Postal Service Office of Inspector General U S

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Subscription Box Services and the U.S. Postal 
Service: The Gift That Keeps on Giving 
This brief discussion of an “Issue in Focus” contains candid observations 
and opinions from staff members of the Office of Inspector General. 
Imagine combining the child-like excitement of opening a birthday present with the daily 
anticipation of checking the mailbox for a letter addressed to you. Well, you can stop 
imagining because that is the experience created by subscription box services, a 
relatively new industry that sends customers monthly or quarterly boxes of their favorite 
food, clothes, beverages, or toys, among other things. Beginning around 2010, this 
industry has experienced rapid growth and attracted substantial attention from venture 
capital firms and innovative entrepreneurs looking for the next big subscription box idea. 
Moreover and more relevant for the U.S. Postal Service, an essential element of this 
industry is the ability to ship and track parcels sent to their legions of loyal customers. 
A New Market but an Old Story 
Though to many observers the growth of subscription box services seems like a new 
phenomenon, it is actually related to several previous shipping trends: sample mailers 
and continuity shippers. The Postal Service has long offered companies the ability to 
mail out product samples to targeted or mass audiences and many of the earliest 
subscription box companies filled their boxes with multiple product samples, often 
samples that were overproduced and sitting in a warehouse. Continuity shippers, on the 
other hand, provide regular monthly 
mailings to customers that the customer 
either elects to keep and pay for or 
returns to the company at no charge. A 
prime example of this type of shipper 
was Columbia House who sent a 
monthly selection of compact discs from 
popular musicians. Subscription box 
services often sign up their customers 
to receive packages on 1, 6, and 
12 month subscriptions and employ a 
December 9, 2015 
Figure 1: A Small Selection of Subscription Box 
Services Currently Available 
Issue in Focus   
Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving December 9, 2015 
 
 
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model where customers are automatically renewed unless they cancel their 
subscriptions. Observers might also draw parallels between subscription box services 
and other subscription services like Netflix and Gamefly, which send physical products 
to their customers at regular intervals.  
The exact size of the market for subscription 
boxes is difficult to establish, partly because it is 
so new. Subscription box services took in $5 
billion in revenue in 2014. The market has also 
seen rapid growth since 2011 with hundreds of 
new entrants and an annualized growth rate of 
200 percent. While it’s unclear exactly how many 
total packages correspond to these revenue 
numbers, Barkbox, a subscription service that 
sends a box of toys and treats for your dog, has 
shipped 4 million boxes in the last five years. One 
of the most well-known subscription box services, Birchbox, amassed 800,000 monthly 
subscribers in 2014.  
A Market That Is Expanding and Diversifying 
Though the first successful companies in this industry focused on women’s beauty 
supplies, the market has seen rapid diversification into other niches. 
Subscriptionboxes.com, a website that provides information and customer reviews 
about subscription boxes, lists over 30 different categories of boxes including arts and 
crafts, pets, fitness, beauty, and gaming. For example, Citrus Lane includes a monthly 
assortment of products and activities designed specifically for toddlers and boasts over 
45,000 monthly subscribers.  Meanwhile, Blue Apron delivers grocery items along with 
recipes for preplanned dinners. Subscribers generally tend to be young adults, given 
their willingness to experiment with new products. 
One thing that is certain about the market for subscription boxes is that their customers 
are fiercely loyal and very active in their support for these companies. Amir Elaguizy, 
founder of Cratejoy, a company that provides web, technical, and logistics support to 
new subscription box services, points out that, as individuals, subscription customers 
are worth 10 times the amount of revenue as single-transaction e-retail customers. As 
the market has grown, so have the number of blogs covering the subscription box 
market. One such blog, MySubscriptionAddiction.com, includes articles revealing the 
content of popular boxes and reviews often involving new market entrants. The blog 
creator and writer Liz Cadman claims to personally subscribe to 50 monthly boxes while 
the website lists over 900 active companies. Also, a network of subscription box fans on 
social media websites like Facebook and YouTube share homemade “Unboxing” videos 
revealing what they received in their most recent boxes. This kind of customer loyalty 
and involvement indicates the potential for future growth and the current existence of a 
strong customer base. 
Figure 2: Barkbox, a Subscription Box 
Service for Dogs 
Issue in Focus   
Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving December 9, 2015 
 
 
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Video 1: A Customer “Unboxing” a Birchbox from May 2015 
 
