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EXECUTION Building a subscription box business

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df1992

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May 26, 2020
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Hi All,

I had an idea for a subscription box business, so I thought I'd document my progress and process. The idea isn't groundbreaking, but if done really well it could work and help a lot of people.

At a very high level, my plan is this
  1. Market Research
  2. Validate and test my ideas
  3. Source suppliers
  4. Develop branding, design and packaging
  5. Build a prototype box
  6. Build a shop (using Subbly or Shopify)
  7. Build a limited run of boxes
  8. Sell those first boxes
  9. Assess the results
1. Market Research

Largely completed.

I've identified both direct competitors and indirect competitors and built their value chains and thought to myself (as MJ said), what value can I skew? What's really helped me in this is to look at reviews of competitors products and service. It's really interesting what people complain about and what they value. Amazing what nuggets of information you can get from something as simple as Trustpilot. Part of my box will also have own branded products and again, looking at what are competitors most popular products has been really helpful, and see what people like and do not like about them etc. I struggle with market research as for me it's really quite boring getting into the detail of it, but it provides invaluable insight.

I also ordered 10-15 different products from all of the above competitors and are testing them with my girlfriend, which has been fun. She's getting into the whole "how can we make this better"

2. Validate and test my ideas

I launched a survey 2 days ago, so far I've had 78 responses with some interesting results. I want to get at least 100 before I close it and analyse it properly. What's been clear from the early results is that my idea was largely in line with other people's thoughts, but also what came out of it was another concept I hadn't thought about which I also want two test. So now I have 2 ideas (centered around the same concept).

An early watch out for me is that from the survey, about 60% said they wouldn't subscribe to what I was offering. Now I don't have an issue with this, but I need to get into the detail so that any further testing is on the 40% that would subscribe! I think this might put some people off, but this could be a healthy business with 1000 subscribers and fastlane with 4000 subs. Whilst ambitious, for me it seems achievable.

Next step for validation:

I'm building two different landing pages to test the different ideas. I really want to work hard on making sure I get both landing pages looking good.

After that I need to have a good think about who I need to target, so will think about different audiences this might work for and do some further testing. One thing I've always been nervous about is stopping what could be a good business, because my testing was poor and targeting to the wrong people.

I'll post updates from here...

Feel free to ask me any questions!
 

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sparechange

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Someone in my city that did subscription boxes hit over 1M in the first year.... just wanted to share that for some inspiration. Focus on the 40% that would subscribe to you, whatever you are selling there will always be people that dislike the product, don't let it discourage you. Good luck!
 
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df1992

Bronze Contributor
May 26, 2020
73
123
118
London
Someone in my city that did subscription boxes hit over 1M in the first year.... just wanted to share that for some inspiration. Focus on the 40% that would subscribe to you, whatever you are selling there will always be people that dislike the product, don't let it discourage you. Good luck!
Wow! Congrats to that person! I find subscription boxes models so interesting. The fact you can have a relatively low number customers but yet a loyal community of them means it can be a healthy business.
 

sparechange

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Wow! Congrats to that person! I find subscription boxes models so interesting. The fact you can have a relatively low number customers but yet a loyal community of them means it can be a healthy business.
Yeh it's a game changer, rather than focusing on getting more and more customers, you can focus on building a relationship with a smaller group.

With almost 9 million people in London you only need to convert less than 1% of the population to create a 7 figure business, that means your business can fail and get rejected by millions of people and you'll still clear the magical $1M mark. Take that into consideration, focus on the 40% that WANT to give you money, and try to figure out why the other 60% objected.
 

Andy Black

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Read “The Automatic Customer”, and check out the Subbly blog.
 
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df1992

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May 26, 2020
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Read “The Automatic Customer”, and check out the Subbly blog.
Thanks for the book recommendation, looks like a very worthwhile read.

I've been consuming a lot of Subbly content, they also have a great private Facebook group where people share ideas, problems etc. on sub boxes. Really valuable.
 
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df1992

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May 26, 2020
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London
Yeh it's a game changer, rather than focusing on getting more and more customers, you can focus on building a relationship with a smaller group.

With almost 9 million people in London you only need to convert less than 1% of the population to create a 7 figure business, that means your business can fail and get rejected by millions of people and you'll still clear the magical $1M mark. Take that into consideration, focus on the 40% that WANT to give you money, and try to figure out why the other 60% objected.
Exactly!... Now time to build a valuable box!
 

sparechange

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Here's some studying you can do (you've probably heard of them)


Look at their website and social media pages, things to be learned for sure.
 
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df1992

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May 26, 2020
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London
Update 09/08/2020

The survey is at 85 responses and is about at the peak of what I thought I could get so I've closed it and looked at the data which was really helpful. One thing I wish I had done is had more free text options for people to let me know their thoughts as I think that would have unlocked further value.

