In 2019, First Insight conducted a subscription box survey. Featured in Forbes and USA Today, the statistics immediately grabbed brands attention:
- 31% of Millennials were already subscribed to a subscription box, while another 38% debated signing up in the next 6-months.
- 8% of Baby Boomers subscribed, and 22% wanted to sign up within the same 6-month timespan.
- 25% of recipients (both male and female) previously subscribed, while another 32% discussed joining.
Since then, subscription boxes have been fun for businesses to express themselves. And, not to mention profitable. All things considered, when there is a booming trend, there are also mistakes.
Luckily with this article, you can see the issues beforehand. Spoiler alert: Most of it is inventory and order management.
Non-Profitable Price Modeling
Uncalculated expenditure can easily overpower profit. When money is going down the drain, something needs to change.
Above all else, write down the costs: Huge attributes are packaging, overhead, and manufacturing. And, even though not all subscription companies are the same, most businesses strive for a 40%-60% profit margin. Packaging usually consumes 10%-12% of that.
Also, consider product investments. The trick to product investment is every subscription box specializes in either quality or quantity. Rarely do businesses find themselves mixing the two.
Ipsy and BoxyCharm are great beauty industry examples. The Ipsy subscription box only offers travel-size makeup for $13. Meanwhile, BoxyCharm offers three tiers for full-size products. The base subscription is $28, the premium subscription is $40, and the luxe is $60.
Both businesses are profitable in the beauty industry. However, they use different price structures.
Two popular subscription box pricing principles:
- Adjustable Pricing. These rates depend on subscriber growth, economics, or influx of product cost. Fact: Customers want full transparency on what they pay and when they pay for it. Constantly changing rates result in subscriber dissatisfaction making variable pricing a risky game.
- Tiered Pricing. Tiered pricing is selecting multiple price points for different qualities or quantities. The selection of plans attracts a larger audience with various budgets. BoxyCharm successfully uses this model, as previously mentioned.
Monthly Shipping and Delivery Times
Subscription box deadlines are both a blessing and curse. In one sense, you can estimate shipping dates, supply investments, and accumulate materials based on the current subscriber base. But, if the boxes fail to fulfill, those dates become intimidating.
Subscribers do not forgive easily. The chances of forgiveness lessen if the product is an everyday necessity or held to the same value.
To decrease the possibility of late delivery, try relying on third-party logistics. Yes, we can never guarantee the future. But with calculated risks, we reduce the impact of market dips and leverage expertise, that’s our promise.
Not Hiring the Right Outsourcing Logistics
There are endless benefits to hiring a 3PL (third-party logistics). Storing, picking and packing, customizing, and even fulfilling the package directly to your customer, to name a few.
The devil lies in the details. Inventory and order management problems happen when partnering with the wrong fulfillment company. Valuable 3PLs like OceanX help the business owner with infrastructure, time, and assets.
If mindful of a few factors, there are fewer complications in order management with the right fulfillment team.
Here are just a few factors that make the process of order management easier:
- Strong Communication. Did you know that NASA once blew up the Mars Orbiter with simple miscommunication? One team used US measurements (inches, feet, pounds, etc.) to calculate the abilities, while the other used metrics. One simple miscalculation led to the Orbiters explosion and the loss of $94 million. If America’s finest miscommunicated badly, logistics finest are just as prone.
- Scalability. Many business owners will try fulfilling orders in-house in the beginning. But, if orders scale beyond the company size, it may be more efficient, affordable, and simpler to hire outside logistics. When finding the right logistics team, ensure their warehousing, staff, and equipment scale for current sales and future growth.
- Data Protection. Nowadays, we need to be careful about leaving sensitive information. A tech-advanced 3PL will comply with PCI (Payment Card Information) regulations.
- Clear Goal Expectations. Clear goal expectations dive boards off the strong communication point. For experts to strategize desired plans, they need clear objectives beforehand and updates.
Ninety-Nine Problems, but Subscription Box Orders Aren’t One
The subscription box industry can be a profitable game if the cards are played right. Brand owners can play their hand well by fulfilling high-quality products, expected delivery dates, and fewer management issues.
Owners shouldn’t have to undergo order management alone. With OceanX we provide trusted partnerships for consistency, custom packaging, fulfillment, storage, order management, shipping, and subscriber experience.
We believe that subscription boxes are less intimidating with qualified experts. Are you ready for fulfillment with promise?
