Sign Me Up! 5 Things to Know About the Subscription Business Model

Subscription Business ModelIt is estimated that the subscription box market is as big as $15 Billion. It also appears that many consumers subscribe to more than one subscription box type. This can range from food to dog toys, STEM products for kids, or athletic clothing.

Given the shop-from-home impact of online stores like Amazon, it is no wonder. If you are an entrepreneur that is looking to enter into this market space, read on to learn the 5 things you need to know about the subscription business model.

  1. The Model is Not New

While many may believe that the subscription box model is a new concept in the digital age, that is far from the truth. The model started with early paper newspapers. You pay a recurring fee for your recurring subscription to the newspaper.

In the 80’s and 90’s this model shifted to include things like cassette tapes and fruit of the month clubs. Now it is expanding, to include DIY kits and clothing.

  1. It is About Relationships

Not only is your relationship with customers important, but it’s also important to have good relationships with your suppliers. Finding the right products to place in the box at a price point that allows for-profit requires building relationships in the field. If you are considering a subscription box company, start in a field where you have strong connections.

  1. Create Value

In this market space, it is about creating value for your customers. For example, your box may give them access to unique items or items that they can’t get in stores. Keep in mind, it is also about giving them the most bang for their buck, while many customers are looking for the convenience of home delivery most are still looking for a bargain.

  1. Streamline the Business Model

Because it is a recurring billing model the billing process must be smooth. You may want to consider a subscription billing service. You must also effectively manage your inventory to prevent excess product, a definite profit killer. Finally, consider a tiered pricing structure; this allows you to target customers at various price points.

  1. Customer Acquisition Can Be Challenging

While the space for new subscription box companies is open, it is not without its own set of challenges. Customer acquisition is still one of the biggest hurdles. It is also not uncommon for customers to try a service, but not remain with it for a long period of time, so focus on maintaining those customers once you get them.

As with any new venture, it will take time to build a strong subscription box company, however, with some work on customer acquisition and relationship building you can create a profitable model.

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