Costs of Starting a Subscription BoxApr 17, 2022
Starting a subscription box sounds fun, doesn’t it? Dreaming about what you’ll put in your box, imagining the perfect packaging, picturing your subscribers’ excitement when their boxes arrive. But, starting a subscription box isn’t just fun… it’s also a lot of work. And like any business, you’ll need to invest time and some money into making it a success.
A subscription box is an eCommerce business which means there are start-up costs involved just like with any other online business. These costs can vary depending on what you want to do.
I’m going to break down the five main costs of starting a subscription box so you can be aware of and plan for them in your own business.
1. Product Costs
Product cost is the actual expense of goods for each item you will be putting in your subscription box each month. Whether you make the items yourself, buy them wholesale, or source them from overseas, these costs will make up the highest percentage of your box costs.
When calculating product costs, make sure to include the shipping costs to you. This can have a big impact on your overall product cost and needs to be tracked and planned for.
Realize that you may need to purchase items several months in advance. When you are buying wholesale or sourcing overseas, you need to allow extra time to make sure you have the right products in stock when it’s time to ship your boxes each month.
As you develop relationships with vendors or wholesalers, you may be able to negotiate payment terms. However, be aware that you may need to purchase a few months’ worth of product upfront in the meantime.
Check out this blog post for tips on finding and sourcing products for your subscription box.
2. Packaging Costs
There are so many variables when it comes to packaging costs. You can ship your subscription box in a basic box, custom box, or go without a box and use a poly mailer.
Packaging isn’t just about the outside of the box. You also need to consider the cost of stickers, shreds, tissue paper, inserts, tape, etc. - anything you use to get your boxes ready to ship.
Everything adds up and everything needs to be figured into your costs. Grab my packaging cheat sheet for my go-to resources on packaging.
3. Fulfillment Costs
Your fulfillment costs are made up of packing and shipping costs. Both can be difficult to figure out when you’re first starting out.
Packing costs include the labor it takes to package each subscription box. Many subscription box owners start out packing all of their boxes themselves. Calculating the amount of labor it takes you now will help you allow for labor costs you’ll pay later when you hire team members to help with this task. For example, if you can pack 50 boxes in an hour, divide that by an hourly wage and you’ll have your packing cost per box.
Third-party fulfillment companies pack and ship your boxes for you. They charge a flat fee per box plus “touches.” A touch includes each item in the box as well as tissue paper, inserts, etc. Touches add up quickly if you have multiple items in each subscription box. Listen to podcast episode 61 - What can a fulfillment center do for my subscription box business? to learn all the ins and outs of third-party fulfillment.
Shipping makes up the other part of your fulfillment costs. Shipping can be VERY expensive and shipping costs vary widely depending on the destination. If you include shipping in the price of your box, do some research on the most cost-effective ways to reduce shipping charges.
Look at different carriers and talk to their representatives in your area to negotiate shipping rates. In this blog post, I share my top five shipping tools to make shipping more affordable and more efficient!
4. Tech costs
A subscription box is an eCommerce business. In other words, you need tech in order to run your business. Before you can even get your subscription box up and running, there are several tech pieces you need to have in place.
- Payment processor
- Shipping software
- Customer Relationship Manager (CRM)
I go into detail about what each of these tech tools does in your business and tell you about my favorites in this blog post.
Your biggest tech expense will be your website. It’s so important to set your business up properly and in a way that allows you to grow. A good website is key, so plan for this investment as you get started. Your other tech expenses will be small monthly fees.
5. Advertising Costs
You can have the BEST subscription box, but if no one knows about it, you won’t have sales.
I talk about audience building A LOT. That’s because it’s so so important to the success of your subscription box business. Building an audience takes time and effort. In this podcast episode, I walk you through how several of my Launch Your Box members have built audiences that led to successful launches and continued growth in their businesses.
I always want you to focus on generating organic traffic, but there comes a time when you’ll want to add paid advertising to your marketing plan.
Advertising costs range from printed flyers to online ads. These costs need to be factored into your initial and ongoing costs for your subscription box business.
Advertising costs are called your Customer Acquisition Costs. One of the great things about the subscription box business is that you’ll only have these costs one time. You incur a cost to acquire that subscriber, but because a subscription is a recurring membership, you don’t have those costs for boxes 2, 3, 4, and so on!
Remember, you’re starting a business. And a business needs to be profitable. It’s important that you understand the costs associated with starting a subscription box business and that you get comfortable understanding and tracking expenses.
Don’t get overwhelmed. Keep it simple in the beginning. Start with what you can afford and keep growing and expanding.
I started my subscription box business with $1500 and loads of determination and hard work. I built my business slowly, reinvesting what I could afford month after month. I didn’t start out with custom packaging or a big advertising budget, but I set goals and worked toward them. My subscriptions grew from 44 when I launched to 3000 a few years later.
Learn from me:
- Subscription Box Blueprint eBook: This $10 ebook covers logistics from product selection to packaging to shipping. Plus a 90-day launch plan and bonus ‘Instant Scripts’ for your social media.
- Launch Your Box: My complete training program walks you step by step through how to start, launch, and grow your subscription box business.
- Launch Your Box Podcast: I share tons of practical tips and strategies to help you start, launch, and grow your subscription box business. You’ll also hear from industry experts and current Launch Your Box members who are crushing it - get ready to get inspired!
Find me on social:
JOIN SARAH'S NEWSLETTER
Learn more about how to start and grow your own subscription box business! Subscribe to get our latest content by email.