Subscription Box Business Model: How to Make Your Own App
Subscription boxes are experiencing growth and popularity as well as becoming more competitive. In this article, we shed light on the subscription box business model and give you an ultimate guide on how to make a subscription box app.
What is a subscription-based business model?
The subscription business model is one of the most prevalent monetization models used in modern software, but you’ll be hard-pressed to find an industry that hasn’t had at least one successful subscription story in the last few years.
If done correctly, a subscription model can be a powerful growth tool. Understanding how this business model works and what it means to implement your pricing strategy will help you lay the foundation for success.
A subscription-based business model charges customers a regular fee — usually monthly or yearly — for accessing a product or service. The subscription revenue model helps you capitalize on the aggregate value of your customer relationships.
As long as your customers consistently see the value your company provides, they’ll continue to pay for your product or service.
Introduction to the subscription box business model
A subscription box business is a service that regularly mails a box of items to paid subscribers. Boxes are most often sent monthly, but some services send them quarterly, while others send them weekly or even more frequently.
Companies offer subscription boxes containing all sorts of things. Popular categories of items include:
- Beauty products (makeup, skincare)
- Food (dinners, recipes with ingredients)
- Pet products (toys, treats, vitamins)
- Coffee and tea products
- Baby supplies
It’s absolutely necessary to do research before starting a new box subscription business. First, choose the type of products you would like to sell. Then, you’ll need to determine among which market segments these products are popular and who your potential customers are. It’s also important to collect information about competitive prices, service structure, and overall product quality.
There are two types of subscription boxes:
- Convenience boxes. This type of subscription offers the same product with every delivery, but products may sometimes differ in style, color, and design. The aim is to provide convenience for customers by regularly supplying them with basic necessities.
- Discovery boxes. This type of subscription allows customers to try new products. Discovery boxes contain an element of surprise, as buyers never know what they’ll find in their box.
The subscription market
What are the biggest subscription box companies?
Clutch surveyed 528 online shoppers in 2019 to find out, and here are the results.
According to Clutch, in 2019, more than half of online shoppers (54%) said they participated in a subscription service. Another private study from 2019 found that 25% of all shoppers regularly received a subscription box. A more detailed study by McKinsey found that 15% of all products and services sold are in the form of subscription boxes.
The subscription box business model is huge and growing. Subscription models are widespread, and it would be foolish to ignore their potential.
Basic features of a subscription box app
Let your users choose between three methods of registration. The first is to sign up via social media accounts like Facebook and Instagram. The second is standard registration using an email, name, and other contact details. The third is registration via phone number. Without registering in a subscription box app, users typically can’t see any deals or make purchases.
Registered customers should be able to view and manage their subscription details, profiles, and rewards through user accounts. Remember that customers should be able to manage all aspects of their activities in your app through their respective accounts.
A payment gateway is one of the most important features of any online subscription box app. Provide secure payment options to your customers, and don’t forget about subscription cancelation and cashback options. You can let subscribers pay by PayPal, credit card, direct bank transfer, or cash on delivery.
Use push notifications to improve user engagement. Push notifications can notify users about the latest updates, new messages, price changes, and delivery statuses.
Reviews from real people
Product reviews are very important to gain trust among your customers. Real-life photos help users make purchasing decisions faster.
Social media integration
Social media integration makes relationships between buyers and sellers clearer and more transparent. According to Forbes, 40% of consumers purchase products after liking them on Facebook. Users are more likely to make a purchase if they know their friends or colleagues have made a similar purchase.
Four steps to develop a subscription box app
Here are four steps to bring your subscription box app idea to life and simplify the development process.
1. Research your app’s target market
When developing a subscription box mobile app, the first thing you need to consider is your target audience. Understanding your users’ needs makes development easier and leads to a better final product. Find out as much as you can about your potential users. You can start by researching the following:
- Demographics. Find out the average age of your users, where they live, what devices they use, etc.
- Behavioral trends. Find out what decreases a user’s desire to download an app, your users’ security expectations, and so on.
