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August 8, 2023

How To Start A Subscription Business? Ultimate 2023 Guide

Learn how to successfully launch and manage a subscription business with our comprehensive guide. Get expert tips and insights at Boopos.

How To Start A Subscription Business? Ultimate 2023 Guide

Subscription businesses are not only limited to traditional media like newspapers or magazines. Today, the subscription model is ubiquitous, covering products from beauty items and razor cartridges, to meal kits and aromatic candles. In fact, the market for subscription-based e-commerce products and services is expanding rapidly, with Forbes predicting it will grow to over $904 billion by 2026.

Ahead, we’re sharing practical advice on how to start a subscription business, exploring subscription business ideas, and sharing insights on key aspects such as customer retention, payment systems, and technology implementation.

Is the subscription business model profitable?

One of the biggest advantages in starting a subscription business is its profitability. Customer acquisition is a significant expense for both retail and service-based businesses. In traditional business models, ensuring a customer's return can be challenging, leading to a constant struggle to increase customer lifetime spend and generate revenue

A subscription-based model alleviates these issues, creating a predictable, recurring revenue stream that remains as long as customers maintain their subscriptions. Automating regular billing can also enhance efficiency in revenue generation, helping with scaling a subscription business. 

Different Types of Subscription Businesses

Subscription businesses primarily fall into two categories: subscription boxes and replenishment models.

How to Start a Subscription Box Business

Subscription boxes offer a variety of items around a specific theme, introducing an element of surprise. Popular subscription business examples of this type are Birchbox, FabFitFun, and Mystery Tackle Box. These businesses often have additional revenue streams, such as selling full-size products on their websites or retail outlets.

Here are four steps to kickstart your subscription box business:

Build a prototype box: Find a problem and develop a solution by creating a box with relevant products. Conduct user testing and focus groups for feedback.

Establish supplier relationships: Identify vendors who align with your box theme and are looking to reach new customers or clear old stock.

Figure out pricing: Calculate costs of goods sold, packaging, rent, payroll, and shipping. Research competitor pricing for market insights.

Develop a marketing strategy: Plan a diverse e-commerce marketing approach using tactics like influencer partnerships, SEO, customer referrals, social media, advertising, and events.

Starting a Replenishment Model Business

On the other hand, replenishment model businesses, like Dollar Shave Club or Amazon's Subscribe & Save service, provide regular shipments of specific products to ensure customers never run out.

To start a replenishment-based subscription service, consider these steps:

Figure out your product mix: Identify your niche and refine your products. Crafting a business plan to guide you here is also a key consideration in how to set up a subscription service under a replenishment model.

Set prices: Establish a fixed cost or charge an annual membership fee offering discounts for regular purchases.

Manage inventory: Invest in an inventory management system that updates automatically across all sales channels.

Handle shipping and fulfillment: Design or purchase packaging that is both safe and representative of your brand. Set up a warehouse for storage and fulfillment.

How to Setup a Subscription Service: Where to Sell

Deciding whether to sell your subscription services online or in-store is crucial as you start a subscription business. We recommend a hybrid system that combines the benefits of both digital and retail experiences. 

Online selling promotes lean operations, reducing the need for retail staff and the cost of rent. Physical storefronts allow you to attract foot traffic and provide in-person demonstrations of your products. A hybrid model combines the marketing advantages of a physical store and the reach of an online platform, creating a powerful business model. 

Maintaining Customer Loyalty and Preventing Churn

It’s not just about starting a subscription business - you need to sustain its success, too. To encourage long-term subscription after initial discounted periods, consider these tactics:

  • Reward customers for referrals to attract new subscribers.
  • Collect feedback to understand customer preferences and improve offerings.
  • Offer collectibles or unique packaging with each shipment.
  • Prioritize sustainable practices, as 78% of US consumers say sustainability is an important part of their lifestyle, and 60% say they’d pay more for a product with eco-friendly packaging.

Scaling a Subscription Business

Recurring revenue is the defining trait of a sustainable subscription-based business model, making it attractive for entrepreneurs - and investors. Whether you're interested in starting a subscription box service or a replenishment model business, consider adopting a hybrid approach. When you start a subscription business with both an online store and a physical storefront, you can maximize marketing opportunities and operational efficiency.

Finally, to secure funding for your subscription business, consider platforms like Boopos, the leading funding platform for small businesses. Our financing options are tailored to your business’ specific needs, and you can get pre-qualified in as little as 48 hours. 

With a strong business plan and the right financial backing, your subscription business can ride the wave of this rapidly expanding market. Along with these tips for how to start a subscription business, it’s time to take your idea to new heights of success.

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