“Navigating the Economic Situation for Subscription Boxes: What Things To Do Differently!”

I’m sure many people are wondering how they can grow and thrive in the face of the adversity currently facing all businesses. Specifically, you may be wondering what to do differently in 2023 in response to the tougher market conditions.

So I have created this article to help you to bounce back and enjoy a successful and beyond in your Subscription Box business.

While I will show you some new tips for increasing sales and profits, we are also focusing on going back to basics with many things we know to work. Our chief goal is to optimise the revenue and profits generated from the customers we already have. The strategies we will use are detailed below in this article.

• The strategies:
  
  

What’s New

• Higher prices

• Add-ons & online store

• Yes emails
  
  

What’s Old & Still working

• New offers
  

• Email marketing
  
  

• Conversion rate & A/B testing
  
  

“Revenue is vanity, Profit is sanity, cash flow is reality” – Alan Miltz


For a long time we have been able to reach customers for a low cost and generate growth for our business with relatively simple marketing & advertising. The days of Facebook ads in 2016-2020 were different to how they are today. It all began with iOS14 changes, then we had rapid inflation, cost of living crisis and now a probable recession impacting our industry and it has unfortunately continued to get harder and harder for small businesses to remain viable.

But in crisis comes opportunity, with less competition on advertising platforms leading to lower costs, and poorly run businesses folding & no longer trying to reach your target customer base, there is an opportunity for the well run, profitable subscription boxes to actually grow and thrive in the face of adversity.

We should all strive to be the latter, so let’s talk about how we can become positive profit machines and continue to serve our customers into 2023 and beyond.


Firstly the elephant in the room – I know things are tougher right now…

If you are feeling a little down about things so far this year, take this as a signal it’s time to get re-energised and re-focused because there is still an opportunity.

Remember, in the words of Abraham Lincoln, this too shall pass. Soon things will pick up and you want your business to be in the best possible health to take advantage.

Growth is on the other side of adversity


A quick story

2019 was one of the toughest years in our business, struggling to learn the ins and outs of advertising, offers, emails and everything. Add to that a lot of debt we had racked up trying to figure out how to grow our business to pay it all off, it was a very stressful situation that usually boiled down to the same thing, lack of profitability in our business.

Looking back it was probably the most stressful year of our lives because the stakes were very high at that point, we had a couple thousand customers, high revenue and the debt I mentioned previously. We couldn’t afford to just shut it down if it didn’t work, you couldn’t retreat quietly – it would have been a big story.

Not least in our own lives but in front of peers, family and everyone. We thought if we failed we would have looked like idiots. But looking back it was the year we learned the most, we started to get results from our ads and grow our business successfully by the end of it.

Thankfully we manage to get out of it and things are a lot better now, so let’s talk about how you can do the same by increasing profitability in your Subscription Box business.


So first, what are we doing differently?


#1 Increased Prices

We were afraid of increasing our prices for years. They won’t pay it we kept saying, the market is just like that. Turns out we were wrong, when we HAD to increase our prices, people kept signing up. (In order to avoid unnecessary churn we only increased prices for new people and grandfathered old customers on original prices).

Turns out in the least 2 years we’ve had to increase our prices by a total of £7. On our cheapest plan that works out as a 38% increase and people are still signing up. Now the increases were done gradually over that period of time, and inflation has driven up the cost of everything, but the reality is we should have been charging more in the first place. We weren’t earning enough to begin with.

You should be aiming for AT LEAST 40% margin on your boxes, clear gross profit after shipping and everything. Closer to 50% is even better. The easiest way to get there is to reduce COGS and increase prices. If you can reduce COGS, great, but at some point you just can’t go any lower no matter how big you are.

Most people when launching their box look at what the existing competitors are charging for their box and price theirs similarly, or possibly even cheaper to give themselves an edge. The consequence is you end up unnecessarily struggling because you’ve wedded yourself to a price point and you hear customers complain “it’s too expensive” and then develop a fear of raising them.

In reality, unless you’re sending gold bars in your boxes, someone is always going to perceive it as too expensive (in my opinion, you would probably still have people complaining about receiving solid gold, but that’s for another article LOL).

So let this be your sign, look at your profit margin and if you’re not earning enough then increase your prices. Start with new people only, then if necessary notify existing customers that they must go up in order to continue delivering the service. People are more understanding than you think, we even had people emailing saying no problem thank you so much for all you do.


#2 Add-ons & Online Store

So another way to increase the revenue and profit you make from your customers is to encourage them to buy more things from your business. This one becomes tricky in a subscription box because you just send the box, how can you get people to buy more?

The answer is to offer them add-ons, and allow them to add more items to their upcoming box. People may want more of something they enjoyed in a previous box, or just want to make things more convenient by getting more of the things they love from your box.

If you use a platform like Subbly, you can now turn on add-ons which will appear when the customer logs into their account and they can add them to their next box. However, this is Version 1 of their add-ons feature and it doesn’t allow you to effectively market them to your customers, as there is friction involved.

For example, you can’t send an email to ask customers to add this to their next box and they simply click and buy; they have to log in to their account and find the add-on, with multiple steps involved. They may also have forgotten their password, which also leads to a drop in conversions.

One way around this is to create a store on something like Shopify and list all of your excess stock, cool add-ons, or other products your customers will love there. We have ours on a Shopify store we call the BusterStore.

We can send emails and texts to customers to go here and buy, but the one drawback is that you have to have a VA or someone match the orders in Shopify to your subscription orders to ensure the products are added to the next box. This is better for the customers, however, it is not perfect as they still have to pay in the store and enter all their details again.


#3 Yes Emails

A way around both of these issues and one that we have found works really well is to create what we call a ‘Yes Email’. I must credit my co-founder Liam for adapting this to sell one-time products towards the end of 2022. We had used it in the past to try to get people to upgrade to our upgrade subscription – so you can try that too and get more recurring revenue from your customers also.

This email is a really simple text-based email with a personal tone. In the email, you write it from yourself, i.e. Gary at BusterBox, and you say we have a brilliant product here that you may be interested in. It’s a high-quality dog bed (or whatever it is you want to sell). We have a limited supply of these and we thought it would be perfect for you. Please reply ‘yes’ if you’d like us to add it to your next box.

If you decide to go ahead, we will charge you $X.XX and include the product with your next order. Simply reply ‘YES’ to claim.

Then you check your inbox in 30 minutes and see a ton of ‘yes’ replies from people who want to give you more money. You simply take their email and enter it into your e-commerce platform, find their account and charge them and tag their order to send them the extra product.

It works really well because the friction is removed, it’s personal and it’s simple for the customer to make the purchase without entering any details at all. It is also convenient to add it to their next box and claim free shipping.

Try and ensure it’s high-ticket so you make a good margin from it and it is worth your time and effort to create the ‘yes’ email and manage the orders on your backend.

So that’s three ways you can increase your average revenue per user and make more money from the customers you have. But of course, more customers is still your priority too.


Let’s discuss 3 things that we are still doing that work really well and you can model for yourself also.