Subscription Box Product Sourcing and Procurement Guide
What Subscription Box Providers Want to Know About Purchasing Products and Packaging
Subscription box product sourcing can seem daunting at first, but once you bed down your process, you’ll find it’s easy and enjoyable.
This guide shows you how to source quality products while keeping sales costs low so you can deliver value-for-money to your customers—and keep them happy!
Why Procurement is Crucial to Successful Subscription Box Services
The proof is in the pudding. Your customer’s impression of their first box determines whether they will love or lump your subscription service.
If you’ve been following our Help Guides for Store Vendors, you may already know why procurement—product sourcing, in particular—is such a big deal. New? Welcome! You might be keen to read our articles about running a South African subscription box business and How to Start a Subscription Box Business.
What is Does Subscription Box Procurement Entail?
Procurement, also known as product sourcing, refers to the “process of finding and agreeing to terms, and acquiring goods, services, or works from an external source¹.” This includes your products (the contents of each box), their packaging, and your shipping (delivery) partners if you are not keeping that function in-house.
A lot is riding on the decisions you make here.
How the customer receives their first box will determine whether they stay on as loving subscriber or bounce to another box. There are worse consequences than just losing a sale. A disappointed customer will tell other people. They might even publish a bad review—deterring hundreds of potential customers who haven’t tried your subscription boxes for themselves.
When you run a subscription box business, every box has to meet customer expectations. And that, ladies and gents, is why securing the right products and suppliers is crucial.
Expert Advice: What I Wish I’d Known about Subscription Box Procurement before Launching
Have is a clear idea of what’s needed. Set criteria that will keep you “on brand”. Your customers have bought into a specific concept and have expectations of what they will receive.
Is your brand promise “affordable” or “ultra-lux”? Fashionista or Boho? If you’re all about saving the planet, then anything that comes in single-use plastic is probably a no-no.
Doing this will help you narrow down (an otherwise broad) search and save you loads of time.
Keep packaging and shipping in mind from the start! Too many start-up subscription box providers blow their budgets on products and land up settling for crummy packaging.
Design element call out box style
Heading: Packing a Powerful Punch
Subheading: Packaging and Label Suppliers That You’ll Love
How to Put the Pro in Procurement
Look at things from the customer’s perspective. They will experience their subscription box from the outside-in, being:
- Punctual delivery
- The physical weight of the box
- The aesthetics of the packaging and the unboxing
Will they feel like they have received value for money before they even see the content of the box?
When they open the box, will the quantity and quality of the items live up to the expectations created in the pre-launch (step 4 of starting a subscription box business)?
Make sure that every aspect of their unboxing experience lives up the expectations that you created in your pre-launch. Ask yourself?
- How did it arrive (on time, in good order)?
- Is the outer packaging pleasing?
- Does the weight of the box “feel” like value for money?
Probably the best thing you can do at this stage is to use your prototype box to refine your offering and create the very first box ready to be shipped.
For more on prototype boxes, please take a look at step 3 of our getting started guide.
The Subscription Box Procurement Blueprint
Here’s what you need to consider:
- Box contents
Number of items
Quality of items
Longevity of items
Use of items
How many per box?
Low-, mid- or high-end?
Disposable or built to last?
Are the products appropriate for the application?
If you’re selling goods that are intended last a long time, you might consider sending fewer items of higher quality per box. On the other hand, if your box is built on items that you only use once, you could get away with inexpensive goodies, allowing you to add more per shipment.
💡Pro Tip: Subscribe to competitor boxes to do a bit of benchmarking.
- Packaging and unboxing
- In-house or out-sourced?
- Are you promised delivery times, realistic and economically viable?
Finding the right products at the right price.
Naturally, you want to keep your cost of sales low, but don’t go so cheap that customers feel like they have not received value for money. This is where you’ll need to choose your purchasing model and sharpen your negotiation skills.
Staying on top of orders and supplier fulfilment.
Procurement is an ongoing process. You need to continually find new products, establish supplier agreements, and manage these relationships. You’ll need to bed-down an ordering process to ensure timely delivery of products so that fulfilment to your customers runs smoothly. You can cut your teeth on the first boxes, but be sure to keep box numbers two, three etc. in mind so you can get ahead of the game.
💡Pro Tip: Do a dry run with “green” participants from ordering online to receipt. Ask for detailed feedback. It’s like having your own focus group.
Planning is your best friend.
The later you leave things, the more they cost. Try to create a 6-month plan so that you can leverage economies of scale and waiver surcharges for expedited orders.
Giving your suppliers ample lead time should afford them better prices, and they can pass on the cost-savings to you.
How Do I Get Products For My Subscription Box?
