‘Build-a-box’, also known as ‘bundling’, or as ‘subscription box’, is a subset of subscription or recurring revenue based business model. In build-a-box, a customer is allowed to literally build their own and customized box of products or services, and check them out together, as a bundle! The same bundle is delivered on a recurring basis to the customer. Some of the well known and successful examples of build-a-box model are Stich fix (apparel and fashion), and Hello Fresh (food).
What started as an innovative business model idea about a decade ago, to build customer loyalty and lasting relationships, has grown at a stellar rate! The imarcgroup estimates the worldwide size of the subscription box market at approx. $18.8B (as of 2020), with a 20% yoy CAGR. That is just astounding.
In this article, I will discuss the intricacies of build-a-box, and some key elements to consider while strategizing your subscription box business.
Traditional subscription versus Build-a-box subscription
The key difference between a conventional subscription model and a build-a-box model, is the number of products. In a traditional subscription model, customers generally subscribe to individual products or services as a unique order, while in build-a-box, the subscription covers a bunch of SKUs together. For example, let’s assume I own a baby products store. Offering monthly subscriptions of baby diapers would be a conventional subscription model. But offering customers the option to build their own, custom box of the all baby products they need on a regular basis (diapers, shampoo and body wash, gerber foods,…), to check out as a recurring monthly order, would be the build-a-box subscription, or bundling model!
The second biggest difference between the traditional and build-a-box subscriptions, is the element of customer choice. In build-a-box, a customer is typically allowed a wide range of product or service SKU combinations, to create their own, unique box. Going back to the baby product store example, a customer building a box subscription in the store, can choose any brand of diapers, with any brand of body wash and shampoo, with any variant of gerber food. They may or may not combine a bottle of baby moisturizer with it. The number of potential combinations can be innumerable!
Benefits of Build-a-box
The traditional subscription business model by itself, provides strong benefits such as recurring revenue, customer loyalty, etc. The build-a-box subscription model takes it a notch higher, and helps form a lasting relationship with the customer. Your store not only becomes a trusted and regular source of their favorite products, but also one that deeply connects with and fulfills their needs, end to end.
Another benefit of build-a-box is that, if done right, your store can become the ‘one-stop-shop’ for a particular aspect of your customers’ lives. Taking the baby products store example, by offering all products related to baby care (diapers, shampoos, moisturizers, food, formula, …), I can become the go to store for my customers’ end to end baby related requirements. And by offering the products as a recurring subscription, I make their shopping experience as convenient as it can get, and reduce friction. And ofcourse, a one-stop shop also means a greater share of the customer’s wallet!
As a segway into the next subsection, I want to mention here that while the build-a-box business model has a ton of attractive advantages from the seller’s perspective, a few criteria should be met, for your store to be a good fit for the model.
Establishing a successful Build-a-box business
There are some very successful subscription box businesses in the world. There are also some subscription box businesses that did not do so well. While there can be several factors that can contribute to the failure of a business, the mis-fit of the business model is often one of the top reasons.
In the subscription box or build-a-box business model, a key element for success is the suitability of the model to the product category. A box business typically works well with products that get consumed or worn out after a while, and need to be replenished (e.g. coffee powder, meal kits, baby products). It also works well with products where people need regular change or updates (e.g. books/magazines, clothes and accessories). But, it may not work very well for products of which consumers do not need too many, and hit a saturation point after a while (e.g. footwear, children’s bath toys). For such items, cross selling them as a one-time add-on to existing subscription orders might be a better way to go.
The second most important element to establish a successful build-a-box business, is to think from the ‘customer outcome’ perspective, rather than a specific product need perspective. For instance, going back to the baby products store example, if I offer 2 separate subscription plans in my store, for baby shampoo and gerber foods, I would be meeting the customers’ separate needs to bathe their baby and to feed them. On the other hand, if I were to offer a box subscriptions model, and display all the product sub-categories related to babies when customers are building their subscription box, I will be head-on addressing their broader need to care for their baby, and offer them the complete package required for the outcome of a ‘healthy and happy baby’!
