Running a South African Subscription Box Business | The 2020 Update
Subscription box services are gaining huge popularity here in South Africa, and it’s easy to see why. These services cater to consumers’ on-demand, home delivery appetite. They also give entrepreneurs all the benefits of eCommerce—with a recurring revenue cherry on top!
This post takes a look at everything you want to know about subscription eCommerce (subcom, for short) including the easiest way to launch your business to the South African market.
Local Uptake of Subscription Boxes
You may already know of global subscription box services like Boxycharm, FabFitFun and Lootcrate. Perhaps you’ve even tried one. If you have, you know that international shipping costs a fortune (making it feel like a waste of money).
The good news is that we have plenty of providers on our shores too! Think about meal-kits like Ucook or lifestyle subscription boxes, like Little Black Bag.
These services didn’t pop up overnight. The Daily Dish, for example, has been around since 2013. It took a while for South Africans to embrace online shopping. Thankfully, eCommerce gift delivery made major inroads with warming up the market long before 2020. This is the year that eCommerce grew prolifically among sellers (merchants) and shoppers alike.
Emphasised: The market never been better primed to take up subscription services.
You, too, can create a subscription product or service for every hobby, interest and need. Arts and crafts, books, games and puzzles to make-up, chocolate, coffee, wine—the list is virtually endless.
Subscription Box Models
Pull quote: “A subscription business model is based on selling a niche-orientated product or service regularly to receive recurring subscription revenue.”
The beauty of the subscription business model is that it lends itself to virtually any application, from physical goods to physical services (like SweepSouth for domestic cleaners). Digital subscriptions are rapidly growing in popularity (and they are often more profitable), too. Examples include newspaper subs like Business Live premium, content subs (Netflix) and online study courses like Masterclass and Shaw Academy.
The concept remains the same: selling a niche product or service regularly for recurring income.
Are Subscription Boxes Worth It? Here’s Why They Work
Call out: The subscription eCommerce market grew at a compound annual growth rate (CAGR) of nearly 60% from 2014-2019.
Fuel, a specialised McKinsey research company, has been analysing the US subcom market since 2014. They found growth upwards of 30% year-on-year from 2018, and over six years, the market is consistently growing at a CAGR of almost 60%. The analysts still see plenty of room for new entrants, stating “We believe the market is poised for continued growth.”
There’s money to be made, but, don’t think owning a subscription box business is a silver-bullet to making millions. Like any other enterprise, there will be obstacles to overcome. It is a competitive market, and you will have to work hard to get your business off the ground.
Is it worth it? You bet So! Subscription-based businesses yield much higher returns with less risk than other retail ventures. That’s because customers commit to multiple purchases. So, you make more sales per customer acquisition (more on the benefits to come).
Why Subscription Box Services Are So Popular?
Everything about the nature of subscription services appeals to 21st-century shopper behaviour.
- Instant gratification. We live in an “on-demand” age. We are used to—and expect—to expect to get what we want when we need it. Subs boxes provide strategically timed auto-replenishment that feeds this desire.
- Who wouldn’t want the convenience of receiving your favourite goodies direct to your door or inbox every month without reminders or prompts? It’s so easy. Sign-up once, load your credit card details, done.
- Like our Spotify playlists, we love having someone pick-out a collection of things centred on our particular taste. A subscription box can feel like having a personal shopper.
- Almost hand-in-hand with curation is the excitement of discovering new products that may not have otherwise found.
- Cost-effective. Subscription boxes are notorious for offering value for money. It saves you time, and the monthly amount is budget-friendly. For a fixed fee, you get exclusive, high-quality goods shipped directly to your door.
Getting Started: Building a Subscription Box Business That Makes Money
Subscription box business offer numerous benefits, but, with high reward comes high risk. Having the security of guaranteed recurring monthly revenue means having to deliver quality consistently. You achieve this with meticulous organisation and staying true to your brand promise. Therefore, your start is critical to your future success.
Get the foundation right, and you’ll be running a successful subscription box business in no time.
Here are some excerpts from our detailed step-by-step guide on How to Start a Subscription Box Business, (read the full article here).
1. Define what you are offering: What Are You Selling and to Whom?
Define your niche, be as specific as possible. You need to carve out your unique positioning and target market. Identify direct and indirect competitors as well.
2. Find Pricing that’s Palatable and Profitable
You want your subscription box business to make a profit. Work out your start-up costs and overheads. Then, set up what your customers would be willing to pay for similar goods against the value that your service provides to determine your ideal price-point.
3. Create a Prototype
Make a tangible representation of what customers can expect from your box. Take photographs of the prototype to begin marketing and generating interest.
