How to Start a Subscription Box Business

Market research should try to identify the growth projection of the industry, potential startup costs, your competitors, and your target market.

How to Conduct Market Research:

• Conduct surveys.
• Read articles or books about the industry.
• Ask for feedback on samples.
• Gather statistics about your target market.

Once you have this information, you can begin to form concrete ideas about your specific business model as well as create your sales strategy.

Most subscription boxes will focus on particular products like beauty and wellness, novelty items, or food. Another option is to have a monthly theme that includes various products. These themes can reflect seasonal changes, a particular ingredient, a specific method of sourcing, or a dietary requirement.

Your market research should reveal what other subscription boxes do for themes and help you identify potential gaps in the market. Cratejoy is a site that lists the most popular subscription boxes with their pricing information. You can search your content ideas here to see who your competitors will be.

Types of Subscription Boxes:

• Snacks from a specific country.
• Beauty products.
• Reading material and literary novelty items.
• Items specific to a hobby or project.
• Seeds and planters.

A business plan is of utmost importance if you plan to secure funding from investors. They will need to see your estimated expenses, growth projections, and a detailed description of what the company will do.

In addition to providing investors with a clear picture of your growth strategies, a business plan will help you map out the steps needed to launch and expand your business. It includes measurable goals like improving subscription numbers or hiring more staff.

A business plan should include the following items:

• Executive summary.
• Business description.
• Market research.
• Marketing plan.
• Competition analysis.
• Financial data.
• Future goals.

There are several expenses involved in selling subscription boxes, such as:

• Packaging material.
• Domain purchase.
• Website creation and maintenance.
• Vendor payments.
• Shipping costs.
• Salaries.
• Office/storage space rental (if you choose not to work from home).

One way to cover these costs is by using your savings. However, this may not be viable, depending on your financial status. Securing a small business loan from the bank may be required. Failing this, you could fund your business with a credit card, or you could try crowdfunding.

It is also possible to sell equity in your company or apply for local and state small business grants.

Choosing a name is essential, as you will need to create a website to sell your products. Your name should be easy to remember, relevant to your products, and/or unique compared to your competitors (if your name is too similar to a competitor's, this can cause confusion).

Check to see if your business name is available as a domain name. Your website will be where all information and purchasing facilities are, and you need to ensure that the name you have in mind is free before working on logo designs and registering with your state.

Choose a legal structure and register your business with the state. This is essential for tax purposes.

Types of Legal Entities:

1. Sole proprietorship: Includes only one person who is the owner/operator of the business. There are no employees and all profits are the proprietor's personal income. The sole proprietor personally assumes all liability for the business. You'll likely need to use a schedule C form to report profits and losses.
2. Partnership: A business relationship between two or more people who share costs and revenues. Partnerships do not pay income tax but must file an annual return. Taxes are passed on to the individual members of the partnership.
3. Corporation: A corporation is a standalone entity with shareholders. A corporation must file an annual tax return and is required to pay corporate taxes.
4. S Corporation: S corporations are corporations that pass all profits, losses, deductions, and credits on to shareholders. This is done for tax purposes so that the shareholders and not the corporation end up being responsible for the tax burden. Corporate income is still taxable.
5. Limited Liability Company (LLC): LLCs are regulated by state laws. An LLC can be owned by a person, persons, or a corporation. Depending on the size and location of the LLC, it may be treated as a partnership or corporation for tax purposes. Check your State's laws for more information.

Initially, you may choose to handle most operations yourself until you can afford staff members. There are, however, several roles that would best be fulfilled by other staff members.

Your website is where all of your sales will take place, so it is important to ensure that it functions correctly and looks appealing. If you don't have experience with building a website, it is worth the fee to hire a website designer. A professional designer will also be able to suggest useful plugins and tools to improve functionality.

Social media advertising has been proven to be highly effective with a wide range of audiences. Your market research should include information about which social media platforms your target market frequents.

Instagram would be a great platform for subscription box advertisements because of the emphasis on high-quality images and videos. Instagram also has an advertising feature where promoted posts have direct links to your website. Followers can also tag your business in stories, which can then be shared by your own page.

Facebook allows you to create a page for your business and share content from there. Facebook users are more likely to read the information on a post, as opposed to Instagram where users prioritize images. Links are easier to include in captions, and advertisements can have call-to-action buttons to streamline the purchasing process.

YouTube is also a good place to post videos about your subscription box to show content, behind the scenes, interviews with suppliers, and other content that viewers may request. Many subscription boxes approach YouTubers to review their products, so you could be advertising on YouTube without posting your own videos.

You may not need office space if you choose to fulfill your orders with dropshipping. However, if you plan on ordering products and packaging them, you will need space for these operations.

One benefit of selling your subscription boxes online is that your location does not need to have frequent foot traffic or retail facilities. Your office will mainly function as a storage and packaging space, and/or a place for staff to work. Your location requirements will mostly be space.

Unless you plan on creating your own products, you will need to source your box items from external vendors. One way to find vendors would be to do a Google search with keywords relating to items you are interested in. You can include area-specific keywords if your box will focus on locally sourced products.

You can also reach out to your community on social media to ask for reliable vendor suggestions. Small business Facebook groups could also be a great source of vendors.

Aside from the content inside the box, you will need packaging materials to house your items. You will need to find a wholesaler for boxes, packing material, and box design or printing.

If you plan to sell products online, they will need to be shipped. Decide on which areas you will be shipping to, and choose a courier that offers a competitive fee for their services.

You could also make use of an order fulfillment service like the one provided by Amazon Seller Central. This service allows merchants to store their inventory in an Amazon warehouse and have Amazon manage deliveries when items are purchased online. Amazon Seller Central charges $0.99 per item or $39.99 per month with their Pro service.

An alternative to the above process is dropshipping, which refers to when sellers order their stock directly from suppliers, and the suppliers deliver to the client's door. This minimizes delivery fees for online business owners and ensures that there is no surplus of unpurchased stock. Ordoro is a company that offers dropshipping services with positive reviews from clients.

Unlike brick and mortar stores, an online business needs to be launched on multiple online platforms to gain exposure.

Make your website go live. Once you have designed your website, you will be able to make it 'live', meaning that it will become visible through internet searches.

Advertise through social media. Platforms including Facebook, X, and Instagram have paid advertisement services that may be useful for reaching a wider audience.

Reach out to niche forums, social media groups, and/or newsletters. If your target market is a specific group of hobbyists or professionals, there should be several dedicated news hubs and social media groups that you can approach for advertising opportunities.

Encourage new followers to join your mailing list. This provides your online business with a network of consumers that you can reach through email marketing.