Of all the emerging trends in online shopping, one of the hottest is subscription box services. According to Fuel, A McKinsey Company, the subscription box industry is now worth about $10 billion and is still growing. Even more enticing is the fact that, while there are certainly leaders in this market, there are still opportunities for newcomers to claim market share.
While they are essentially eCommerce offerings, subscription services do have a few key differences with traditional eCommerce – particularly in the area of fulfillment. In this article, we’ll examine subscription box fulfillment and tell you what you need to know to take advantage of this emerging trend – and how 3PLs can help.
What are subscription box services?
Subscription boxes are product packages shipped to customers on a regular basis, typically every month. A common example involves grooming products like shaving razors, where a customer places an initial order and then opts to have that product replenished on a regular basis.
Another example, which is becoming increasingly popular, involves ‘curated’ subscription services in which a business assembles a unique package each month for subscribers. This type of offering now exists for virtually any product that can be sold online – from food and beverage items to cosmetics to electronics and other consumer goods.
A McKinsey study found that most subscription customers are between 25 and 44 years old with incomes between $50,000 and $100,000. Women account for over 60% of subscribers. However, men are more likely than women (42% vs 28%) to have three or more active subscriptions.
Subscription box fulfillment challenges
As with traditional eCommerce, subscription box services are purchased online and orders are processed and shipped from fulfillment centers. There are, however, some key challenges inherent in subscription services that regular old eCommerce doesn’t typically have.
Labor management is the biggest challenge. With subscription box fulfillment, your fulfillment operation will experience a spike in orders once a month. On the plus side, this spike is predictable and allows time for planning. The downside is that this volume spike generally requires an accompanying spike in labor for kitting and assembly of the packages – potentially several thousand of them – along with the picking, packing, labeling and shipping involved.
For many companies, this entails bringing on extra labor to handle the spike, letting much of that labor go once the spike is over, and then staffing up all over again to start the process the following month. This cycle may prove unsustainable for companies that are going it alone and do not have robust internal and outside labor resources.
Inventory management can also prove difficult. To gear up for the labor spike, you’ll need to make sure that you receive product in advance. This ‘advance’ part is crucial. It’s difficult enough to scale up labor resources, you don’t want to pay to have them wait around until the materials show up.
In addition to receiving the products, packaging materials and kitting components, you’ll need space to store it all and an inventory management system (ideally a robust warehouse management system – WMS) to keep track of everything and update as items are removed and/or reconfigured. These capabilities may also be beyond the scope of most companies currently in the DIY stage.
Customer expectations are high. A major attraction to subscription box services – especially the curated ones – is the uniqueness factor. The customer feels that he or she is part of an exclusive club that is receiving a unique offering that (in many cases) would not be available outside of the subscription.
Many customers of curated subscription services are fond of showing off their unique experiences with unboxing videos on social media. To please this type of customer, companies will want to ship products so that customers receive them at roughly the same time. Otherwise, you run the risk of having unhappy customers as they watch other people unbox packages days before they receive their own. If you’re shipping from one warehouse to the entire country, this is not going to be possible.
How 3PLs can address subscription box fulfillment challenges
If you feel overwhelmed by these fulfillment challenges, you don’t have to be. There are third-party logistics (3PL) companies with the infrastructure and expertise to make your subscription fulfillment operation lean and efficient. The following are some of the advantages that 3PLs can bring to the subscription box table.
3PLs can handle labor management challenges. Many 3PLs don’t just have “a warehouse;” they have a network of warehouses. As such, when certain warehouses have a spike in order volumes, some 3PLs can pull labor in from other warehouses – or from other operations within the same warehouse – to augment regular staff numbers and help with the project.
When internal resources don’t fully cut it, 3PLs typically have close relationships with temporary labor agencies. The 3PL can then work with the agency to meet current challenges and plan in advance for upcoming spikes.
3PLs have inventory covered. Just about every 3PL has already invested in a robust WMS so that you don’t have to. That’s a good thing as WMS systems can come with a hefty price tag. Your 3PL’s WMS can sync seamlessly with your own systems and provide visibility into inventory, order management and reporting.
3PLs have fulfillment warehouse networks. As mentioned above, many 3PLs have warehouse networks in which several warehouses – often nationwide – operate under the same 3PL umbrella and utilize the same systems and share the same company culture. If your customers are spread out all over the country, such a 3PL can help you spread out your inventory accordingly so that you can reach all of your customers quickly and lower shipping costs.
In light of COVID-19, a multi-warehouse approach can also help mitigate the risks associated with fulfilling orders from a single warehouse.
3PLs have buying power with parcel providers. A 3PL that handles B2C fulfillment for many different customers is going to have substantial shipping volume. This high volume translates into buying power that the 3PL can use to negotiate bulk rate discounts with major parcel providers. These discounts then get passed along to you as a 3PL customer. The resulting cost savings can have a major impact on your bottom line as parcel costs can account for up to 75% of your total fulfillment spend.
3PLs can customize your operation. Just as your subscription services may pride themselves on delivering unique customer experiences, many 3PLs can offer unique fulfillment experiences. As such, just about every aspect of your warehousing and distribution operations can be customized to your specifications. Examples include:
- Planning of all warehouse operations, from pick paths to label generation
- Customization of kits and packaging to reflect your brand – anything from the dunnage to the outside package
- Investments in automation and equipment to meet your operational needs
3PLs are flexible. If your subscription box business is taking off, it may no longer be possible to handle those monthly volume spikes as they grow ever larger. To many 3PLs, such large-volume projects can be handled with relative ease.
In fact, 3PLs that specialize in eCommerce fulfillment services can work with you to accommodate your highest and lowest volumes, allowing your costs for space and services to rise and fall with your volumes.
As with eCommerce fulfillment, subscription box fulfillment requires a true partnership with a logistics provider. From planning to execution, you need a provider that will work with you to roll with the punches, adapt to emerging trends, and continually seek to optimize your supply chain. If you feel that it’s time to hand over your fulfillment reins to a true expert, contact Amware Fulfillment today to learn how our nationwide fulfillment expertise can serve as the backbone of your operation.