Case Study: Subscription box (put down the pitchforks) 6 month revenue is about to hit $1,000,000.

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Each month Teen Entrepreneurs showcases an Entrepreneur Case Study from Reddit.

This month’s Case Study is a successful drop shipping business in the body building niche.

Reddit: Original Reddit
Sub Reddit: r/Entrepreneur
Author: Thatmovieguy

Subscription box (put down the pitchforks) 6 month revenue is about to hit $1,000,000. With the bad rap the subscription box model has gotten lately I would like to put forward my 2 cents and explain why and how I did it.

G’day fellow entrepreneurs. Please bare with my horrible grammar, sentence structure & body odour. And AMA. (Ask me Anything).

I have seen a few subscription box threads on r/Entrepreneur from people bagging the niche or just getting an idea off their chest. This thread in particular thinking of starting a subscription box is very critical of the niche but gives some good insight into one person’s opinion of the industry.

I’m not going to tell you my opinion but I recommend you read through this post, many other previous /r/entrepreneur subscription box posts, google a whole lot, and and form your own opinion.

I started Musclebox.me at the start of this year with a partner and launched in July 2015. Being a long time redditor I discovered lootcrate.com, one of the kinds of the sub box niche, and decided to try out the idea with the bodybuilding niche. We developed a great product and released it to the market using shoutouts on Instagram. If my head doesn’t explode from the stress we will hit $1,000,000 in revenue in December.

Our main marketing strategy was instagram shoutouts to build up a email list. We released our product to the market and have since slowly grown over 5 months organically through customer referrals and instagram. We are developing a proper marketing strategy for the new year that will encompass all avenues in digital marketing.

I highly recommend doing research on reddit and google about using instagram as a marketing tool.

We have huge plans for the Muscle Box but have had some hurdles in place which have really held us back in many ways. Being a Australian company trading in the USA has caused monumental problems so the next major phase is to try relocate to the USA and potentially seek funding for expansion.

I literally have pages up page of information i want to write but time is not on my side. I’ve left some dot points below including some tools I’ve used but please ask as many questions as you like.

Why did I start a bodybuilding subscription box?

  • My partner and I have been bodybuilding for over 10 years. It’s a hobby and also a lifestyle so why not apply it to a business idea. I have been told many times go into ventures that you like or where you are personally interested in the niche.
  • The subscription box niche was growing and there were no decent boxes out there that that covered bodybuilding.
  • Between me and my partner we were able to build every single part of business at next to no cost with our own skills. This included nearly everything from the website to marketing and executing everything. One of the defining moments that made us push forward with the venture was because we could build a $50,000 website and management portal ourselves. Even the branding was done at next to nothing.
  • My partner has many connections in the fitness/bodybuilding world that gave us 1 foot in the door.

What was our strategy?

  • Actually give the customer something fun, useful and good value.
  • Work on high volume and low margins.
  • Use our social media accounts in the bodybuilding niche to market and build a email list at no cost.
  • Concentrate on one product only and expand our line later down the track.

Problems

  • Australian based merchant selling to the USA caused many many problems including lost revenue/reputation – Paypal made this big mistake
  • Website crashed at launched under stress.
  • Delays in shipments due to holidays.
  • Suppliers sending defective products.
  • Customers complaining on social networks unjustly.

How did we do it?

  • WordPress (I have been building wordpress sites for 5 years +. Started as a hobby and for me its the number 1 platform.)
  • Amazon aws (server)
  • Chargify.com (Management portal for recurring billing)
  • Photoshop + 99designs + upwork (graphics/branding)
  • Stripe (credit cards) + Braintree (paypal) – Read here about how braintree screwed me over. Paypal – made a mistake
  • Zendesk (customer support)
  • Trello, google keep and wunderlist (lists, management)
  • Google drive + dropbox (spreadsheets etc)
  • Ambassador (referral program)
  • Mailchimp (email marketing)
  • Shopify (online store for one off purchases opening soon)
  • Instagram + Facebook + Twitter ( marketing)
  • Fulfillment company in the USA. PM me for details.
  • Reddit.com (keeps me sane)

What’s next?

  • Expand shipping worldwide.
  • Build out our product line.
  • Improve on a few quality control aspects of the business.
  • Move the business fully to the USA.
  • Explore funding options.

P.S Thanks to r/Entrepreneur over the years it’s been a source of great information and inspiration.

Just in the past week I was especially taken back by the following from localcasestudy in his thread. Another thread spoke about depression which I highly recommend if you’re having a tough time.

Fear is Mostly a Lie
And I say mostly because it’s useful in some very specific scenarios. Being chased by lions in the plains of Africa, fear is a super helpful thing. It triggers adrenaline glands to make your body do some amazing things.

Beyond situations like this though, and especially for new entrepreneurs fear is a lie. It’s by and large a cognitive error that exists in our heads that essentially creates a fantastically negative story about all the bad things that happen if your business fails.

