Lunch and Learn: How to build a successful subscription business

Books That Matter founder Molly Masters has built the business to 3,000 subscribers in three years. Molly shared her story and advice on today's Lunch and Learn.

How did you come up with the idea for Books That Matter?

Books That Matter is a subscription book service. Its goal is to provide a platform for women and their writing that introduces people to feminism.

Molly started the business in her last year of university and has been running it for nearly three years.

"It was a way to capture what I was feeling at university. I was being introduced to lots of fiction but it wasn't until I was 20 that I was introduced to female writers in a similar canon."

Around that time, she undertook an internship at Cosmopolitan and became aware of makeup subscription boxes Birchbox and Glossybox.

"There weren't really any market leaders in the book space. They were niche based, like fantasy. There wasn't one that was for the masses, for the typical woman that likes to read and wants to discover more fiction."

How do you recruit customers?

Instagram was key to building Books That Matter's customer base (follow them at @booksthatmatteruk). Molly applied for a grant to start the business and wanted to show the judges the idea had a community behind it.

"There's this wonderful community called bookstagram where people post pictures and reviews."

Today, Instagram Stories show what's included in each box and share customer posts. Molly also uses it to get feedback, such as asking what referral bonus people would prefer. It remains their most popular marketing channel with 19,400 followers. She explains:

"It's not an element to be undersold. It's the best way to get a trustworthy review and people's friends see what they're buying. Playing into that in terms of tags and interactive content online has been really key."

The monthly theme helps ground the social media activity and they update the colour scheme each month. Molly added it's important to check in with the audience, who all have a corner of the internet where they like to share books, and react to the content people are posting.

How do the economics of subscription boxes work?

Molly said that subscription box businesses have different models and that it's important to find something that works for the space you're in.

Books That Matter buys a set amount of product for each month and aims to sell out, although they can top this up. She says:

"Scarcity is key to subscription models. When we sell out, people cheerlead us online because they know it's important."

Her approach follows entrepreneur and author Daniel Priestley's advice in Oversubscribed: How To Get People Lining Up To Do Business With You. For Books That Matter, this means creating anticipation and having a launch period.

People who become fans can set up rolling subscriptions, but treating each month like a new product launch brings in one-off sales and attracts new customers.

Did you pick and pack at home?

Books That Matter sold 200 boxes on the day it launched. Molly was still working full time, and packed the boxes in her flat and sent them by Royal Mail. She recalls:

"It was everywhere. My cats were going crazy. We then worked out of a storage unit for a while. The growth wasn't sustainable when you're doing that each month and are crammed into a unit."

She then had an office for a year. One week of packing became two and then three.

This meant Molly spent too much time packing and not enough time going to events and looking into other opportunities. Moving to using a fulfilment partner was game changing because it freed up time and allowed them to scale.

"If there's anything I would change, it's going to a fulfilment partner earlier. You have to realise your time has value."

How do you cope with the cost of postage and packaging?

Molly advised the founders of subscription box services to look for the right box supplier. When she started it was £3 per box for 200. However, some people will print a thousand and only charge you for the amount you're sending each month, giving you access to bulk discounts.

Talk to people in subscription box entrepreneur groups, who can help you find wholesalers. Suppliers will be able to recommend each other too.

What growth have you had?

Demand increased dramatically when lockdown started and they've had 2,500 to 3,000 people buy boxes in May.

Molly's been shielding since early March, when the coronavirus crisis started. The team was already remote, so were used to working remotely.

How do you deal with the accounting side of the business?

Molly started by reading lots of business books, like Profit First by Mike Michalowicz, but couldn't find any go-to guide about managing subscription box businesses.

People may prepay for a six or 12-month subscription, but they also have to buy stock in advance. That means it's complicated to track profitability. Molly explains:

"It's a juggling act, but I'm happy to outsource accounting to someone that can manage our profit and loss accounts and how much money we're making."

She added that this frees up her time and recommended looking for an accountant that has experience in the sector.

What are the best e-commerce platforms for subscription box businesses?

Molly recommended going for a platform that puts a high focus on search engine optimisation (SEO) and has good email integration. Look at pricing options that are suitable for subscription businesses.

How do you reduce churn?

Customer acquisition costs can be high for subscription box businesses. That means it's important to reduce the number of customers who cancel their subscription, which is often referred to as "churn".

Books That Matter offer discounts to people that subscribe for longer. One month is £17 but if you subscribe for three months then you're given a £6 saving, six months a £12 saving and so on.

The rolling subscription is a popular option and Molly said having that type of subscriber helps if you're looking for investment or talking to corporates.

"You want to be able to tell them about your churn rate - how many people are leaving. Gifting around Christmas becomes a bit mad for us. Creating that loyalty that they want to subscribe to is a task but it's key."

Having someone on the team that's dedicated to customer experience has been crucial to refining the process.

Books That Matter has an automated system to let people know when their subscription is running out. It reminds them of the great stuff they've received and includes testimonials. They schedule a nudge email to land the day after customers have received a box to remind them of the experience.

"Telling them they're leaving a community helps too. You don't want to tug on their heartstrings too much but people are involved in our Facebook and Instagram."

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