The subscription box market is projected to grow significantly in the next five years. In 2021, the market was valued at $23 billion. By 2027, this value is projected to reach $70 billion. While major players like Blue Apron and Dollar Shave Club have their dedicated customer bases, these projections prove there is still room for new businesses in the subscription box game. 

However, just because there is room for growth in this market doesn’t mean it’s not competitive. You need to have a strong business model (and your assets in order) if you want to succeed. Here’s what you need to know about starting your own subscription box company.

You need a business plan.

Before you can start marketing your business and attracting customers, you need to have a strong business plan in place. Whether you are bootstrapping this venture or working with investors, you need to prove on paper that you can turn a profit. Here are a few questions to answer.

• Who are the competitors in your niche, and what do they charge?
• What will make your box different?
• How much will you charge for your monthly boxes?
• What are the discounts for long-term subscribers?
• How will you procure the items you plan to ship out?
• What secondary expenses (marketing, office space, accounting services) do you need to budget for?

Most subscription boxes cost between $10 to $40 per month. While setting a higher price point can increase your revenue, it can also push customers away. Conducting market research can help you confirm a reasonable price point that can also help you turn a profit.

You need to brush up on your ecommerce know-how.

The vast majority of subscription box companies are ecommerce driven. Customers will discover your brand online, manage their accounts on your website, and pay for extensions within your webpages. Now is the time to familiarize yourself with the aspects of managing an ecommerce brand, including SEO, page design, and credit card processing for subscription sites.

There are many resources for website creation and tips for ecommerce operations; however, you might not realize that your business will need a high-risk payment processing partner — a specialized company that can ensure your customer data is secure.

You need to account for customer turnover.

Subscription companies have a shorter customer lifetime value (CLV) than most brands. While a customer might frequent their favorite restaurant or use the same accounting software for years, the average lifespan of a subscription box customer is between three and six months.

The more customers you acquire, the steeper discounts you can get on wholesale goods to fill your boxes; however, you will reach a point where new customers need to replace the ones that cancel their subscriptions.

As you develop your subscription business, keep track of your acquisition and turnover costs. What are you spending on a per-customer basis to acquire a new subscriber? How much do you profit from them before they cancel?

Get the right fit for payment processing.

There’s a lot to learn when launching your subscription box business. Luckily, Humboldt is here to help. We work with several brands to offer payment processing for subscriptions. Let us help you set up a subscription box merchant account to protect the financial data of your customers and your business. Learn more about Humboldt Merchant Services and how we can support you.