Before building my landing page I'm mood boarding what the box could look like and really make sure I know what I'm trying to get people to sign up for. To be honest I'm really enjoying it, being creative and trying to create something new is just fun.

The economics of subscription boxes is very interesting. I've been running some numbers and the cost of postage and packaging is very high, so finding that balance of bringing high perceived value, at a price people will pay, whilst also making a good enough margin is leading me to actually be way more creative.

I think I'll price my box at £14.99 and at the moment the total complete cost of creating the box (and shipping) is coming in at £11, giving a margin of 26% before any customer acquisition costs. Obviously without knowing the lifetime value of a customer it makes it difficult to know if this good enough or not.

Question: For a subscription box, what do you think is an appropriate gross margin target?
 

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biophase

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Update 09/08/2020

The survey is at 85 responses and is about at the peak of what I thought I could get so I've closed it and looked at the data which was really helpful. One thing I wish I had done is had more free text options for people to let me know their thoughts as I think that would have unlocked further value.

Before building my landing page I'm mood boarding what the box could look like and really make sure I know what I'm trying to get people to sign up for. To be honest I'm really enjoying it, being creative and trying to create something new is just fun.

The economics of subscription boxes is very interesting. I've been running some numbers and the cost of postage and packaging is very high, so finding that balance of bringing high perceived value, at a price people will pay, whilst also making a good enough margin is leading me to actually be way more creative.

I think I'll price my box at £14.99 and at the moment the total complete cost of creating the box (and shipping) is coming in at £11, giving a margin of 26% before any customer acquisition costs. Obviously without knowing the lifetime value of a customer it makes it difficult to know if this good enough or not.

Question: For a subscription box, what do you think is an appropriate gross margin target?
That margin is way too low. I don’t think you can make any money that way. You’ll see most subscription boxes are priced around $35+.
 

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sparechange

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df1992

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May 26, 2020
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That margin is way too low. I don’t think you can make any money that way. You’ll see most subscription boxes are priced around $35+.
I was nervous about that margin as well. The interesting part of subscription boxes is how long they will subscribe for and balancing that out with the cost of acquisition.

What do you think is a better target margin %? 30-40%?
 

biophase

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I was nervous about that margin as well. The interesting part of subscription boxes is how long they will subscribe for and balancing that out with the cost of acquisition.

What do you think is a better target margin %? 30-40%?
I don’t know. I have a subscription product at $15 with a cost of around $10. It’s a headache but I’m not trying to make money with it.

I’d shoot for something like $50 with a $30 cost probably.

What would you do with the inventory that doesn’t sell?
 
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df1992

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May 26, 2020
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I don’t know. I have a subscription product at $15 with a cost of around $10. It’s a headache but I’m not trying to make money with it.

I’d shoot for something like $50 with a $30 cost probably.

What would you do with the inventory that doesn’t sell?
I've seen some other subscription boxes were they just sell previous months as inventory, or even have a "random box" option. Seems to work quite well.

I think from my research so far, creating a buzz and having sign ups before launch will be really important (and hopefully help me forecast inventory), so I really want to focus on building a healthy email list.

I've been recommended to read the "Daniel Priestley: Oversubscribed".. started it yesterday and already 25% through, really well written and explores the concept of creating your own market and I think has a lot of learnings to take through to a subscription box business.
 

Kid

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I'm 50/50 on either you action fake or really into it (after reading all replies).

Prove me wrong and we both win.
 
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df1992

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May 26, 2020
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I'm 50/50 on either you action fake or really into it (after reading all replies).

Prove me wrong and we both win.
Ha what makes you think that?

This week I've just finished building my first landing page (using ConvertKit) for one of my concepts. I'm getting a few friends to feedback on it before I launch it this weekend. I haven't rushed this stage, I'm giving it considered thought on the actual prop and value the customer would get to make sure these benefits are clear.

This weekend I will create my ads and launch the page.

Also this week: I've built a prototype box, had call with key supplier for main product of box, sourced suppliers for other matching and complimentary products, developed branding.

I'm in no rush to test quick and fail fast. I'd rather test properly and learn.
 

Kid

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First thing, i'm rooting for you.

Having said that lets continue.

All those things you mentioned, are vanity metrics.
Things like family&friends feedback. Calling supplier.
Online surveys. Reading books. Thinking of price.
Even "building" a prototype (read about people that are stuck in "building" process and never really deliver).

Action (as in real action) comes when you show your product to
a person that has nothing to do with you or no incentive beyond
being interested in your product, pulls a credit card and puts those numbers
into form then clicks "Pay".

So, if you're still interested, do it in reverse.
Put up landing page. List whats in your box.
Put a payment system (fake or not, you can refund them anyway).
Bring people.

Wishing you well.
 

