Costs of Starting a Subscription BoxFeb 07, 2021
Starting a subscription box sounds fun! Of course it is, but you might also be wondering how much of an investment it is to get started in this business.
Like all e-commerce businesses, there are start-up costs, and these costs can vary greatly depending on what you want to do. Let's break down the 5 main costs of starting a subscription box.
1. Product Costs
Product cost is the actual expense of goods for each item you will be putting in your box each month. Whether you make items yourself, buy them wholesale, or source them from overseas, these costs make up the highest % of your box costs each month.
There are 2 things to consider with your product costs.
- Include the shipping costs to you.
- You may need to purchase items several months in advance. When you are buying wholesale or sourcing overseas, you will need extra time to ensure you have products in stock for your shipments each month. You can negotiate deposits or terms. But be aware that you may need to purchase a few months of product upfront until you start building a relationship with your vendors.
2. Packaging Costs
There are so many variables when pricing packaging costs. Basic boxes, custom boxes, poly mailers, etc. Your packaging has costs, and they need to be figured into your price.
Custom boxes can cost anywhere from $1-$5 each, depending on size, print, and vendor. Grab my packaging cheat sheet for my go-to resources on packaging.
Packaging is not just about the outside... it's about the inside as well. When choosing if you will use shreds, tissue paper, custom tape, inserts, stickers, etc., remember everything adds up and needs to be figured into your costs.
3. Fulfillment Costs
The costs to fulfill your boxes each month include both packing costs and shipping costs. Both of these are the hardest to figure out when you are first starting a subscription box business.
The packing costs include the labor it takes to package each subscription box. Many people do this themselves initially, but you should figure out the time it takes for future wages you will be paying when your company grows.
If you can pack 50 boxes an hour divided by an hourly wage, you will have your answer.
There are also fulfillment companies that can pack and ship your boxes for you. They charge you a flat fee plus touches. A touch would include each item, plus tissue paper, inserts, etc. The touches could add up fast if you have a lot of things in each subscription box.
Shipping is the other part of fulfillment. If you are including shipping in the price of your box, you need to do some research on the most cost-effective way to reduce shipping charges. Look at different carriers, and talk to reps in your area to negotiate shipping prices.
4. Tech costs
Before you can get your subscription box up and running, you need several tech pieces, which all cost money. If you already have an established business, these may already be in place and not be any additional costs.
The most costly will be your website. It's important to start your business off the right way, and there is no better investment than a good website. Everything else you need will be a small monthly fee and not a big out-of-pocket expense.
5. Advertising Costs
You can create the best subscription box in the world, but if nobody knows about it, you won't have any sales. Sure, you can have organic traffic and sell without advertising, but your growth will be slower and sometimes stagnant.
Advertising costs range from printed flyers to online ads. Wherever you put your dollars, make sure you factor advertising into your initial costs and ongoing costs for your subscription box business.
These costs are called your Customer Acquisition Costs. The beauty of this business is that you only have those costs one time. It's the cost to acquire that person as a customer, but because this is a recurring membership, you don't have those costs on box number 2, or 3, or 4. It's ok to spend a little more upfront because you will keep customers for more than one purchase.
Your head might be spinning in all different directions after breaking down the costs of starting a subscription box business. Just keep it simple in the beginning. Start with what you can afford and keep growing and expanding.
I started my business with $1500 and a lot of hustle. I built it slowly with what I could afford to reinvest month after month. I didn't have custom packaging and lots of advertising dollars in the beginning, but I set a goal and worked towards that, investing a little more each month. My subscriptions went from 44 monthly subscribers to over 2700 in a few years.
Just take it one month at a time!
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