To develop an amazing mobile application, we suggest creating a user persona, or a detailed portrait of your ideal user.
2. Figure out the pricing model
You can use a freemium model for acquiring customers. Freemium pricing is a customer acquisition tool, not a way to get steady income. It widens the top of your funnel significantly and gives you time to develop new customer relationships.
By letting customers experience the value you provide with a freemium plan, you make it easier to offer sales, add-ons, or premium plans to increase and develop your product’s value.
Subscription-based pricing models are highly adaptable. Make it easy for your customers to check and revalue their prices on an ongoing basis.
Create a process to review your prices every six months. While updates and enhancements to your product usually require updates to your pricing, you should analyze your pricing every two quarters so you’re always thinking about what’s best for your business and your customers.
Always provide your customers with a choice. One uniform price doesn’t work for the subscription business model. Let customers choose from a range of prices depending on their individual needs. This will help you attract more buyers, which can lead to more customer engagement.
3. Hire an app development team
The third step is to find a development team you want to work with.
The first phase of development will include business analysis, developing a technical specification, estimating the development cost, and planning the project.
Before diving into the actual development of your subscription box mobile app, you and your team should set up an app development workflow, choose the main features for the app, and design an app concept. Then your development team should create project milestones and start working on the minimum viable product, or MVP.
4. Create an MVP
Creating a subscription box app is a big and complex project. We recommend launching a minimum viable product first and testing its technical and business performance. By using an MVP approach, you’ll be able to find out what users like and dislike in your app. Then you’ll be able to consider their feedback and improve your app.
How much does it cost to build a subscription box app?
The cost of developing a subscription box mobile app depends on these factors:
- Product features
- Product design
- Hourly rate of your development team
- Project size and complexity
- Technology stack
- Number of team members on the project
- Time frame
The biggest factor that influences a project’s cost is the hourly rate of developers, and that often depends on their location. For example, an application that costs $40,000 to build in the US will cost around $9,000 if developed by engineers in Ukraine.
Developing your project with a company based in Eastern Europe is cost-effective and gives you access to top talent.
Pros and cons of a subscription box business
Pros of a subscription box business
Reputable stores selling supplies or collectibles can make a lot of money by building a subscription box business. The benefits include:
- Greater customer retention
- Ability to predict future revenue by simplifying decision-making
- Improved cash flow, especially if buyers pay in advance
- Less money required for customer retention and more money available to attract new customers
- Simple and consistent delivery
- Can predict stock levels, meaning less waste
Cons of a subscription box business
While this business model may seem like a great idea, there are some drawbacks to consider before making a commitment.
- You’ll need to release new products regularly to keep customers interested.
- It costs a lot to convince people to subscribe.
- It’s impossible to predict the churn rate if customers can opt out at any time.
- If you’re selling a subscription box for something like skin care or baby products, then you can probably count on loyal customers, but it can be harder to maintain a steady revenue stream with other products like food.
Top 5 subscription box businesses in 2021
HelloFresh is a subscription meal box delivery service that offers weekly deliveries of recipes and groceries that allow customers to prepare light and inviting meals at home.
This service is a great way to reduce the burden of meal planning and grocery shopping. HelloFresh is a good option if you love to cook and don’t want to cook in advance but also don’t have time to go shopping and look up recipes.
The prices for HelloFresh are reasonable for many households. However, this may not be the best option for people with special dietary needs.
- Groceries and recipes delivered right to your door
- A wide variety of delicious, easy-to-prepare meals
- Vegetarian and low-calorie options
- Price similar to or cheaper than many competitors
- Doesn’t eliminate the need to cook
- No gluten- or allergen-free options
- No meal plans for strict diets like keto, paleo, or vegan
Every week, HelloFresh sends its subscribers a box of ingredients and recipes to help them prepare their own food. These boxes contain all the pre-portioned ingredients needed, including spices, main ingredients, and side dishes.
