How to Use the Subscription Model to Gain Competitive Advantage

Forbes says it’s “one of the fastest growing trends in the start-up world.” The New York Times calls it “the latest consumer craze.” There’s no denying the popularity of subscription box services. The challenge is to sustain momentum on an on-going basis. Want to ensure success for your subscription box business? Here are a few pain points to plan for:

Accommodating Unpredictable and Inconsistent Volume

Subscription box companies often experience explosive growth. Plan ahead, so you’re prepared to receive and store the influx of products. With little historical sales data, predicting demand from month to month can be challenging, but careful analysis of sales data can help you identify trends and determine how much space is needed.

Subscription companies typically have periods of intense volume due to their monthly (or quarterly) delivery cycle. They might ship a million orders one week and just a fraction of that the next. To accommodate these dramatic peaks and valleys, you’ll want to secure flexible space for storing inventory and sufficient labor for fulfilling orders.

[Get news like this delivered to your inbox every week. | Sign up for O+F Advisor today!]

Staying on Top of Technology

As business grows, finding ways to increase the velocity of operations is critical. You need systems that can grow with you. Make sure your software and systems have the capacity to receive and centralize orders from every channel (phone calls, websites, mobile platforms, etc.). They should also be able to keep inventory accurate and up-to-date across every platform.

As order volume increases, you’ll want to incorporate automated fulfillment solutions such as conveyors, scanners and label applicators to speed order processing time and reduce labor costs.

Controlling Cost and Timing of Deliveries

Since most subscription companies have slim margins, it is important to keep a close eye on expenses. Shipping costs are usually second only to production costs, so they warrant careful scrutiny. Select shipping methods that align with subscription costs and customer expectations. For example, using ground service instead of economy postal service can minimize expenses – often without sacrificing service. Timing of deliveries is also important.

Since subscription boxes are often promoted extensively in social media, you’ll need to carefully synchronize arrival dates so that subscribers in different parts of the country receive their orders at approximately the same time. Work with multiple carriers and negotiate competitive rates. Planning shipping volume and zone skipping to specific sortation hubs can further help to control costs and arrival times.

Allowing for Expansion

When considering your fulfillment needs, look ahead to potential opportunities for growth and expansion. For example, many subscription companies now house an ecommerce platform on their website so that they can sell full-sized versions of sample products from monthly boxes.

Be prepared to provide seamless service across channels, as you manage the mix of subscription and ecommerce orders. Also, many companies allow customers to pick and choose the contents of their subscription to suit their personal tastes. Eventually, you may want to offer curated boxes based on client profiles, interests, etc.

Before you commit to offering significant product customization, make sure you have the man-power and processes in place to handle numerous configurations and deliver this labor-intensive service in a tight timeframe.

Partnering with a Fulfillment Provider

Many subscription box companies have found that outsourcing fulfillment to an experienced provider can help to overcome key supply chain challenges and give them a competitive advantage in an increasingly crowded market space. The right fulfillment partner can provide exactly the space and labor to meet your needs – from month to month or week to week.

Because they work with multiple customers, they can balance dramatic fluctuations in volume much more easily. They also have the flexibility to scale space and labor to accommodate growth and expanded service offerings. They’ve already invested in sophisticated systems and automated solutions, so you can leverage state-of-the-art technology without the overhead investment. You can also tap them for assistance in analyzing data. As a result, you’ll be able to improve inventory management, enhance visibility and process orders faster.

Since third-party providers work with multiple carriers, they can leverage their buying power to negotiate competitive freight/parcel programs. They can also help you to optimize your distribution network to reduce transportation costs. The subscription-box model has a number of unique nuances not seen in other retail arenas, so it is important to seek out a fulfillment provider experienced in working with subscription companies. They can leverage best practices and proven processes to get you up and running quickly and effectively.

Outsourcing fulfillment can help you to accommodate business growth, improve service levels, minimize overhead, and control costs. Most importantly, an expert fulfillment partner gives you the freedom to concentrate on delighting your subscribers. And that is sure to set you apart from the competition.

Perry Belcastro is Vice President of Fulfillment for Saddle Creek Logistics Services