Steady customers are vital to every business, but imagine having customers so loyal that you can rely on their business like clockwork. That's the beauty of subscription commerce—the "product-of-the-month" model—in which customers pay a regular fee, usually monthly, for a box of products delivered to their door.
Just about every product you can think of has a subscription business behind it—shoes (shoedazzle.com), beauty products (birchbox.com), diapers (honest.com; see page 28), even men's underwear (manpacks.com). Though acquiring new customers is great, the most compelling aspect of subscription commerce is that it increases the value of existing customers, given that subscribers make multiple purchases over time.
Keeping customers coming back was the reason Jessica Kim launched BabbaBox, a monthly service that delivers a box filled with activities and storybooks parents can share with their children. BabbaBox was born out of Kim's initial business, BabbaCo, a traditional e-commerce business that sold products such as play mats and burping cloths designed for babies up to 12 months old. After two years in business, Kim realized that some of BabbaCo's first customers were still engaging on the company's Facebook page, even though some of them no longer had kids in need of BabbaCo's products.
"I saw this huge missed opportunity," says Kim. "We had nothing to sell them." Because parents were still eager to be customers, she launched BabbaBox last September. The service starts at $29.99 per month, and Kim says her subscriber count, which is a few thousand, has doubled every month since the launch.
In addition to stabilizing revenue, the subscription model also makes managing inventory a lot easier. "In the past, we would either be running short and making last-minute runs, or we made too much," says Kim. "Now we know how many people we're sending to each month, and we know how much we're going to order. It's very predictable, and we don't have any excess inventory."
The rise in subscription businesses has been helped in large part by new technology that makes setting up these businesses relatively easy. Services such as OrderGroove, Zuora, and Memberly provide platforms that automate the billing and processing of subscribers' recurring payments, no coding required. The pricing varies according to the size and volume of the business.
The most successful subscription businesses have a customized feel to them. Blissmobox, a service of flash-sale site Blissmo, delivers boxes full of healthy snacks and organic soaps and shampoos. Each month, a guest curator helps select the contents of the boxes. "Maybe it was an organic blogger who had blogged about organic chocolates," says Blissmo founder Sundeep Ahuja. "We walk you through every product in there and explain why it's better than conventional."
Developing a sense of community also helps keep subscribers engaged. BabbaBox members use the company's Facebook page to trade parenting tips and post photos of their kids enjoying BabbaBox activities. As one of BabbaBox's Facebook fans commented, "So looking forward to next month's box." What more could a business owner ask for?