The subscription box marketplace is growing increasingly crowded with thousands of boxes available. While the business model is relatively easy and inexpensive to start, a subscription box company can be difficult to sustain. Of the subscription boxes tracked by industry website My Subscription Addiction, an estimated 13% had ceased production as of 2018, according to Fast Company.
Order fulfillment is one of the biggest challenges for subscription box companies. Peak order processing, unpredictable growth patterns, slim profit margins and high shipping costs are just a few of the most common pain points.
In order to hold your own in a competitive marketplace, you need to stay on top of your game. Want to master subscription box fulfillment? Steer clear of these common pitfalls:
Failing to Weigh Cost/Benefit of a Fulfillment Solution
When designing a fulfillment solution, it is important to balance service with cost. Naturally, you want to delight your subscribers, but first make sure your current order revenue can support the solution.
It’s best to avoid over-engineering. This is especially true when investing in automation. Sometimes the simplest solution can be the most effective and most flexible. While it may be tempting to add all the available bells and whistles, basic solutions might, in fact, be sufficient.
For example, consider barcode scanning and powered conveyors before investing in light- or voice-driven technology. Gradually increase the complexity of automated solutions as necessary to achieve the service level your subscribers expect.
Lack of Scalability
In a batch subscription model, orders are usually processed in a peak period once a month, resulting in significant fluctuations in cycle volume. Be prepared with flexible space and staffing. Adding temporary staff and powered conveyor production lines can help to manage maximum volume.
Planning for business growth is also advisable. Seek out scalable fulfillment solutions that can accommodate an expanding subscriber base. Rigid solutions demanding a major capital investment could lock you into a solution that doesn’t work in the long run.
Inadequate Inventory Management Capabilities
For merchants that use the same inventory for multiple channels (i.e., subscription, retail, ecommerce, etc.), inventory management can be particularly challenging. Often, it is necessary to allocate a certain quantity of particular SKUs to each channel. Accommodating this level of complexity requires an order management system (OMS) that can give you visibility over all the channels and the ability to reserve units for orders in the appropriate channel.
An OMS is also valuable if you use more than one fulfillment source, such as multiple distribution centers or vendors. In this case, you need visibility across your entire enterprise in order to optimize inventory.
The “unboxing” ritual is a vital part of the subscriber experience and often shared on social media. To ensure customer satisfaction, take care to package subscription orders attractively. When possible, include special touches like tissue, ribbon, insert cards, etc.
Of course, extras like these can be more costly and labor intensive, so make sure you have the resources available to support them.
Unrealistic Expectations for Order Accuracy
Obviously, it is important to delight subscribers, but ensuring 100% accuracy is not realistic. Checking every single order requires an investment that the slim margins of most subscription box companies cannot afford. A more common, cost-effective approach is to set an Acceptable Quality Limit (AQL) for quality inspections. This method can be used to establish a maximum allowable percentage of defects for inbound and/or outbound shipments.
If you plan to begin working with a third-party fulfillment provider, be sure to set quality expectations before beginning a relationship.
Failing to Communicate Proactively with Subscribers
When quality issues do occur, one of the biggest possible missteps is to sweep them under the rug. If you know that a subscriber’s order will arrive late or damaged, for instance, be sure to let them know. They may be disappointed, but they will appreciate the advance warning.
Whenever possible, let your subscribers know what to expect with regard to their subscription orders ahead of time. Anticipating their questions can help to ensure a positive customer experience and build subscriber loyalty.
Neglecting Transportation Management
Transportation can be one of the most challenging aspects of subscription box fulfillment, and it is important to consider a variety of factors when evaluating shipping options. For shipments loaded on trailers, be careful to take all shipping costs into account, including the cost of pallets, dunnage for ensuring loads do not shift, etc.
For parcel shipments, it is important to keep up with carrier rate increases, dimensional (DIM) weight rates and potential surcharges for fuel, residential, delivery area, etc. Avoid expediting shipments unnecessarily. With strategically placed distribution centers, most shipments can be delivered in just two days using more cost-effective ground services. Parcel analytics software can help identify opportunities to increase efficiency and better manage costs.
Good communication is also critical. Be proactive in communicating with shipping partners. Advise them of schedule changes or changes in the size or weight of packages from month to month.
While competition is intensifying, avoiding pitfalls like these can help your company stand out and earn your share of today’s $10 billion-plus subscription box market.
Nicole Lee is director of fulfillment for Saddle Creek Logistics Services