More and more people are considering starting an online business in hopes of becoming their own bosses and realizing their dreams of becoming entrepreneurs. While traditional Internet businesses like e-commerce stores and service-based businesses are still incredibly popular choices of start-ups, a newer type of online business is slowly gaining traction and attracting would-be business owners as well as investors. That online business model is the subscription box business, and if you’re toying with the idea of entering the online business world, it could be the right choice for you.
What Is a Subscription Box Business?
A subscription box business isn’t a completely new idea. The concept comes from “Of the Month” clubs from decades past. Typically purchased as gifts, “Of the Month” clubs sent members a gift box or single item related to a given theme every month. Buyers could purchase subscriptions through mail order catalogs and by phone.
The subscription box business takes this concept and puts it online. Not just given as gifts now, the businesses send monthly packages of items that are usually beneficial for the purchaser now. There are many types of subscription boxes that are experiencing great success in niches like men’s and women’s fashion and accessories, gourmet and healthy foods, kids clothing and toys and arts and crafts supplies.
How Do Subscription Box Businesses Work?
With a subscription box business, the business owner typically works with a variety of vendors that want to promote their products to people within a certain niche or age group. They’ll often provide samples or small packages of their items at a deeply discounted price or for free to the subscription box business. The subscription box business advertises online and sells subscriptions that renew on a monthly, quarterly, semiannual or annual basis. When the subscription renews, the customer’s credit card may be charged automatically, so that they remain members until they cancel. Some subscription boxes allow users to select some or all of the items in their boxes or return items that they don’t like. Businesses that accept returns typically only charge customers a small fee per box plus whatever they decide to keep.
Pros of Subscription Box Businesses
Part of the reason why subscription boxes are becoming popular start-ups is because they do have a number of benefits, including:
1. Business Is Predictable. With a subscription box service, you’ll know how much money you’re going to make each time you ship a box or at least what the minimum amount you’ll make is. You’ll also be able to accurately predict how much inventory you’ll need to fill orders, so you can easily anticipate costs.
2. Overhead Is Low. You don’t need a huge team to start a subscription box business. In fact, many have started off with just two partners working from their homes or apartments and then expanded as they grew.
3. Getting Started Isn’t Costly. With most vendors willing to donate or deeply reduce the cost of merchandise in exchange for the chance to advertise, you don’t need a lot of capital to get started with a subscription box business.
Cons of Subscription Box Businesses
Like any other Internet business, subscription box businesses are not without their drawbacks or challenges. These include:
1. Maintaining Interest Can Be Hard. Each subscription box needs to be new and exciting if you want to retain customers. You may struggle to keep things fresh after a while or hit a point where you’re having trouble attracting new vendors to keep your boxes interesting.
2. Competition Can Come Suddenly. Because it’s not expensive to start a subscription box business, someone can steal your idea and become a competitor, not just for your customers but also for your vendors.
3. Attracting Customers Can Be Expensive. To scale a subscription box business, you need to get the word out and that can be costly. Social media ads, search engine ads and other costly forms of advertising are almost mandatory for subscription box businesses to succeed.
4. You Have to Please Vendors, Too. If vendors don’t see results from giving you free or discounted merchandise, your pool of products could start to dry up.
If you’re interested in starting a subscription box business, you don’t necessarily have to come up with your own idea to launch. An online business broker could help you find a subscription box business from someone who is hoping to sell their online business. The advantage of buying an existing business with the help of website brokers is that you’ll already have relationships with suppliers and merchants and subscribers in place. For more information about buying a subscription box business, contact us and talk to one of our Internet business brokers.