Ecommerce subscriptions have exploded in popularity in recent years: brands that offer subscriptions grew their overall customer base by 31% in 2021 alone, and the market for ecommerce subscriptions is expected to surpass $900 billion by 2026. These automated, recurring orders pose a huge opportunity for ecommerce companies to boost revenue, but subscription box fulfillment comes with unique logistical challenges.
Subscriptions, once reserved for magazines and newspapers, have evolved significantly in the digital age. From streaming services to automatic refills of goods like razors and coffee beans, subscriptions have become part of most consumers’ daily lives. A 2021 survey found that 61 million U.S. consumers have at least one retail subscription (in fact, consumers on average have 3.7 active subscriptions).
A retail subscription is simply a recurring order sent to customers on a predetermined basis. They’re especially attractive to direct-to-consumer brands because they provide a predictable, recurring revenue source and help build brand loyalty and affinity.
Selling subscriptions is easy, but fulfilling them is another story. Subscription box fulfillment requires logistical efficiency, careful inventory management, and top-notch quality control. Fulfilling these orders takes on new complexity because they must be shipped according to each customer’s unique timeline and the business must account for these recurring shipments when determining how much inventory to hold.
While there are several subscription models, retail subscriptions usually fall into one of two types: curated subscription boxes and replenishment subscriptions.
Curated subscriptions refer to recurring shipments in which the products change with each delivery. Some common examples include fashion brands like Stitch Fix and monthly wine clubs like Winc. With these subscriptions, the customer gets a surprise in every box.
Curated subscriptions offer more flexibility for the business because you can determine the contents of each order based on the price and availability of certain goods, but they also come with increased complexity in inventory management and fulfillment.
When a subscription box contains the same product in each shipment, accounting for inventory is as simple as monitoring the number of active subscriptions along with standard, one-time purchase demand. If the products change with each delivery, you’ll encounter large fluctuations in demand for each product month over month—especially if each individual order contains a unique set of items.
Because curated subscriptions require a lot of pick and pack labor by nature, using a 3PL’s subscription fulfillment services can become expensive quickly. If your company offers a curated subscription, you may be better off fulfilling those orders in-house or sending the orders to your warehouse pre-assembled. Alternatively, you may opt to use your fulfillment center’s kitting services to assemble the orders before they are packed and shipped.
The exception here is curated subscriptions that contain just one item, like a coffee-of-the-month club. In this case, fulfillment is as simple as forwarding the subscribers’ shipping information and the pre-selected SKU to be sent to your 3PL.
The much simpler sister of curated subscriptions is the replenishment subscription. In this case, a customer receives the same order on a recurring basis without having to place a new order each time. The replenishment model is common—and effective—for businesses that sell products with a high use frequency, like razors, cosmetics, and pet food.
These subscriptions lock in repeat business, reduce competition, and increase brand loyalty. If your customers aren’t repeatedly shopping for a product, they’re less likely to investigate your competitors.
Replenishment subscriptions are ideal for outsourcing to a 3PL with subscription fulfillment services because the requirements for successful delivery are any reliable fulfillment center’s bread and butter: timely shipping at scale. Plus, most 3PLs will allow you to use branded packaging to create a memorable unboxing experience and can include marketing inserts to increase the customer’s lifetime value.
From the customer’s perspective, subscriptions are attractive for their simplicity. Of course, behind the scenes, subscription box fulfillment comes with its own unique challenges.
Some complications that come along with subscription box fulfillment are:
Expedient delivery is always a critical part of the customer experience, but this is especially true of subscriptions. Your customers are expecting their order to arrive within a specific window—either because they’re looking forward to the surprise or because they’re running low on your product.
Using a 3PL—especially one that employs a multi-warehousing strategy—can go a long way in making sure subscription boxes are delivered quickly and efficiently.
As you think about your subscription strategy, be sure to plan when your orders will be sent: all at the same time, staggered throughout the renewal period, or based on individual customers’ buying cycles and frequency preferences.
Once you introduce subscriptions to your online store, you can expect an increase in demand; but planning for that increase is complex.
If you’re sending replenishment orders, you’ll need to account for three variables:
And if you’re sending curated subscription boxes, you’ll have to account for all the same variables, plus:
You’ll need to monitor your inventory very carefully in the first few months after launching a subscription service while you learn how it’s affected your entire supply chain. If you opt to outsource to a 3PL, consider how their fulfillment software integrates with your ecommerce store and warehouse management system (WMS) so you can keep a close eye on inventory counts and fluctuations.
Subscription boxes are often more than your standard order—they’re meant to create an experience for the customer so they’ll grow to love your brand and keep renewing that subscription.
For many brands, subscription boxes are works of art—carefully curated and meticulously assembled—that may contain special fill, inserts, or branded packaging. That ups the ante for your fulfillment operations, which could increase pressure on your in-house fulfillment or quickly expose an underperforming 3PL.