Customers can choose a meal plan and let HelloFresh choose which meals they get, or they can choose each meal themselves. HelloFresh offers a 20-course menu to choose from every week. Customers can also skip a week at any time.
HelloFresh costs around $ 8 to $11 per person per meal. Subscribers can get the lowest price by ordering the largest quantity: five recipes a week for four people. Shipping costs at $7.99 per box.
The most popular HelloFresh plan is three recipes a week for two people. That’s $8.99 a serving, or about $55 a week, plus shipping.
Dollar Shave Club
Dollar Shave Club is a subscription-based American company that delivers razors and other personal care products to customers by mail. Dollar Shave Club offers three membership plans that you can upgrade or downgrade at any time: The Humble Twin (two blades per razor, five razors per month, $4 per month), The 4X (four blades, four razors, $7) and The Executive (six blades, four razors, $10). This membership service was first launched on March 6, 2012, with a YouTube video that went viral.
Most of the razors and blades subscribers receive are not actually made by Dollar Shave Club, which resells Dorco products.
BarkBox is a monthly subscription service that delivers dog treats and toys right to your doorstep. The whole process is simple. Just choose the size of your dog and your subscription duration and wait for a BarkBox to arrive!
BarkBox adjusts boxes to fit a dog’s size:
- Small BarkBox, also known as Small and Cute: 0–10 lbs.
- Medium BarkBox, also known as Just Right: 20–50 lbs.
- Big BarkBox, also known as Big & Bold: from 50 lbs.
When customers order a BarkBox every month, they receive four to six items customized for their dog. Each box contains at least:
- 2 sachets of natural healthy treats
- 2 innovative and funny dog toys
- Dog chew toys
Outside of this formula, every BarkBox remains a mystery.
Causebox is a subscription service offered on a seasonal basis. Each box contains six to eight items, which can include jewelry, home decor, accessories, clothing, skin care and beauty products, health products, and art.
Each item in the package is produced by a socially responsible brand, and Causebox cooperates with various charitable organizations to help them raise funds, expand the customer base, and tell their stories.
Customers can subscribe to individual annual memberships at $49.95 per box or opt for a quarterly subscription at $54.95 per box.
Causebox is not the only company capitalizing on the apparel, beauty, and home decor subscription trend, but what sets it apart is that all the products in its boxes come from socially, economically, and environmentally conscious brands.
Fabletics is a subscription-based online store selling fitness apparel and accessories. Customers don’t need to be members to shop there, but they’ll pay much higher prices if they aren’t. VIP members get a first outfit heavily discounted at a cost of around $25.
To become a VIP member, you need to take a lifestyle test that asks about fitness activities, gym/studio preferences, body type, and favorite colors. Based on these responses, Fabletics will select the products that best suit your lifestyle.
VIP members can purchase clothing starting at $49.95 per month. Every month, members need to either buy clothes or skip a month of membership, which is free.
Quick summary of developing a subscription box app
Developing a subscription box app, if done correctly, can bring a lot of value to you as a business owner.
- A subscription-based business model charges customers a regular fee — usually monthly or yearly — for accessing a product or service.
- A subscription box business regularly sends boxes of items to paid subscribers. Boxes are most often sent monthly, but some services send them quarterly, while others send them weekly or even more frequently.
- A 2019 study by Clutch revealed that more than half of online shoppers (54%) participate in a subscription box service.
- When developing a subscription box mobile app, the first thing you need to consider is your target audience. Understanding your users’ needs makes development easier and leads to a better final product.
- Allow customers to choose from a range of plans at different prices depending on their individual needs. This will help you attract more buyers, which can lead to more customer engagement.
- Subscription-based pricing models are highly adaptable. Make it easy for your customers to check and revalue their prices on an ongoing basis.
- Launch a minimum viable product first and test its technical and business performance.
- Developing your project with a company based in Eastern Europe is cost-effective and gives you access to top talent.
If you want to create a subscription box app but don’t know where to start, contact Mobindustry for a consultation.