What is the Average Churn Rate for a Subscription Box Business?

Foodzie subscription box

I wrote in a previous post about typical subscription e-commerce retention rates and how, when considering launching a subscription box businesses, your assumptions about the retention rate you’ll achieve have a huge bearing on whether or not the business looks like it’ll be profitable.

Lately I’ve come across published details about the retention rates and churn rates of a few other subscription box businesses:

  • According to this interview with Andrew Warner of Mixergy, one of the founders of Foodzie (selling monthly tasting boxes of artisan food) said they had average subscription lengths of 6-8 months. That implies a churn rate of around 14% (and a retention rate of 86%).
  • BarkBox (selling monthly boxes of toys, gifts and treats for dogs) reportedly boasted a 93-95% retention rate in their first year. I assume that’s a monthly retention number. Taking the midpoint of 94% retention rate, that equates to a 6% monthly churn rate or an average subscription length of around 17 months.
  • UmbaBox (selling monthly boxes of curated handmade goods) reportedly claimed a retention rate of 90% (churn rate of 10%) a few months after their launch, with a not-insignificant $18,000 in monthly revenue. That’s equivalent to an average subscription length of 10 months.

It would be dangerous to read too much into these numbers, especially the ones for businesses in their early stages, but they at least give some ballpark numbers that you might find useful.

Note: do bear in mind that there may be some survivorship bias here – businesses with low retention rate would have been less likely to raise money and get written about. So these numbers may be on the optimistic side.

Have you come across any other published numbers for subscription box churn rates or retention rates?

For more information about subscription commerce, see Subscription Commerce Insider.

Photo by ceonyc

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What Makes a Good Ecommerce 2.0 Startup?

PandoDaily have been running a series of articles lately on ‘ecommerce 2.0’, featuring video clips from a dinner with the CEOs of some of the top ecommerce startups: Birchbox, Warby Parker, One Kings Lane and Jack Threads.

I’ve rounded up the clips from the series here as they’re worth a watch if you’re interested in some of the high-level trends in ecommerce at the moment.

[ Edit: the videos are currently unavailable :-( ]

Some key points put forward:

  • Adding commerce to an existing content business can be extremely tough to pull off successfully.
  • Ecommerce businesses may increasingly look to generate demand rather than just fulfil demand.

What do you think will be the key success factors for ecommerce companies starting now? Have the CEOs in the videos got things right?

I’ll try and keep this post updated as more videos are added to the series.

In the meantime, if you’re interested in more thoughts from Ben Lerer, have a look at this post.

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Our Share of Visits from iPads is up 23% Since Christmas

iPad Share of Visits Up 23%

In the month before Christmas, 13.2% of our unique visits came from iPads. In the seven days since Christmas, that has leapt to 16.2%. That’s a whopping 23% increase in a matter of weeks.

I guess plenty of our customers received iPads for Christmas!

Is It Just Technophiles?

Who are these gadget-hungry consumers, you ask?

Well… it turns out they’re not Fab’s hip design-lovers. And they’re not a bunch of geeky dads who finally have a much-anticipated tech gizmo to play with.


Our site sells knitting wool.

Our customers are, by and large, knitters. Someone looking for a dozen balls of Rowan Pure Wool DK or a new pair of knitting needles isn’t the most likely to be using the latest technology. And that’s why this is particularly noteworthy. These are everyday people — a fair proportion are middle-aged women — and, according to Google Analytics, 26.0% of them are now using mobile devices to visit our site (up from 22.7% before Christmas).

The One Mobile Device You Should Worry About Above All Others

So what should we take away from this?

First, in case you were trying to ignore it, ‘mobile’ is clearly a very real factor in today’s e-commerce. Significant numbers of ordinary people are now using mobile devices to buy stuff online.

But let’s be more specific. ‘Mobile’ might conjure up images of smartphones. And that wouldn’t be accurate when nearly two-thirds of our mobile visits are from just one familiar (non-phone) device. At least for now, if you run an e-commerce site, there’s one mobile device I suggest you worry about before all the others: the iPad.

How about you? Have you also seen a big increase in iPad traffic on your site? If so, how are you optimising your site for it?

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Magento E-Commerce Checkout Conversion Rates

Screen Pages, a UK ecommerce agency, publish some great data on their blog. Their latest post is about Magento e-commerce checkout conversion rates.