Ecommerce retailers often offer a discount to customers who sign up for a subscription, whether it’s that the first shipment is free or a percentage discount on recurring orders. To take advantage of this, some customers will sign up for the subscription to get the deal, then immediately cancel it before they’re charged again. You may want to set a small delay on these orders within the 3PL’s software to ensure you’re only shipping repeat orders to customers who intend to keep the subscription, reducing your losses and rate of returns.
Subscription box fulfillment follows the same steps as any other order’s fulfillment, though with a few small differences.
Like anything else you ship through a 3PL, the merchandise must first be received and stored by the warehouse. Under replenishment models, inventory management likely won’t be that much different than when accounting for typical order demand. If you offer a curated subscription, you may need to send inventory to the warehouse more frequently to ensure you’re stocked on that month’s products.
As previously mentioned, you’ll also need to take into account when your subscription orders are shipped when planning how much storage you’ll need at the warehouse. Say you’re sending 1,000 curated subscription boxes on the same day each month, or just once per quarter. In this case, you might see dramatic fluctuations in your stored inventory before and after that shipment date. If your subscription boxes are shipped on a staggered schedule, you’ll likely see a more steady dwindling of your inventory.
If you’re working with a tech-forward 3PL, this part should be easy.
If it’s a replenishment subscription, orders will be automatically fed to the warehouse management system via your ecommerce store integration. Leaders like Shopify have subscription functionality that will automatically send repeat orders to the warehouse and allow customers to choose the frequency with which they receive them—often weekly, bi-weekly, or monthly.
If your subscriptions are curated, there will be a bit more work on your end in order to communicate what SKUs are to be shipped to each customer. That said, getting that information to the fulfillment center ought to be as easy as uploading a spreadsheet to the 3PL’s tech platform.
Depending on your subscription model and when you choose to ship the boxes, this process may follow a few different paths.
Replenishment subscriptions will be picked and packed like any other order, but you might opt to include special inserts or packaging if it’s a recurring order. These orders should be fed to the fulfillment center based on when they should be shipped, via the 3PL’s software. Depending on when your customer signed up for the subscription and the frequency with which they expect orders, the software should automatically place these orders at a regular cadence for each unique customer.
Curated subscriptions may be sent at irregular intervals (based on either the customer’s preference or based on your company’s decision to stagger the orders) or all at once, over the course of a day or two. Because these orders change month to month and often contain more than one item, you’ll likely want to send these orders to the warehouse pre-assembled or pay for kitting services once the inventory arrives at the warehouse. That way, there’s just one SKU for the warehouse to pick and ship.
Much like sending lists of curated orders to your warehouse, requesting kitting should be straight through the 3PL platform as well. Airhouse’s Project Request feature makes it easy to send detailed instructions to the warehouse and monitor the project’s status.
This bit is pretty self-explanatory. Once the order has been picked, packed, and labeled, it’s ready to be picked up by the shipping carrier and delivered to your expectant customers.
Outsourcing your subscription box fulfillment is probably a no-brainer if you’re shipping 100+ per month. When evaluating subscription fulfillment services, look for the following features.
As we mentioned earlier, subscription boxes are more than your average order—they’re an experience for the customer. A 2015 study found that 34% of consumers said the use of branded or gift-like packaging affected their perception of the brand. Be sure the provider will allow you to use your own packaging, and investigate any fees that may be associated with doing so.
Using a network of strategically placed warehouses—also known as multi-warehousing—will go a long way in reducing both shipping costs and delivery time. Using multiple warehouses, your orders can be routed to and shipped by the warehouse closest to your customer, reducing how often you’re shipping into high shipping zones.
To successfully manage subscription box fulfillment (that is, without pulling your hair out or being mired in complicated spreadsheets), you’ll want to work with a 3PL that offers advanced technology. This will allow your ecommerce store to seamlessly integrate with the warehouse’s software, so orders are sent to the fulfillment center at the time they should be fulfilled, taking into account the customer’s order cycle and preferences.
We’ve already established that meticulous inventory management is crucial to fulfilling subscriptions. Look for a 3PL that provides real-time reporting across your inventory and order statuses so you can monitor inventory levels and send more to the warehouse if you begin running low—especially if a new round of subscriptions is scheduled to be shipped soon.
The cost of fulfillment will always vary greatly based on a number of factors, but subscriptions come with additional costs: namely when it comes to picking and packing for subscriptions with multiple SKUs or marketing inserts. Ideally, work with a 3PL that uses a la carte billing—it’s far more transparent and will allow you the flexibility to optimize your costs.
Kitting is going to be crucial if you plan to send curated subscription boxes with multiple items. The cost of pick and pack for each of those orders would be exorbitant—so if you can’t send the items to the warehouse pre-bundled, look for a fulfillment provider that will assemble the items and label them with a single SKU before they’re packed for shipping.
From our one-click integration with Shopify to our scalable warehouse network, transparent billing, and powerful software, Airhouse is uniquely qualified to manage your subscription fulfillment services. To learn more, schedule a call with us today.