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.
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.

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Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"