Subscription boxes are monetized convenience. They’re low-risk, recurring-revenue streams that are predictable, scalable, and trendsetting.
Businesses and entrepreneurs who want to dominate the still wildly popular market can leap from niche to niche, stuffing boxes with anything from fan-cult goodies to beef jerky to matching underwear.
This boxed-up business model is still an opportune way to launch, manage, and grow businesses.
How subscription boxes work
Unlike typical “one time buy” eCommerce ventures and shops, a box model works slightly backward.
That is to say, retention of customers is more important to the success and revenue of the company than acquiring new customers. Companies must work relentlessly and ceaselessly to understand their customer base and keep them happy and present.
Preventing churn and maintaining customer relationships aren’t just feel-good values or altruistic visions – they’re mission-critical, and your revenue depends on it.
Curated vs. replenishment boxes
Two main types of subscription box models are curated and replenishment. The broad range and deep popularity of these models rely heavily on the “everybody wins” mentality. Customers get easy, convenient access to new products and companies get a predictable, sustainable flow that’s easy to market.
More than half of all subscription boxes are in the “curated” category – think StitchFix and Glossier. In some cases, you can give input into getting a personalized selection, such as filling out a style profile to receive clothing items through Stitch Fix. In others, the surprise is part of the fun – you’ll receive a selection of new-to-you items that are substantially discounted from their retail purchase price. In many cases, if a box includes products such as skincare or cosmetics, you’ll receive sample or trial size items, as with beauty products, though throwing in a few full size items will help you hit your customers’ sweet spots.
With these boxes, the novelty is a big part of the fun. If you choose a curated box model, you’ll want to manage customer expectations carefully – should they expect to be able to individual items from the box, the box as a whole, or are you not open to returns at all, given that you’re selling the product mix below retail value?
Some brands, Stitch Fix among them, actually make it a selling point that you’re simply trialing the items and can make a commitment to purchase the items you want, sending back the rest hassle-free. With most curation boxes, however, returns are either nonexistent or limited.
Replenishment boxes exist to automatically deliver a product you need with regularity – Dollar Shave Club, which sends out razors, shaving cream, and other shave essentials each month, is a prime example of this model.With a replenishment model, the risk of return is low, as customers already know what they’re getting and when they’re getting it. However, there are times when a product may be damaged or defective. In this case, it makes sense to offer a customer satisfaction guarantee, as Dollar Shave Club does, in which you’ll give your customers their money back if they’re not satisfied with the product within a certain amount of time.
Challenges for subscription boxes
Problem #1: Setting lower cyclical prices lures customers and decreases financial strain, but it takes longer to recover a customer’s acquisition rate and they’re profitable to the company.
How to Offset: Work to retain customer relationships longer, in new ways that stand out from the flooded market because it’s 5-10x cheaper to keep a customer than it is to acquire a new one.
Get Real Stats: 41% of revenue comes from repeat or return customers.
Real Solution: Yoga Club offers LIFETIME referral discounts. That’s right. They accumulate, roll over, and never expire. Refer a friend and get a monetary price reduction on every box for the rest of your lifecycle with them (or until you’re down to $19mo, whichever comes first.)
Problem #2: There’s a post-purchase void. Not enough time, money, and energy is spent keeping customers happy, present, and in the loop.
How to Offset: Build flexible models to continually nurture customer relationships until they’re advocates for your brand.
Get Real Stats: 60% of customers leave because they don’t feel cared for.
Real Solution: Rocksbox jewelry subscription allows unlimited rentals, credits towards purchases, free returns, free shipping, customers keep pieces as long as they want and only return (or buy) when they want new pieces. This gives customers a sense of flexibility that goes a long way towards building satisfaction.
Problem #3: Box subscriptions have the highest ecommerce churn rate, with up to 27% in some categories.
How to Offset: Be proactive, not reactive. Use an automated returns management solution to set the company and customers up for success, prioritize retention and maximize revenue.
Get Real Stats: 30% of all e-commerce is returned, but 92% will stay with the company and repeat buy if returns are smooth and simple.
Real Solution: Loop provides an automated solution for ensuring customers’ satisfaction with their subscription box options, making it easy to set conditional logic for when you can issue a return, exchange, or refund – without sending them to a black hole waiting for customer support.
