Subscription Box Business Models

The subscription box business model describes any business sending paying subscribers a box of products regularly. Boxes are usually sent monthly, but can also be sent quarterly, half-yearly, or yearly. This model has gained popularity starting in the 2010s to reshape the customer value chain, giving consumers more options and less friction. Examples comprise Dollar Shave Club, BirchBox or BoxyCharm, and many more.

dollar-shave-club-business-model
Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscription model to cut off the costs and friction to get new blades and grooming products with a curated package.
how-does-boxycharm-make-money
BoxyCharm recognized that there was a gap in the popular beauty subscription box market. Most companies were shipping boxes with sample-sized products that were not on trend or seasonally appropriate. As a proponent of the subscription box business model, BoxyCharm makes money via subscription revenue.

Understanding the subscription box business model

The subscription box business model is nothing new, with many brick-and-mortar businesses having used the system for decades. Wineries are perhaps the most obvious example, regularly shipping wine to members of clubs or loyalty programs.

Having said that, the internet has caused renewed interest in the model and lead to proliferation in its adoption by eCommerce businesses. Some of the companies responsible for starting this trend include Graze and Birchbox, delivering regular boxes of healthy snacks and beauty samples respectively. Dollar Shave Club is another business that has used the model with great success, sending men tailored shaving and face care products.

What’s more, there now exist companies such as Subbly and Cratejoy that offer dedicated, subscription-based commerce platforms for other entrepreneurs and start-ups.

Why is the subscription box business model growing?

What are some of the reasons for the popularity of subscription box business models? 

A few are outlined below:

  1. Convenience – likely the biggest and most obvious contributing factor to the popularity of subscription boxes. If consumers do not need to leave their homes to purchase goods, they won’t. Some subscriptions, such as meal boxes or shaving kits, also offer additional convenience because they allow consumers to purchase multiple and complementary items in just a single purchase. 
  2. Brand loyalty – for merchants, subscription boxes offer reliable, recurrent revenue streams. This is seen as an effective way to build brand loyalty since consumers are less likely to cancel their subscriptions once they have been persuaded to sign up.
  3. Repeatability – much of the popularity of this business model can simply be attributed to the ease with which it can be copied by other businesses. 
  4. Simplicity and scalability – the subscription box model by its very nature is relatively simple. The business only has to worry about making a fixed amount of deliveries per year, allowing it to solve other problems during interim periods. This is particularly useful for new businesses whose scalability and growth depend on addressing issues as they arise.

Key takeaways:

  • The subscription box business model describes any business that sends boxed goods to paying customers regularly.
  • The model itself is nothing revolutionary, but it has since widespread adoption thanks to the proliferation of eCommerce and associated businesses.
  • Research suggests the subscription box business model is responsible for at least 15% of all goods sold in an economy. What’s more, more than 50% of consumers are members of a subscription box service – with most motivated by convenience. For merchants, the model increases brand loyalty and is a simple yet scalable means of growth for entrepreneurs and start-ups alike.

Read Next: Subscription Business ModelHow Does BoxyCharm Make Money, How Does Birchbox Make MoneyHow Does Dollar Shave Club Make Money.

Related Visual Concepts

Subscription Business Model

subscription-business-model
Subscription-based business models are built on a recurring customer base, where customers usually have access to the product or service rather than their own. The customer can have the upside of the service without owning the good underlying it, which is maintained by the company running the subscription-based business.

Ipsy Business Model

how-does-ipsy-make-money
Ipsy is a monthly subscription service for cosmetic and beauty products founded in 2011 by Michelle Phan, Marcelo Camberos, and Jennifer Goldfarb. Phan used her large YouTube following to launch and grow the platform. Ipsy makes money by charging customers monthly for beauty subscription boxes. Various subscription plans are available depending on the beauty product size and customization level. Ipsy also operates an eCommerce store selling branded and in-house beauty products. The company also sells product placement spots to brands eager to receive highly targeted exposure.

Birchbox Business Model

birchbox-business-model
Birchbox is an online American monthly subscription service for skincare, perfume, and other cosmetic items. Birchbox was among the first players to start leveraging a subscription-based model to reshape how value is delivered to customers. Instead of a one-off purchase, Birchbox curates a set of samples that each time are sent to its subscribers, enabling them to discover new cosmetic products while reducing the friction and cost of discovery for new products.

FabFitFun Business Model

how-does-fabfitfun-make-money
FabFitFun is an online subscription box service sending electronics, cosmetics, fitness, wellness, and fashion items every quarter. Founded in 2010, it started as a simple website, and as it gained popularity, thus following later on a similar subscription-based model to Birchbox. It now generates revenues through membership services and brand sponsorships.

Dollar Shave Club Business Model

dollar-shave-club-business-model
Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscription model to cut off the costs and friction of getting new blades and grooming products with a curated package.

BoxyCharm Business Model

how-does-boxycharm-make-money
BoxyCharm recognized a gap in the popular beauty subscription box market. Most companies were shipping boxes with sample-sized products that were not on trend or seasonally appropriate. As a proponent of the subscription box business model, BoxyCharm makes money via subscription revenue.

Razor and Blade Business Model

razor-blade-business-model
The razor blade business model, also known as the razor-razorblade model, involves selling a product at a lower price to sell a related product later for a profit. The razor and blade business model was popularized by King C. Gillette, founder of the safety razor company Gillette, which sold a durable razor at cost while selling disposable blades at a premium.

HelloFresh Business Model

hellofresh-business-model
HelloFresh is a German provider of meal kits founded by Dominik Richter, Thomas Griesel, and Jessica Schultz (née Nilsson) in 2011. HelloFresh has a relatively simple revenue generation model. The company makes money by charging users a weekly subscription fee for meal deliveries.

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