4. Pre-Launch and Promotion
A pre-launch is a build-up marketing campaign, also called a soft-launch. Most run between 30-60 days.
There are two main objectives. 1. Create anticipation for your boxes. 2. Get a head-start on building your subscriber base.
Use the time while your pre-launch is underway to finalise your procurement and shipping.
5. Pin-down Your Procurement Process
Procurement is also known as product sourcing. You want to keep your costs low, but don’t go so cheap that customers feel like they have not received value for money. Your customers’ impression of their first box determines whether they will love or lump your subscription service.
Find a reliable shipping partner that will uphold your delivery promise. Publish your shipping info and delivery schedule to manage customer expectations.
For more information on where to source products, purchasing and processing read our complete procurement process guide.
6. Set-Up Your Website or Marketplace Listing.
Choosing where and “set up shop” online is not much different from that of a brick-and-mortar store.
Running your own website is like owning a stand-alone store. You are responsible for the look and feel, maintenance, security, and utilities. You have total control over your space, but it can be a burden trying to do it all by yourself.
Presence on a marketplace site like Subscriptionbay is similar to renting in a shopping mall. The landlords take care of hosting, design, maintenance, security, and advertising. Your brand will be exposed to qualified leads, who are already partial to subscription box services.
Setting up your billing and payment processors
Once you know where the sales transactions will take place, you can set up your payment processors. Remember that all processors carry a transaction fee that you will need to factor into your margins.
7. Launch Day! Start Taking Orders and Shipping Your Subscription Boxes.
- Make an announcement. Let your database know when the first shipment will take place.
- Run a final promotion to encourage more sign-ups. Include it in a press release for extra publicity.
Pro tip: If you have the next 2-3 shipments prepared in advance, you’ll buy yourself the time to implement learnings from month one.
8. Future Growth
Focus on building up your subscriber base. The best and most cost-effective way is through word-of-mouth referrals. Positive reviews are priceless!
For this reason, we recommend improving your processes continually. In conjunction with your ratings and testimonials campaigns, practice good old digital marketing 101.
The Benefits of Becoming a South African Subscription Box Provider
The benefits of running a subscription box business in South Africa right now are two-fold. To start, you enjoy the advantages of eCommerce with a heap of additional perks that only subscription eCommerce can provide. Let’s dive in.
- Marginal overheads, which is perfect for start-ups or sales expansion.
- Highly scalable, meaning that you can grow without major cap-ex, fast.
- Greater competitiveness, in other words, your business can better compete in the market (competitive edge) thanks to digital’s cost-effectiveness.
- Recurring revenue; guaranteed repeat orders and cash inflow are the dream!
- Comfortable procurement lead-time; the beauty of the subscription box model is that you can plan months in advance, often affording you better rates because
- you have more time to negotiate;
- can leverage economies of scale (if you’re repeating a product in months three and six, for example, you can purchase for both months now;
- you’re not paying unnecessary surcharges for express delivery.
- Better forecasting enables accurate financial planning, scheduling, resource planning, order fulfilment —and allows you to tighten your targeted marketing communication.
- Build rock-solid customer relationships, which is invaluable in any commerce business these days. You can send personalised emails between shipments and create a feedback loop that encourages dialogue, fostering robust brand trust and advocacy.
- More sales per acquisition. You might work a little harder to acquire a single customer, but, because that results in multiples sales, you actually reduce acquisitions expenses long term.
- Cost-effective customer retention. No other business model has such low costs to retain customers.
- High customer lifetime value (CLV), this refers to the “total revenue a business can reasonably expect from a single customer account.” (Hubspot). Because it costs less to acquire and retain customers, your CLV is higher (and it looks great to financiers or possible business buyers).
The Best Way to Get Your Subscription Boxes to the SA Market
As if all those benefits weren’t enough, a market place listing turbo-changes them all!
Subscriptionbay is South Africa’s premier subscription box market place and online management platform. Read all about the abounding benefits of a market place presence here.
What Is A Subscription Box Market Place?
Like Amazon is to books, and iTunes is to music, that’s what Subscriptionbay is to subscription boxes. It’s a virtual, specialised, mall. Everyone knows that’s the place to you go when you’re looking for something in the realm of subscription services.
What Is An Order Management Platform?
In this context, an order management platform is a mechanism to enable your eCommerce ability that facilities your online sales transactions. Again, like Etsy and Alibaba, your customers can buy from you via our platform, saving you hundreds of Rands.
It’s much easier to focus on your core business when your online presence, payment facility and marketing are already expertly managed. Sign-up with Subscriptionbay, your one-way ticket to subscription eCommerce success.
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