Setting up your returns policy
Across all the different box subscription categories and companies, point systems are the most common, and usually the only, tool in place to keep customers around. A solid customer loyalty program is an effective marketing strategy for boxes looking to brush up on their customer relationships, but it’s not enough.
Return policies in e-commerce are a huge focus for business intelligence and customer analytics– but when you get to the subscription box service side of e-commerce, there is barely a return policy to be found.
Return policies drive retention. They drive saves. They drive revenue. They drive customers crazy trying to locate them.
67% of ecommerce consumers look for a visible, clear return policy before they check out online. If you’re trying to dig up deets about a subscription box company’s return policy before you commit, you’re not alone.
If you do find a mention about returns on a subscription box website, it’s probably buried deep in the FAQ. Chances are it’s also unclear, a flat out “no”, or confusing.
Trust and transparency are paramount. They’re also missing along with most of the return policies.
If you’re launching a subscription box service, setting up a clear and transparent returns policy is a great way to differentiate yourself from the competition.
The realities of returns policies in the subscription box world
So what do returns policies look like for subscription box brands? Let’s take a look:
Health, beauty and makeup
Refusing to return or exchange, these companies try to keep customers happy, offerings fresh, and engagements high by offering options for creating a more personalized box experience. This is a fast, easy way for businesses to reward positive customer behaviors, see more revenue, and create longer relationships with existing customers.
FabFitFun, a lifestyle and beauty box brandishing full-sized products, offers 2 different tiers of loyalty perks to customers. One option allows customers to “pay as you go” each month with slightly more meager benefits. The other is an annual price point with a discounted long term rate, a one-time payment, and the truly coveted perks like: “Boost my Box”, “add ons”, Swap for Credit (skip a monthly delivery for store credit instead), and early access, and full access product selections. But if you don’t want anything in your box, tough luck: refunds are not an option.
Over on the “his” side of the bathroom vanity, Dollar Shave Club and Harry’s are ready to get personal. Offering convenient delivery of world-class razors, neither of these brands accept returns. Regardless, both companies approach the topic with transparency and tact on their websites, allowing refunds within a 30-day window for customers who aren’t satisfied with the products.
BattlBox, a survival gear subscription box, spearheads customer loyalty with a tidy, 4-tiered pricing plan. Customers can correctly set their expectations by choosing the amount they want to pay and the price value for each level’s box. The brand also offers a customer community, sells “extra” boxes from prior months, hosts videos and experiences for boxed items, promotes monthly giveaways, and their extensive online storefront includes an anticipation-building countdown timer for the next month’s box shipment. The fact that they never, under any circumstances, honor customer refunds, returns, exchanges, credits, or cancellations almost becomes an afterthought. That is marketing for survival indeed.
Bespoke Post is more transparent about its lack of a returns policy than BattlBox. They offer several themes each month, some recurring, from which guests or members can choose. They dote heavily on their less-known, swank-worthy, heavily-vetted vendors and their own curation skills. Along with their “free to join” subscription model, Bespoke Post creates customer relationships that are devilishly fast and surprisingly deep-set. They may not allow returns or exchanges, but they certainly deliver the trust and care it takes to retain customers.
Food, pets, and others
These policies vary by brand – BarkBox, for example, doesn’t accept returns or exchanges on its dog toys and goodies from its BarkBoxes, but the team asks you to contact customer support and they’ll make it right. They encourage customers to donate unwanted items to a shelter, rather than sending them back.
With food boxes, such as Purple Carrot, customers have the option to choose their meals and delivery schedules – but brands tend to recognize that if something falls short of their quality standard, they need to make it up to their customer. In this case, customers won’t be asked to return the item, but they can connect with customer service and the brand will likely issue a refund or replacement, though their policies aren’t fully transparent.
Win customer loyalty with a better returns policy
If your subscription box service isn’t handling, managing, and capitalizing on your customer’s returns, you might as well slam the door, the funnel, and the loop shut.
If your customers need to return your product, don’t hide your return policy or hide behind it. And don’t force them to play phone or email tag with customer service agents. They should be able to easily resolve issues with their products through an automated platform in the space of seconds, not days.
Let your return policy be transparent, trustworthy, accessible, flexible, and an opportunity to build loyalty. Stay in touch with your loyal customers, learn how to better serve your top customers, earn goodwill and word of mouth, and stand out from the crowd. No matter the model you choose, the conditions you set, or the controls you levy, Loop automates the returns process for you and for your customers.
Want to learn more about Loop? Get in touch.