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."