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df1992

Bronze Contributor
May 26, 2020
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London
Action (as in real action) comes when you show your product to
a person that has nothing to do with you or no incentive beyond
being interested in your product, pulls a credit card and puts those numbers
into form then clicks "Pay".
100% agree with you with on the above. I have experience of creating products and selling them, so I'd have slightly disagree with you on your vanity metrics point but understand the sentiment.

There is not point trying to jump in a "sell" a half baked product which is ill-informed and ill-thought out, which then just results in a failed attempt, but that's just the way I work and everyone has there own process right?

I'll tell you what, my next update will only be when I make my first sale...
 

Kid

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100% agree with you with on the above. I have experience of creating products and selling them, so I'd have slightly disagree with you on your vanity metrics point but understand the sentiment.

There is not point trying to jump in a "sell" a half baked product which is ill-informed and ill-thought out, which then just results in a failed attempt, but that's just the way I work and everyone has there own process right?

I'll tell you what, my next update will only be when I make my first sale...
From your post (and prev ones) it seems You have enthusiasm AND experience, that's very unique combination - so it seems i jumped the gun here.

You want to take it at your own pace and you have full right to do so.

If you still want to post about progress, i bet people on this forum would appreciate it.
 

Andy Black

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df1992

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May 26, 2020
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Update 27/08/2020

I've been building my socials to build some audience engagement, so thanks for the links @Andy Black. Numbers are nothing to shout home about just yet.

I launched my landing page with paid Facebook ads now live which aim is to drive landing page visits and sign ups to hear when the service launches.

It's very early days but at the moment my ad is performing absolutely terribly, so much so that it's actually making me laugh... I realise that I don't have any significant data yet so I won't jump the gun on looking too much at the numbers but I can't help but feel I've got off to a bad start lol

Question for those who have done this process
... when validating an idea how do you make sure that you've given the concept a fair chance, e.g. I worry that the concept is good, but if the creative doesn't land, targeting sucks, landing page isn't right then I haven't done it justice. Or to flip it, when is it the right time to bury a concept because it hasn't landed and how can you be confident this is because of the concept and no other factors?
 

spElle

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This thread is so exciting, some great info! I can't wait to read more about your progress @df1992 . I'm considering launching a subscription box for my community of around 500,000 people.
 

sparechange

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Update 27/08/2020

I've been building my socials to build some audience engagement, so thanks for the links @Andy Black. Numbers are nothing to shout home about just yet.

I launched my landing page with paid Facebook ads now live which aim is to drive landing page visits and sign ups to hear when the service launches.

It's very early days but at the moment my ad is performing absolutely terribly, so much so that it's actually making me laugh... I realise that I don't have any significant data yet so I won't jump the gun on looking too much at the numbers but I can't help but feel I've got off to a bad start lol

Question for those who have done this process... when validating an idea how do you make sure that you've given the concept a fair chance, e.g. I worry that the concept is good, but if the creative doesn't land, targeting sucks, landing page isn't right then I haven't done it justice. Or to flip it, when is it the right time to bury a concept because it hasn't landed and how can you be confident this is because of the concept and no other factors?
Aim for 10,000 impressions
 

Ing

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A dump Questio: what exactly do people mean with a „subscription box“?
Is that something special or does it only mean a servic or deli thats payed monthly?
 

sparechange

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Update 27/08/2020

I've been building my socials to build some audience engagement, so thanks for the links @Andy Black. Numbers are nothing to shout home about just yet.

I launched my landing page with paid Facebook ads now live which aim is to drive landing page visits and sign ups to hear when the service launches.

It's very early days but at the moment my ad is performing absolutely terribly, so much so that it's actually making me laugh... I realise that I don't have any significant data yet so I won't jump the gun on looking too much at the numbers but I can't help but feel I've got off to a bad start lol

Question for those who have done this process... when validating an idea how do you make sure that you've given the concept a fair chance, e.g. I worry that the concept is good, but if the creative doesn't land, targeting sucks, landing page isn't right then I haven't done it justice. Or to flip it, when is it the right time to bury a concept because it hasn't landed and how can you be confident this is because of the concept and no other factors?
Im in the middle of my own process, today I went out and offered free samples door to door knocking / flyers / calling....

Something to consider. See if people express interest from a sample of the product, you could start small and just give away 10 or so and see the response. Doesn't hurt, I handed out a few and got crickets, but just today asked the person why they didn't like the product and they quickly explained the problems.

''paid feedback'' is what I'll call it :clench:
 

Vadim26

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I was wondering about the survey you launched.

What software did you use to do it? Surveymonkey? Was it expensive to get 100 reviews.

—-

I have had landing page before to validate one of my products. I remember paying close to a $1 for email + feedback. I optimized my fb campaigns for “email”.

Once I switched to “lookalikes”, my cost per lead halved or even became less.

I wouldn’t do it again, just because it takes $$$ to optimize your cost per lead. Took me around 500. But worth it I’d say.
 

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