It’s interesting for a couple of reasons:

  1. It gives some useful benchmark conversion rate numbers.
  2. It shows how conversion rates can and do vary significantly between sites with checkouts that are functionally almost identical. (Clearly other factors are at play, e.g. brand, initial purchase intent, removal of any impediments, etc.)

Here’s a quick summary of the findings.

Data collected:

  • Analysed 2.5m visitors to over 27 websites.
  • All used standard Magento ‘accordion-style’ checkout page (customised for each brand).
  • All niche brands selling lifestyle goods.


  • Average conversion rate (visit to sale): 2.47% (ranging from below 1% to over 10%)
  • Average % of visits leading to a basket page view: 5.76% (mostly between 3% and 7%)
  • Basket page exits: 9.29% (mostly between 7% and 11%) [people who leave the site at the basket page]
  • Overall checkout completion rate (basket page view to sale): 37% (mostly between 22% and 48%)



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What’s a Typical Subscription Commerce Retention Rate?

Cocoa Subscription Box

What’s a typical retention rate for a subscription commerce business?

If you’re trying to model a potential new subscription box business, or just wondering how profitable an existing business is, retention rate is a key variable. What retention rate should you assume?

The answer, of course, is “it depends.”

But you need something to plug into your calculations. So let’s look at some potential comparables.

Retention Rate Comparables

Here’s some retention data that has been shared publicly:

(If you know of some other good public data, please let me know — this sample is a bit limited at the moment!)

Why Churn Rate Tends to Decline Over Time

If you look at the H.Bloom and Relay Foods examples, you’ll see that lots of subscribers cancel early in their subscriptions and the remaining ones tend to be more loyal. I’d expect to see this in most subscription businesses — customers that aren’t getting value from your service are likely to leave early on. Those that remain are likely to be doing so because they like the service. Consequently, as your business matures, your overall churn rate is likely to fall.

Churn Rate Varies by Acquisition Channel and Offer

You will also find that your churn rate is affected by how people sign up. At Boudoir Privé, for example, we found that, when we ran a special offer giving a discounted first box, a lot proportion of those new subscribers cancelled after they’d received that one box.

Churn Rate vs Retention Rate

I’ve been talking about churn rate and retention rate. But how are they related?

Churn rate is the percentage of subscribers who cancel in any one period. e.g. if you have 100 monthly subscribers and one month 20 of those subscribers cancel, then your churn rate for that month is 20%.

Retention rate is simply the percentage of subscribers who remain. In the example here, 80 subscribers remain and your retention rate is 80%.

retention rate = 1 – churn rate

Modelling Retention Rate for Your Business Plan

In my opinion, simple is good where possible. And I think that applies to modelling retention rates and churn rates for subscription commerce businesses.

Here are a few models you may want to use:

1. Average subscription length: Probably the simplest model (and my favourite for back-of-the-envelope calculations) is to assume an average subscription length and not worry about the details beyond that. This is good for estimating whether or not a business is likely to be profitable.

2. Fixed churn rate: To model cashflow, you’ll need to look at retention over time. One simple way is to assume that a fixed percentage of your overall current subscribers will cancel each month.

3. Declining churn rate: A slightly more complex model is to assume a slightly high overall churn rate to start with, dropping gradually over time.

Any of these approximations is probably fair for a pre-launch business where there are large amounts of uncertainty about other key factors of your model anyway.

More advanced businesses with a better idea of their numbers (or early stage ones run by ex-investment bankers) may want to look at a cohort analysis to better predict and model how the churn rate for a particular group of customers is likely to change over time.

Your assumptions about future retention rates significantly affect how profitable a business looks in the long term, so whatever approach you take, it’s worth understanding this component of your model and any simplifying assumptions you’re making.

How about you? Are you trying to model retention rates for a new business idea? What approach are you taking?

Update: you may also like to read this more recent article: What is the Average Churn Rate for a Subscription Box Business?

For more information about starting or growing a subscription commerce business, have a look at Subscription Commerce Insider.

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Comparing Payment Gateways and Merchant Accounts

PaymentBrain logo

Working out how to accept payments online is a pain. What do you need, exactly? Which payment gateway should you choose? How much will it cost?

I’ve set up a few online businesses now, so I think I have a pretty good idea of it all, but I remember how confusing all this payments stuff was to begin with.

What’s so Hard about Payment Processing?

When it comes to payment processing, there’s lots of terminology to get your head around (PCI, chargebacks, 3-D Secure, IMA) and dozens of factors to consider (security, shopping cart compatibility, support, retention periods).