But as someone who has gone through business failures before, here’s what really happens: Nothing.
Fear of a business failing is like being afraid of the dark. There’s nothing there.

Feedback and Questions from Redditors

R: (Redditor)
Which fulfillment company did you go with? How did you navigate the headache of taxation in the USA, being a foreign entity? Which country are your products sourced from?

cinramgroup.com for fullfillment. Since I ship from Tennessee I have to pay tax there. I sent out emails to USA govt departments and basically set it all up over hundreds of emails.

I source products mostly from the USA and a small fraction from China.

R:
Great post! Very inspiring. I just wanted to find out, did you get Instagram shoutouts from day 1? And for the shoutouts, were you sending sample boxes to Instagrammers? (From what I understand, It’d be hard to get a supplier to sell you very low quantities in the beginning) Or did you just send a simple picture to an Instagrammer and ask for this to be reposted on their accounts?

Hey we didn’t do many sample boxes to instagrammers at the start. Mostly after a few months up and running.

We started shout outs a few weeks after we had the website and email submit running well.

R:
I’ve seen you around. Congrats. I know that you have the largest Instagram network for bodybuilding by far. Can you explain a bit how you built those?

Right time right place really. Alot of the best accounts were started very early.

R:
How much were you paying for your shoutouts on Instagram?
We used our own social networks mostly. When we paid they were normal prices. We always bulk bought for cheaper prices.

R:
How much time do you deal with customer complaints (hate the box, already have the merchandise, thinks the books is stupid)?

I spend as much time as necessary on complaints. 9/10 its not our mistake but we have to wear the cost and brunt of the abuse.

A good example is lost shipments. UPS/USPS loose 1% of all shipments. Each lost shipment consists of nearly 10 exchanged emails and we wear the cost.

R:
How did you go about finding a partner to do this with? How did you learn to trust each other in the beginning?

Friends for years. We have both known each other for 20 years+ through family members.

R:
Did either of you have a background in marketing or understand the HOW to be successful? If not, what were the most influential things you read along the way (aside from reddit).

Both are self taught in everything we have done for Muscle Box. We learn mostly from our mistakes.

R:
Hey awesome story love to hear it. I was the previous owner of BeastBox which was a supplement sub company in Aus. Love the origins of your company and where you are now.

Did you sell or what’s the reason for not continuing with it?

R:
I sold due to limited supply of samples in Australia. We only had 400 subscribers and it was a ballbuster getting supplements each months for 400 people with a variety. But in the US its all game.

R:
Hey I actually met someone who knew your or the new owner of beast box can’t rememeber. How did that fair?

R:
It was a good business but the new owners ran it into the ground.

R:
Your Alexa page rank is 514,178 and your MOZ domain score is 1. Both of that indicates low traffic. What kind of traffic did you have to generate to make this amount of revenue?

Meaningless numbers, actually.

R:
How did your referral program work? For my box I charge 35 bucks, getting 1 referral who signs up gives a 5 bucks discount. Thoughts?

Hey we use Ambassador. We give 5$ per referral on a 30$ purchase. I am very new to referrals etc. but I plan on spending a few days googling it to get up to speed.

R:
Revenue and growth is great, but what’s your overhead and margins?

I can’t go too far into those but we are aiming at 30% margins. Overheads are fairly low at around 10%. No paid staff.

R:
How many hours are you putting in a week?

Busy week around 40 to 50. I run a second business by day though it’s full on.

R:
What is the second business? 🙂

Tourism industry and property.

R:
Those are super low margins 🙁 Are you paying yourself at all? How much profit are you netting from your 1 million in revenue?

R:
30% margin is low??

R:
Yeah when you’re selling a product you need at least 40-50% gross margins – you’ll never be able to pay yourself and grow the business well without it. For a party time gig, it’s good – and it’s a hobby at that point that affords a nice lifestyle – but I wouldn’t call anything with 30% margins a business.

R:
I know of retail locations that pay rent and employees with 35% margin products.

All profit is put back into the business. 30% margins seem to be the subscription box norm from what I have gathered.

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Comments (1)

  1. Just a comment from us here at I Heart Making Money Online.

    This is a cool post but any case study should be refering to profit and not revenue.

    For all we know, Musclebox could be moving $800,000 worth of merchandise each month but only making $2,000 a month in profit.

    However, revenue is still a very interesting and valuable statistic.

    It can point to how successful the business COULD be.

    It is an indicator of the demand of the product.

    Eg. If MuscleBox’s profit was low but the revenue was high, they could tweak the business model, product price, or target market into a more profitable zone.

    The MuscleBox site looks great.

    My complete no-proof guess is that if the business has a good conversion %, the profit margins are pretty damn good.

    Jessica

Comments are closed.