretches into infinity.

Consequently, a particular branch of subscription eCommerce that has recently experienced the most dramatic growth is the subscription box model. The participants on both sides, the customers and entrepreneurs are becoming aware of its benefits. But, why?

One of the reasons for such booming success might be down to the moment of box delivery itself, as it can be like a birthday surprise every month/week/etc. On the other, more entrepreneurial side, why is a subscription business model a great example of a lifestyle business? First off, it provides the ease and simplicity every business owner is yearning to achieve.

The truth is, almost every aspect of subscription box business hides an opportunity for growth beneath its surface.

Subscription = Recurring Revenue

Most business owners reach the point of a nervous breakdown due to uncertainty. Does that sound familiar to you? We entrepreneurs often need to fight the competition, invest an arm and leg into marketing, take various risks, and at the end of the month - we’re never sure whether the sales targets will be reached or not. You see, this game of feast and famine can be mostly bypassed with the aid of a subscription commerce business model.

The secret lies in turning that one-time purchase - the action of subscribing and ordering - into a recurring purchase. Whether the subscription stands for a daily, weekly, monthly or maybe, yearly delivery, the principle and a benefit stays the same. There’s no uncertainty here!

With predictable margins and a positive cash flow, you’re empowered to solve all pre-shipping operations without investing from your own pocket. This is of course providing you have your customer churn managed and optimised (this is really important and requires further reading which we won’t cover here).

A Rare Opportunity To Build Lasting Connections

Rare are the businesses in which you have a chance to engage with your customers continuously. So, another benefit of the subscription (box) commerce model is the ongoing communication with subscribers and customers. Each and every time the box reaches their door, you can get feedback (hopefully positive), often followed by photos on social media with your brand mentioned, or a YouTube video showing the unpacking process. In the case of negative feedback, there’s a chance to improve on your service right away for the next shipment or subscriber!

Providing a smooth, high-quality service pays off in any kind of business, but particularly in subscription based ones. When subscribers are satisfied, the retention rates improve and therefore compounding growth. We all know how ensuring a high customer lifetime value presents a key challenge in any kind of business. In the category of customer support and loyalty, a point definitely goes to a subscription business model.

How Difficult It Is To Start A Subscription Business?

Compared to more “traditional” non-recurring business models, it is relatively easy to start a subscription business but of course it does come with it’s own unique challenges. Keep in mind that even before the first shipment, you’ll most probably already have the money - from your first subscribers and their orders! The initial costs, such as setting up the website, are not even worth the mention.

And if the starting process could get any better: you could use sample or free products at the beginning to put in your boxes. How? Think of it this way: you are promoting brands while including their products in your boxes. Creative heads often arrange partnerships with an existing warehouse, to save on floor space renting. By leveraging the possibilities of Internet (eCommerce) and the nature of subscription business, an entrepreneur can start off with minimal costs. As the number of satisfied subscribers grows, the business will grow as well.

Scarcity Of Resources Available

Unfortunately, there are not many resources available online on how to start, build, and grow a subscription business. This is why, for any striving subscription entrepreneur, a collection of free, but at the same time comprehensive, practical, and in-depth guides can certainly help.

Starting from that initial spark of inspiration, all the way to advanced automation, Subbly understands the entire spectrum of challenges this kind of initiative carries. And rest assured that our doors are always open for your questions! Speaking of questions, can you name another lifestyle business example similar to subscription business? Have you tried to launch such a venture? Share your experience in the comment box and help other striving entrepreneurs find their way.

References/Further reading:

  1. Why You Should Use a Subscription Business Model | Entrepreneur
  2. How to build a successful subscription business | The Guardian
  3. How do subscription business models work? | Investopedia
  4. This is why you should start a subscription box business | Young Upstarts
  5. What I Learned as a Subscription Box Entrepreneur | Bench

Stefan Pretty is the founder of Subbly, an ecommerce (management) platform for subscription based businesses. Subbly’s mission is to make running a Subbox business as easy as possible, providing tools and resources for rising entrepreneurs all across the world. Stefan’s work is focused on bootstrapping and sustainability through profitability. He’s devoted to sharing lean business principles with future founders through webinars, blog posts and interviews.