The third most important element of a successful box model is to deeply understand, and solve a critical pain point of customers. Recurring orders costs money (to your customers). Recurring ‘box’ orders cost even more. So, to convince your customers to subscribe to a bundle of your products, you should be able to directly address their troubles in a highly relevant manner. For example, taking into account the customers of the baby product store, parents/guardians of young children are often pressed for time, and generally feel stretched thin between their jobs, home, and baby. Additionally, if they are first time care-givers of children, they can also feel overwhelmed in the new and unknown territory. For this customer segment, a store that offers to cover all baby care related needs on a regular basis, can be a savior. They might not mind paying a premium for the convenience and peace of mind that a box subscription plan in my store gives.
Choosing the right subscription model for your store, especially when deciding between a traditional subscription model and a build-a-box model (if the latter can fit your store and product category), does not have to be an either-or situation. The best way to ensure that very little to no money is left on the table, is to offer both models to your customers, and let them choose.
Offering Build-a-box: Key tactical elements
We have discussed in detail, the suitability of different product categories to the build-a-box model, and key strategic aspects such as addressing a greater consumer need. Beyond that, there are a few tactical elements that can help make your box business stand out, amidst the growing competition.
1. Offering a wide array of options across products.
Directly connected to the fundamental aspect that a box subscription business address a consumer need end to end, is the requirement that the store offer products across a wide array of categories. Going back to the baby products store example, the customer need that I am trying to solve is ‘baby care’, with the desired outcome of ‘happy and healthy baby’. To achieve this, I will have to put myself in the shoes of my customers, and think about all the products that they would need to effectively care for their baby. A few things include baby blankets, diapers, diaper cream, formula and baby food, body wash, etc. Of this list, a few products such as blankets might be a one-time or ad-hoc buy, but diapers, diaper cream, baby food, body wash, etc will be a recurring need. To offer a solid build-a-box subscription and to become the one-stop-shop for my customers’ needs, my store will have to carry at least 80-90% of these items.
While this may sound like a lot, thankfully we are in the online and e-commerce age. As long as my store has the products in accessible warehouse(s), and can ship them when needed, I am covered. Moreover, the predictability that recurring orders bring, will also ease any logistical stress, by a great degree.
2. Being flexible and adaptive to meet the evolving needs of customers.
Just like traditional subscription, box subscription means commitment from your customers. In fact, box subscription means a greater and longer commitment. To make this loyalty smooth and enjoyable, you can set a few smart tools in place, in your store. These can be features built into your customer portal that enables your customers to modify or update their box if needed, with less to no friction, or giving them the ability to easily pause or skip a specific delivery, if needed.
Using the baby store example again, the needs of babies change as they grow. Depending on circumstances, a newborn might be entirely dependent on formula, while a slightly older infant might need less of formula, and more of stage 1 food. Giving customers the flexibility to modify what goes into their recurring box order, as and when required, will make their subscription journey as smooth as possible, and will give them very little reason to cancel the recurring order.
3. Regularly upgrading the store offerings to keep things interesting.
Every relationship needs some rekindling! Same applies for box subscriptions as well. In the highly competitive retail and e-commerce space, it is crucial to regularly update your product offerings, to stay relevant to your target customers, and ahead of the competition. This of course might apply relatively more or less to each specific store, depending on the product category they sell.
To make sure that you are making the right upgrades, it is important to know your customers well, and to understand their demographics and psychographics. For example, if the target customers of my baby store are very environmentally conscious, it is imperative that I include and expand vegan products (vegan baby body wash, vegetarian baby foods, etc) in my store, as and when the options in the vegan category increase .
Irrespective of whether you are someone who already has a box subscription business, or are exploring the option, we hope this article was useful to you. If you are looking to understand more about the Build-a-box or bundling business model, and how Appstle Subscriptions supports it, you can reach out to us at firstname.lastname@example.org. Our 24x7x365 available experts will be happy to assist you further.