Even when you understand it all, it takes ages to dig out relevant information about the different providers. And if you’re getting a merchant account you really need to shop around and play different providers off against each other to get good rates.

Does it Need to be so Hard?

Taking payments really shouldn’t be this hard. But no-one seems to be doing much to help UK merchants figure all this stuff out. The best resources I’ve come across are some excellent blog posts by David Mytton and Daniel Tenner.

So I’ve decided to have a go.

Introducing PaymentBrain

I’ve set up a site called PaymentBrain as a home for resources to help UK merchants choose online payment solutions.

So far, it’s hosting my first stab at a comparison engine to compare payment gateways. I hope to be adding and improving upon it as time goes by.

If you have a friend who’s planning to apply for a UK merchant account in the next few weeks, please put me in touch. I’d love to chat with him or her about it and to share what I know.



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How to Publish and Sell by Email – an Interview with Ben Lerer of Thrillist

I told you about an interesting interview with the Bonobos founder last week on a site called Grovo. Well, Grovo’s next interview with a founder of a successful Internet company is now available and it’s another good one.

This week’s interview is with Ben Lerer, the co-founder and CEO of Thrillist, a daily email city guide with over three million subscribers. Thrillist also owns JackThreads, a members-only online retailer, and Thrillist Rewards, a ‘localised commerce business’.

It’s interesting to hear Ben’s perspective on his large, email-centric businesses.

A few key points for me were:

  • For Thrillist, the daily emails are the full content; for JackThreads they’re about merchandising – showing people a curated set of products that they will hopefully go and buy on the site.
  • Currently, everyone gets the same emails. Over the next year, they’re planning to start personalising the JackThreads emails so the stuff you’re shown will tend to be more of the things you’ve indicated an interest in (I’m assuming this’ll be based on actions like clicks and purchases.)
  • Ben sees fast iteration as key. Over time they’ve become better at the try / monitor effectiveness / make changes cycle.
  • Building a brand online is about: knowing who your audience is, being consistent, and being authentic. They use an honest, slightly irreverent tone.
  • Over time, they’ve moved away from building ‘what Ben wants’ to letting the data drive things.
  • Having this kind of data-driven approach is important.
  • With the e-commerce business, the numbers are very specific (sales, profits, etc.); with the publishing business, they’re fuzzier.

The interview is here.

I’ve enjoyed this interview series so far, so I’ll be continue to follow it. If there’s an interview I think is particularly good, I’ll share my thoughts about it with you here.



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How to Build a Fashion Brand Online (According to Bonobos)

I came across an online education website called Grovo this evening. Perhaps you’ve heard of it already?

Grovo has lined up a series of what promise to be interesting interviews with successful figures in the world of online business. Their first interview (and only one for now) is with Andy Dunn, one of the co-founders of Bonobos which is a very successful men’s fashion brand in the US that was launched via the web.

In the interview, Andy offers some fascinating advice about doing the kind of vertically-integrated retail that has worked for Bonobos. He sees personalisation and curation being extremely important trends that will improve the online shopping experience.

In case you don’t have time to watch it, here are my notes:

Building a Brand Online

Four keys:

  1. Aggregate customer service to one point and staff that well (the “Zappos model”).
  2. Have a high-quality product.
  3. Vertically integrate so that you look after sourcing, design and merchandising.
  4. Get great at brand story-telling.

Customer Acquisition

Early phase: use word-of-mouth, editorial/PR and direct-selling; get up to a run-rate of $1 million to $2 million (!)

Growth phase: multi-channel (test everything and use what works best). Requires:

  1. Culture of analytics and experimentation
  2. Money to run the tests
  3. Understanding of your customer lifetime value (LTV)


  • Bonobos have differentiated through their vertical integration into design (starting with better-fitting men’s trousers, now expanding into other garments).
  • They focus on serving a specific demographic really well: 25-50 year-old active, urban, professional males.

Leveraging Social Media

  • Have a conversation (don’t just talk at people)
  • Use social media as a channel for real-time customer feedback
  • Be hugely responsive on social media
  • Use social media to let customers and your team connect on a human level (e.g. Bonobos ran a poll to ask customers to vote on which Bonobos team member had the best Halloween costume)

Evolution of Commerce

  • Think of the online experience as a bundle of product and service.
  • Be a great storyteller.

I love what Bonobos have managed to do and I think there’s lots to learn from their success.

Grovo have done a great job with this interview, so I’m looking forward to checking back with them soon.

I’ll keep you posted here with any interesting notes.


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