If you are contemplating starting an e-commerce business, you may already be familiar with some of the business models such as dropshipping. However, you may not be familiar with other business models like the subscription box service.
A subscription box business model, also known as subcom, is an e-commerce business that allows the subscriber or customer to pay a flat monthly fee to receive a type of box in the mail. Most often, these boxes are filled with sample products sold by the company. The products can be chosen ahead of time by the subscriber, or the box could be filled with random products. It depends on the subscription offered by the company.
A subscription-based box company usually has a defined target audience and its products can be used to solve a particular need or problem for the subscriber.
Why are Companies Attracted to the Subcom Business Model?
Most of the time, the decision to start a subcom business is based on the industry or the niche chosen, and a need the market in this niche may have. Another attraction for businesses is the personal relationship they can develop with their subscribers. Building a relationship is critical because a business owner would not want a customer who only orders once and then cancels their membership.
The Pros of the Subscription Box Model
As previously discussed, this type of business model allows business owners to form a relationship with their customers. After subscribing to your service for a while, your customers will seem more like family than customers.
From a business point of view, this model provides recurring income from customers that do not need continuous influence to purchase repeatedly. Auster uses this business model to reassure its customers that they will receive hand-selected, premium products every month.
The Cons of the Subscription Box Model
Although there are a lot of positive aspects to this type of business model, there are some negative aspects as well. The first thing that a business owner will need to consider is that this model is not appealing to customers who are one-time shoppers. A buyer who only wants to purchase a product from you one time may be deterred by the need to subscribe to receive a product.
Sending customers similar products every month is the core of this business model. It may become more difficult to keep customers satisfied and their subscriptions active. Unfortunately, the business model prevents e-commerce owners from being innovative with their business plans. Once a customer subscribes to your box service, it can be challenging to justify a need to make changes to the service.
There is also the possibility that this model will have a short life span, like the flash sales and daily deal business models of the past. Pioneers of the subscription box business model are moving away from the concept, although there are several businesses that have seen long term success with subscriptions.
Subscription box companies are continuing to trend and they do not appear to be going anywhere just yet. However, keeping customers engaged will always be the main challenge and objective for this e-commerce model.