Places to Source Products
- Search online for inspiration. You don’t have to “marry” anything you find here, use this time to find a new avenue to explore. You’ll most likely come across vendors that you like. *This is important* Keep a catalogue of everything you research—track it all. You never know what you’ll need to refer back to in six months.
- Keep an eye on social media too.
- Look out for niche websites, listings and market places. These sites have done the hard work of sourcing and gathering similar vendors in one place in one place for you.
- Visit local markets and boutique stores. This is particularly good for sourcing artisanal products that may not have a web presence or even store presence. When it comes to negotiation, ask them if they’d consider a special rate for commissioned, bulk orders.
- Don’t discount the power of networking and referrals.
From your research, create a shortlist of suppliers that meet your criteria.
Bed Down Forecasting
Sound sales projections are a sure-fire way to grow trust and credibility with potential suppliers—giving you an even better vantage to start negotiating. It communicates that you are a serious business person. Giving them an indication of how you intend to fill their pipeline will help them to accommodate your requests.
🔎 Reality Check: The irony of accurate forecasting relies on historical data. In other words, it gets better as you go. You might find that your first months’ projections were pie-in-the-sky, and that’s OK.
Your buying patterns will change as your business grows. At first, you may need to go with ordering month-to-month to manage cash flow and avoid carrying excessive stock.
As you progress, you can stagger increases against your growth. It’s wise to discuss this with vendors upfront and set milestone goals or KPIs, fostering a better relationship with them (and bargaining power) for the future.
💡Pro Tip: Create a welcome pack or intro box so that you have the same box for all first orders. You can keep stock on hand for new sign-ups, buying you time to increase your orders for the following month and ensure that you always meet expectations.
Choose a Procurement Strategy
There are two ways to secure products for your subscription boxes:
- Free sample product marketing
- Wholesale rates or exclusive rates
Each has its merits. We recommend a blend of both to decrease risks and costs.
Product Sample Marketing
With this procurement method, you would “sell” the value of your subscription boxes—namely, the audience which they attract—to gain free products. These can either be samples or miniatures in exchange for the marketing opportunities that you can provide.
Free sampling or product marketing (as it is also known) secures incredible margins on your subscription boxes, but it’s labour intensive. It’s hard to convince people to give away stock for free, and you’ll need to focus your energy on keeping up your end of the deal.
That being said, this is the ideal solution for boxes that curate niche, high-end, boutique or rare items for a target market with a high propensity for spending!
Note that as you scale, you’ll most likely have to eventually purchase or make negotiations and vendor management a full-time job. The golden rule here is to keep your suppliers as happy as customers.
Wholesale or Favourable Rates
With this subscription box procurement strategy, you’ll use economies of scale by buying in larger quantities at a secured, lower-than-average rate.
The downside is that you will have costs of sales, and that will affect your box price. The big plus, though, is that the process is straightforward, scalable, and therefore a safer option. You can your suppliers can budget
A combination of both subscription box product procurement methods will enable you to offset costs savings against purchases.
Prepare Your Sales Pitch
Create a simple presentation that includes your sales pitch. With this, you’ll be in a better position to negotiate excellent rates or free products for your subscription boxes—depending on your procurement strategy.
At a minimum, have the following information ready:
- The subscription box concept and brand promise
- Target market: The people who are going to subscribe. Here’s an easy way to identify your target market
- Frequency: How often recipients receive their boxes (weekly, monthly, quarterly)
- Projected sales: An estimate of how many boxes you’ll likely sell over a set period
- Order quantity: An estimate of how many products you’ll by at a time based on your projected sales.
- Your Proposal: What do you need and what can you give?
💡Pro Tip: Always keep vendors in mind in your marketing. As much as you want to attract subscribers, invite vendors to contact you too!
Finally, everything comes together in a well-defined, streamlined process. As always, good organisation is an essential ingredient to successful subscription box order fulfilment.
For this, we highly recommend automation software to optimise your time and efficiency.
- Customer Relationship Management (CRM) software. Your business is going to rely heavily on a comprehensive, well-segmented database. If there’s one thing to invest in as early as possible, it’s this! Apps like Pipedrive help you to manage your sales process as well.
- Keep a categorised list of all the vendors and products that you’ve explored in a database as well.
- Accounting Software. If it has an ERP (enterprise resource management) component, even better. With Cloud accounting software, you can automate invoicing and statements and shred transaction processing time down to nothing. Plus, almost all accounting apps include forecasting features.
- You can also create purchase orders (or sales orders) to show act as a record of the details of future sales to which you have committed.
- A process workflow or project management tool to keep you on track with your procurement checklist, making sure you don’t accidentally skip a step. This doesn’t have to be a separate programme, as mentioned, your CRM or accounting software may include this functionality.
- Whether standalone or integrated, make sure that you have a way to manage payment and shipping timelines. It’s also a good idea if you can keep track of supplier deliveries, too.
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