The subscription box market is experiencing explosive growth – more than 100% each year over the past five years, according to a McKinsey & Company study. Experts predict that the industry will keep growing and evolving for the foreseeable future.
If you’re a subscription box company, or one of the many retailers that have recently added a subscription service offering, it’s time to evaluate your business and make sure you’re prepared for growth. You may want to be prepared to handle greater order volume, consider offering add-ons or adding an ecommerce channel. Whatever your plans, thinking things through today will ensure you’re positioned to achieve your goals tomorrow.
Order fulfillment considerations should play a key part in your planning process. Naturally, the bigger the business, the greater the complexity of fulfillment operations. Not sure where to begin? The following three areas are a good starting point.
Curated subscription boxes are very popular. Consumers delight in receiving a surprise package in their mailbox each month. To increase their satisfaction, many subscription companies tailor some or all of the contents to meet personalized tastes – i.e. beauty products they haven’t tried that are suited to their skin tone, or vinyl albums in a new, complementary genre. When the package arrives, it may contain a note or insert tailored to their unique interests. In fact, for many subscribers, personalized experiences like these are the primary reason they continue to subscribe.
Providing that personal touch is relatively easy when you’re shipping a few hundred orders each month, but as you start to ship thousands, hundreds of thousands or even millions of them, it’s a different story. Suddenly, you’re managing countless order configurations as well as multiple value-added services such as kitting, card insertion, packaging and the like.
The work tends to be labor intensive and can cause staffing needs to fluctuate greatly. Often, operations are at maximum capacity for a week or so, requiring additional equipment and multiple shifts to get a month’s worth of orders out the door. The remainder of the month, activity slows to a virtual standstill. Additionally, as you try to scale intensive personalization, you may begin to tax labor resources in a particular geographic area and require a transition to expensive technology. Be sure to balance the level of personalization with the cost involved to ensure it is supported by existing margins, particularly for lower priced subscriptions.
To help manage costs, plan ahead to ensure that you have flexible space and labor ready for those peak periods. Carefully consider fulfillment processes and engineer them to scale for growth so that you’re not continually recreating the wheel. For operations that require extensive value-added services, it can be helpful to postpone those functions so that they are performed closer to the customer.
Subscription box companies often cultivate a sizeable following on social media and encourage subscribers to share their unboxing experiences. Batch shipments like this must be coordinated according to customer location to ensure that subscribers in different parts of the country receive their orders at approximately the same time, so everyone participates in the surprise simultaneously.
As order volume grows, it becomes increasingly challenging to synchronize deliveries in a tight delivery window. Planning shipping volume and zone skipping to specific geographic areas can help to control arrival times and transportation costs.
Increasing freight costs are a reality all merchant companies are facing. It’s not always possible to pass these expenses on to value-conscious subscribers, so seek out ways to keep shipping costs under control. With parcel rates on the rise, it’s best to work with multiple carriers and negotiate competitive rates. Keep a watchful eye on surcharges and accessorial fees for parcel shipments. If you routinely ship larger, lightweight packages, pay attention to dimensional weight rates as well.
For even greater transportation savings, consider utilizing multiple distribution centers so that shipments travel a shorter distance to the customer. Whenever possible, select shipping methods aligned with customer expectations. Expedited delivery is often unnecessary. In fact, 90% of U.S. consumers can be reached via two-day ground service using strategically located fulfillment centers.
Different types of advanced technology are essential for expanding fulfillment operations. The personalization mentioned earlier requires extensive data collection and the ability to tailor customer communication. A simple spreadsheet might have worked when you had a handful of subscribers, but it’s simply not going to cut it when you have thousands of contacts. Good customer relationship management (CRM) software can help to compile and organize customer data.
Business growth also necessitates more sophisticated order and inventory management. As a result, most subscription companies reach a tipping point where they need to adopt a robust order management system (OMS). This provides greater inventory visibility as well as the ability to process higher order volume quickly and accurately and pull from multiple fulfillment sources. It is wise to seek out a scalable system that will be able to accommodate additional growth down the road.
In addition to software, automated fulfillment solutions such as such as conveyance, scanners and label applicators help to speed order processing time and reduce labor costs.
Of course, there are many other fulfillment factors to consider as your subscription box business grows, but mastering these will definitely set you apart from the pack. If your resources are limited, a third-party provider can be a valuable partner. Start today and you’ll be perfectly poised for growth.
Nicole Lee is director of fulfillment at Saddle Creek Logistics