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Solve Common Challenges Outsourcing to Build a Better Subscription Business

Subscription-based companies were hit hard during the pandemic, with shipping challenges drastically affecting the customer experience. But delivery inconsistencies are just the tip of the iceberg when it comes to e-commerce brand woes. Sustainable growth hinges upon inventory, supply chain management, adequate staffing, and attention to detail, amongst other factors. For brands looking to grow their base, outsourcing may be the solution.

Solve Common Challenges Outsourcing to Build a Better Subscription Business

This article by Visible Supply Chain Management breaks down the greatest challenges that subscription companies face, and proven strategies for tackling those issues. Content includes:

  • Subscription at scale: How to manage a rapidly growing base
  • Customer experience is king: Pitfalls to avoid
  • Unruly inventory: Best practices for ordering and moving excess product

Content Summary

Overcoming the Challenges of the Subscription Business
The subscription base grows too quickly, making it hard to manage and fulfill
A poor experience can mar the brand
Inventory becomes unruly
Shipping is uneven or unaffordable
Choosing the Right Fulfillment Partner
Partnering for Success: Finding a partner that understands

Who doesn’t love to receive a package in the mail? Subscription e-commerce has skyrocketed over the past decade, as consumers enjoy “curation subscriptions” of everything from fitness wear to wine and vegan jerky or a replenishment model that regularly delivers a favorite shampoo or dog food right to their door.

COVID-19 acted as an accelerant as consumers became wary of in-person shopping and increasingly craved both the convenience and element of discovery and delight offered by subscription boxes. In fact, one market research firm expects the category to achieve a compound annual growth rate of 68% from 2019 to 2025, pushing the market to $478.2 billion by 2025.

Yet while a subscription model offers a bevy of benefits to an enterprise, including steady revenue, loyal customers, and the ability to upsell and cross-sell, the industry is fraught with challenges, and one false move can send your reputation — and sales — tumbling. Oftentimes this false move comes down to a fundamental logistics issue.

“Subscription businesses are by nature product- and brand-driven, and their focus and expertise lie in their ability to keep their customers engaged and interested in their offerings,” said Casey Adams, president of Visible Supply Chain Management, an industry leader in full-service shipping and fulfillment for small to midsize businesses.

“Supply chain is quite likely the last thing on a marketer’s mind, and frankly, that’s how it should be. And yet the supply chain is the key link in the successful completion of customer service and the ultimate delivery of brand promise.”

Wondering how you can best scale your own subscription model? Outsourcing could be the answer.

Overcoming the Challenges of the Subscription Business

When brands determine that a subscription model is viable for their product, they become immersed in the excitement of building their customer list and dreaming of seeing that first unboxing video online. But as they get down to the specifics of fulfillment, unexpected obstacles often come to light.

An inadequate logistics experience can quickly lead to churn, which is the biggest threat to subscription success. Here are four common challenges that can be avoided with proper planning and know-how.

The subscription base grows too quickly, making it hard to manage and fulfill

Customers flocking to your brand might seem like a great problem to have, but if it’s more than you can handle, it leads to dissatisfaction and they desert you just as quickly. “Most companies start to consider outsourcing fulfillment when they reach the inflection point where they realize they don’t have the resources to adequately manage the logistics internally,” said Paul Chambers, CEO, and founder of the Subscription Trade Association (SUBTA).

However, the concept of outsourcing brings on a new set of concerns for enterprises, particularly the apprehension that the fulfillment center won’t handle the merchandise with the same care and attention they do. “A company’s first reaction is usually something like, ‘I make sure all the hats are facing the right way and the logos are always right side up when I pack my boxes,’” Chambers said. But letting go doesn’t mean losing control. “The goal is to work with your partner on the essentials so the process is done exactly as you want it. An experienced center will be equipped to handle these details, probably even better than you can once you reach a certain volume.”

But Visible can scale up and down with consumer demand, unlike any other player in our field – Casey Adams, president, Visible Supply Chain Management

Ability to scale up and down with consumer demand

While outsourcing ensures successful shipping, it also frees personnel to pursue more strategic goals, such as marketing the business or focusing on customer service.

Adams recommended finding a partner the brand won’t outgrow, adding that one of Visible’s greatest strengths is its ability to scale with an enterprise. “The vast majority of fulfillment houses are set up to operate in a specific manner, with specific volumes of shipments and within specific SKU counts. But Visible can scale up and down with consumer demand, unlike any other player in our field.”

A poor experience can mar the brand

“Subscription companies often assume their brand is self-sustaining, but it’s imperative to constantly reinforce your image and value,” Adams said.

Often the enterprise focuses so much on the components inside the box that it neglects to take advantage of every customer touchpoint. “Reinforce your message and aesthetic by seeking out opportunities all along the customer journey, such as your welcome and order confirmation emails up to delivery notifications,” Chambers suggested. “Remove your owner-entrepreneur hat and get in the mind of the customer to create the best possible encounter at every juncture.”

Then think through every aspect that will encourage recipients to engage and share with their network once the box arrives: an enticing exterior, clear instructions for opening, a lavish presentation, and suggested hashtags.

