Subscription Box in India- Keys to Building and Challenges

Update- We have successfully launched PaWish which is a monthly subscription box of dog food, toys, treats, chews etc delivered to the doorstep. We sniff the products from the warehouse and pack them in a box based on the age, size, breed and other information about dog.

Disclaimer- The article contains the first hand experiences

1. Of Launching subscription business model
2. The Challenges in the journey so far

Before actually understanding how to launch a Subscription based business model, it’s important to understand What and Why of Subscription Box Business?

What is Subscription Box Business?

A subscription box is a package of retail products sent directly to a customer on a recurring basis. Subscription boxes are a marketing strategy and a method of product distribution. This gives the product companies an opportunity to reach to the new set of customer for their product trial and also the consumer gets the new product as a surprise on recurring basis.
The most famous subscription boxes are Birchbox, Barkbox, Dollarshave club etc.

Why do Subscription Box Business?

Running a subscription box business has unique benefits and challenges. These types of businesses experience almost the same bears and bulls as typical e-commerce business, but unique aspects are presented as well, such as:
1. Predictable revenue

Since you would have customers who have subscribed for 3/6/12 months subscription and also new customer for this month, it’s much easier to predict the revenue and sales forecast. The model is very simple, the customer is billed on a recurring basis and receives the products at their doorstep at the same time every month. Since the customer has signed up once, it’s much easier to determine what revenue ranges will be there on a month-on-month basis when you know the churn rate.
Read more about churn rate and how to Forecast Sales for Monthly Subscription Services

2. Develop customer relationships
In the typical e-commerce the biggest challenge is to acquire and retain a customer and the best way to know your business is to talk to your customer. The beauty of subscription lies in the fact that a customer who has signed up once will remain customer for subscribed duration. So the customer retention is easier and more fruitful.
Over time you grow relationship with your customer and with regular feedback you can understand what vendor and what product is most liked by your customer and who need to be re-evaluated and it helps in your inventory selection.
The subscription business gives you a unique proposition of turning a customer base into loyal fan base and then the sales and revenue projections becomes much clearer and easier.

3. Good publicity for vendors
Since it’s a lovely platform for new and upcoming vendors to get their products to the customer via a surprise box which increase their brand awareness and serves as the best marketing platform for the vendors. Vendors want their products in your box, resulting in higher and healthier margins.
Of course, just like any other industry, there are unique challenges that come along with running a subscription box which I will talk about later in this article before that it’s important to know How of the business.

How to start and build it?

1. Identify the niche: Subscription works best with identifying the niche industry and the product offering. Below are mentioned some successful subscription boxes in different niche industries:

Box for dogs: PaWish, BarkBox, Woofbox, PawPack, Petgiftbox etc.
Chocolates/bakery products box: Batterbox, Cocoarunners, MysteryChocolate Box etc
Ladies beauty products: Birchbox, Ipsy, Glossybox, Fabbag etc.
Men’s grooming box: Dollarshave club, Ustraa etc.

2. Choose Subscription Commerce Platform: Choosing a subscription commerce platform is a tough business and that’s critical to every subscription commerce business. The choice that you make today in opting the platform will impact your day-to-day operations and will be hard to change later. Here are even startups to help you startup your subscription box startup, like Cratejoy, Subbly and Wordpress so you don’t have to deal with the headache of handling online storefront website coding, hosting and billing.It’s worth taking the time to get it right. We decided to go forward with Wordpress as our Subscription commerce platform.
There are free plugins available in Wordpress for:

• Invoicing/Billing/Recurring payment- WooCommerce. This is amazing plugin available for free and helps in managing Orders, Coupons, Subscription. WooCommerce PDF Invoices & Packing Slips for generating Invoices and the packaging slips.
• Importing products- WooImporter. This helps you to import products with images, price, description to your Wordpress website from Aliexpress, ebay etc.
• SEO- Yoast SEO. This helps in managing the SEO of your Wordpress website. It has an indicator which turn red, orange to green showcasing the search friendliness of content on the wordpress website

3. Pricing and Unit Economics- The selling price of the entire subscription box depends on various parameters which goes into making the box. This would help you understand the right selling price with the parameters given below:

• Shipment/Delivery- The shipment and delivery prices are based on weight and size of the box. This cost varies depending on the delivery partner and the kind of delivery services that you would opt for.

• Packaging- The size and weight of the box is to be considered when you are building your subscription box business. Here is how you can decide on the weight and size of box. The size and weight of the box effect the shipment pricing. This should also include the additional packaging materials that would be used on the box like branding stickers, kite paper etc that would be used in the box to wrap the products.

• Selling price of the box- Considering all the above parameters and a minimum profit margin of 30% you can calculate the selling price of the subscription box using this pricing calculator

• Products- The products should have a profit margin so that the total products in the box prices should not be more than 45% of the selling price of the box. The sample products from the vendors helps in increasing the profit margins.

4. User Acquisition- In the subscription business since the user acquired once is acquired for 3/6/12 month period so their is one time acquisition cost and recurring profit, that’s the beauty of a subscription business. Here is a guide to learn how to acquire first 1000 subscriber

Challenges in Subscription Box Business?

1. Recurring Payments-The beauty of the subscription is the recurring payments. But sadly, in India there is two-step authentication required for every online transaction. So either you will have to take the down payment upfront for the entire subscription period or will have to make the customer pay monthly for the subscribed service. This stringent RBI policy is defeating the subscription business in India. Companies like Practo have registered them in Singapore because it’s easier to accept international payments and recurring payment for a company registered outside India. There are generic payment issues are the solution for them

2. Consumer are afraid of contracts- Many people are afraid of putting their credit/debit card details where the business runs off charging customer monthly. They are also of the belief that they would end up signing up for the product which they might even like.

3. Maintaining value is key- Losing subscribers is arguably the biggest challenge for a subscription service. Subscription services must focus on maintaining the value of their box, or else customers will start fading out. It’s important to continue to impress customers and “wow” them into staying signed up for another month — because customers will easily get bored of a subscription service if the gifts become repetitive.

All in all, it was an experience to cherish. We feel that we would be able to help you with the basics, incase you are planning to start a subscription based business on your own.

You can reach out to me at [email protected] -

Incase you need any help on a subscription box business
If you want to give us any feedback or have any suggestions on the product
If you want to connect with me for an “interesting conversation”

Thanks for reading. Would love your comments and feedback on the above.

Abhinav Tyagi
Founder, CEO
Petdom
LinkedIn