Secrets of the booming £1bn subscription box market
By Matthew Caines 18 February 2019 • 12:30pm
The Craft Gin Club team keep their subscribers on board by freshening up the offering each month Credit: Craft Gin Club
The subscription box market is booming, according to a report by the Royal Mail, which estimates that one in four (27pc) of us are signed up to receive a regular hit of food, flowers, booze or something else. The sector is growing at such a rate that it will be worth an estimated £1bn in 2022.
Low barriers to entry mean that many small companies – and some established ones – are getting in on the act. Oliver Bridge, the founder of Cornerstone, a shaving product delivery brand, can see the appeal. "Your revenue is more predictable, so you can spend more time on improving the product and service instead of constantly recruiting new customers," he says. "There are fewer sleepless nights."
But gaining the first of those clients is the big challenge, says Asher Budwig, owner of Lola's Cupcakes. "People want to try before they commit, so you end up giving a huge amount of product away for free," he explains. "It makes for an expensive and unprofitable start."
Another difficulty is keeping customers once they're on board. "You need to maintain a low cancellation rate, because if your 'churn' is too high, you can't replace departing clients quickly enough and you end up running to stand still," says Bridge.
He cites three main reasons for people leaving: they're unhappy; they don't need your product any more; or a competitor has convinced them to switch. "It's vital to guard against all three," he adds.
Part of the club
One way to keep subs sweet is to constantly freshen up the offering, says John Burke of Craft Gin Club. "We work directly with distillers to deliver exclusive and limited edition drinks," says the co-founder, who also puts on subscriber-only giveaways and competitions. "You've got to reward people for staying in the club."
Budwig thinks that people stick around when there is a sense of excitement about opening the box each month. "The experience, information and packaging are all key," he says, suggesting an "explosion of colour" when the package is unwrapped. It's also worth spending on a strong seal to ensure that food products arrive in perfect condition. "The small things that go around the core product make a big difference," he adds.
For those starting out, Bridge suggests outsourcing manufacturing and logistics so that "your business can easily scale from day one and you can focus on building your brand, not packing".
Budwig recommends taking an existing product (such as brownies) and repositioning it. "You will find it much easier and faster to gain traction than trying to educate customers about something entirely new."
For Burke, it's about stock management and planning ahead. "The sweet spot is having enough product while remaining flexible enough to offer new items as they come to market," he says.
Retail and Consumer industry,
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