Don’t neglect the importance of sustainability, especially when appealing to Gen Z and millennials. Chambers cited one subscription company that wisely uses the exterior of the box to explain what can be recycled or reused and then offers specific instructions on how to recycle as many components as possible, all the way down to the cooling bags.

The right fulfillment center can help brainstorm ways to reimagine a bespoke experience that represents the brand, Adams said.

Inventory becomes unruly

Managing inventory is one of the trickiest parts of a subscription model, and while it might initially feel that outsourcing adds another layer of complexity, it actually can make it easier. “This is the core business of fulfillment centers, and they will have the processes and procedures in place to make it easy for you,” Chambers assured.

Processes and procedures in place

He recommended that brands avoid being caught off guard by planning out the majority of the box contents with an advance calendar. They can then tweak quantities closer to the time, taking into account supply chain delays and fluctuating projections. Actively managing inventory numbers is crucial because leftover items incur costs, not only in the capital but in storage fees. However, these fees are often offset by the fact that outsourcing lessens an enterprise’s own overhead.

An experienced center will share best practices that allow you to fine-tune your inventory ordering, as well as suggestions for how to move excess product. For example, if someone calls to cancel, you might ask if they’d prefer a quarterly rather than monthly subscription and then adjust your inventory accordingly. Relying on a fulfillment house to manage this type of delivery cadence can take a logistical challenge off your plate.

“Inventory is a brand’s largest financial exposure with a supply chain partner, so your fulfillment center must provide full transparency into a volume on hand and product movement in real-time,” Adams said, adding that Visible’s proprietary technology offers this insight on an ongoing basis. “Our goal is to always share extensive information, which inspires confidence in our solution and peace of mind in our customers that their needs are being handled.”

Inventory is a brand’s largest financial exposure with a supply chain partner – Casey Adams, president, Visible Supply Chain Management

Shipping is uneven or unaffordable

Any enterprise that lived through 2020 knows that shipping woes can drastically affect customer experience; according to one study, an estimated one million packages failed to arrive on time during the holiday season. Fortunately, more affordable and predictable shipping is a key benefit of using a fulfillment house. “Shipping options are confusing, vast, and very costly if mismanaged,” Adams said.

Partnering with an established center allows subscription companies to benefit from the economies of scale that can come from a fulfillment center’s multiple clients and multicarrier focus.

Having access to a variety of options is critical, and Visible uses a tool that can help determine the best shipper in both time and cost for a variety of weights and dimensions. “Many companies think consolidating their shipments with one carrier is the best strategy, but it’s almost always wrong and tends to lead to blown budgets and lost customers,” Adams said. The cause of the majority of the upheaval in 2020 was when a company’s sole carrier cut them off or limited their lanes. “A multicarrier solution not only protects you from the next ‘ship-ageddon’ instance but also optimizes the time-price balance and gives predictable outcomes.”

Whether facing a delay, an untimely cost increase, or a shipping dispute, centers are uniquely qualified to leverage their track record to achieve a better outcome than an enterprise could realize on its own. “Fulfillment companies have nurtured strong relationships with shipping partners, and they can pass those bulk prices and negotiating power on to their customers, which is a huge advantage,” Chambers said.

Choosing the Right Fulfillment Partner

Wondering how to choose the center that’s right for you? Here are four tips for finding one that will prioritize your brand to ensure delight with every delivery.

Verify their offerings

Not all fulfillment centers provide end-to-end service. You want to find one that handles all the facets you need, such as:

  • Collaboration on packaging and design considerations.
  • Adequate labor to handle the picking and packing on your preferred schedule.
  • Up-to-date technology, such as a warehouse management system that gives you insight into your inventory and customer tracking.
  • A strong network of carriers that allows you to take advantage of volume pricing.
  • Ability to scale and accommodate volume fluctuations.
Seek recommendations

There’s nothing like talking to existing customers to find out more about a prospective vendor’s quality, service, and communication. Ask how they respond to delays and capacity fluctuations. “You want to make sure they’re dedicated to strong relationships and that you’re going to be working with people you like and trust,” Chambers said.

Conduct a “mystery shop.”

Wondering if packages actually arrive accurately and properly packed as expected? See if you can suss out the names of a customer or two and put yourself on their mailing list to check the quality for yourself.

Maintain open communication

Ultimately, strong relationships will be built on two-way dialogue, according to Adams, who said the most common pitfalls they navigate were related to communication.

“A partner needs timely and accurate information around inventory, promotions, and product introductions,” he said.

Brands should determine how easy it is to initiate that conversation, asking about the availability of the account management team and the fulfillment center’s commitment to staying up on the ever-changing landscape of their clients’ businesses.

Partnering for Success: Finding a partner that understands

A brand’s image can be burnished with a compelling subscription box business, but often the scope becomes unmanageable without outsourcing the logistics element. The key is finding a partner that understands that how a package arrives at the customer is as important as what’s in it.

“By trusting a fulfillment center with that portion of the experience, brands can focus on what they do best,” Adams said. “It’s the formula for growth and prosperity.”