Source: Youtube, https://www.youtube.com/watch?v=gMUS3_ngIfE.  
One Industry, Many Business Models 
Despite the uniform need for quick and affordable parcel service, not all subscription 
box services operate under the same business model. With roots firmly in the 
distribution of product samples, companies like Birchbox and Barkbox create curated 
monthly assortments of products around a specific theme. This is probably the most 
popular model because it preserves the element of surprise and intrigue about what 
each box contains. However, other companies like Naturebox and Dollar Shave Club 
allow their customers to select the contents of their box from a product list, essentially 
serving as their own curator. This type of service requires a different type of customer 
interface that requires more direct communication between the company and the 
customer. Finally, subscription box services in the area of clothing are adopting a 
slightly different approach. Fashion boxes like Trunk Club and Bombfell send customers 
an assortment of clothes selected by an expert in fashion design and based on the 
customers’ stated preferences. While the boxes may include several hundred dollars 
worth of clothing items, customers have a week 
to decide what they want to keep and pay for 
and what they want to return to the company. 
These different business models necessitate 
different approaches from shippers. The 
clearest example is the fashion box, which 
requires companies to arrange for quick and 
efficient package return service. At a minimum, 
subscription box services require shipping 
services that are cheap, easy to use, trackable, 
and insured. Birchbox is proving that 
subscription boxes can also drive traditional 
e-commerce sales. The company created an 
online marketplace where customers can shop 
Figure 3: Door Delivery of Birchbox with a 
Priority Mail Label 
Issue in Focus   
Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving December 9, 2015 
 
 
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for the products contained in recent boxes, an option taken advantage of by 50 percent 
of their subscribers. 
At least one service has incorporated traditional mail matter with its product offerings.  
Gentleman’s Box, which offers a monthly assortment of men’s grooming and fashion 
items, also includes a copy of men’s magazine GQ with every box. Other boxes have 
innovated by linking the physical and the digital. Geek Fuel, a box of entertainment 
items for video game enthusiasts, created a box that comes with a new code every 
month that allows subscribers to play an online video game for free.  
What Can the Postal Service Do? 
It is important for the Postal Service to 
evaluate what it could be doing to nurture this 
small but growing segment of it’s core parcel 
business. Entrepreneurs get into the 
subscription box business to focus on the 
creation of inventive, customer-pleasing 
packages, not to deal with the complexities of 
shipping and logistics. In fact, Cratejoy has 
negotiated an agreement with the Postal 
Service to provide its members (now over 
400) with Commercial Plus Cubic pricing for 
Priority Mail packages, reducing cost and 
allowing the subscription box services to track 
and insure all their packages.1 Still, to enjoy 
this advantage, subscription box services must sign up with Cratejoy, who takes a 
percentage of their revenues as payment. By providing simple and cheap shipping and 
logistics solutions directly to subscription box services, perhaps through the USPS.com 
website, the Postal Service could reduce barriers to market entry for more subscription 
box entrepreneurs. The Postal Service could also negotiate special agreements for 
returns or warehousing, particularly for clothing subscription services that ship larger 
packages and see frequent returns. Previously, the Postal Service developed a product 
called Bulk Parcel Return Service (BPRS) to provide a cheap and easy solution for 
continuity shippers whose business required a high volume of returns. BPRS charges 
shippers a flat rate for each returned parcel, allowing the Postal Service to avoid 
measuring and weighing each returned parcel. Though BPRS is limited to standard 
mail, a similar product for Priority Mail could appeal to certain subscription box 
companies.  
Additionally, of the 20 customer-ranked subscription box services examined for this 
paper, 13 only ship to the United States and Canada. The Postal Service could also 
                                            
1
 On October 16, 2015, the Postal Service submitted a plan to the PRC to raise the prices of several classes of 
competitive parcel products including Priority Mail Commercial Plus in January 2016. Additionally, they stated that 
their long-term plan was to phase out the Commercial Plus pricing tier by 2017. 
Figure 4: A Shipment of MunchPak Being 
Loaded onto a Postal Truck 
Issue in Focus   
Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving December 9, 2015 
 
 
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foster this market by providing solutions for international shipping, opening up new 
markets for these companies. Currently, the Postal Service does have an agreement 
with online marketplace Ebay that includes discounts for international Priority Mail 
shipments by top rated sellers. 
The Future of Shipping for the Little-Box E-Retailer 
Some journalists have begun referring to these subscription box companies as “little-
box” e-retailers in contrast to big-box stores like Best Buy who make up a substantial 
amount of the e-retail business. Two market signals point to the continued growth of 
little-box e-retail. First, venture capital continues to flow to these companies at a steady 
pace, even those in well-established areas like beauty. For instance, ipsy, a company 
that offers a box of makeup and related supplies for $10 per month, raised $100 million 
in VC funding in September 2015, more than the $60 million raised by industry leader 
Birchbox in April 2014. Second, rather than ignoring the little-box business, large 
traditional retailers like Target and Walmart have attempted to compete by testing their 
own monthly subscription box services. For instance, Target has created a women’s 
beauty supply box. Released only quarterly, the Target Beauty Box undercuts 
competitors on price by offering six beauty items for $7 per box with free shipping. 
Gillette also recently began advertising a monthly shaving item service to compete with 
Dollar Shave Club. It remains to be seen whether the entrance of big-box e-retailers will 
stifle new entrants, but it does point to the fact that subscription services are likely to 
continue regardless of who is doing the selling. 
References 
Amrita Jaykumar, “Little-box retailing: Subscription services offer new possibilities to consumers, major 
outlets,” Washington Post, April 7, 2014, 
http://www.washingtonpost.com/business/economy/tktktktk/2014/04/07/f68135b6-a92b-11e3-8d62-
419db477a0e6_story.html. 
Chris Illes, “Dollar Shave Club vs. Harry’s vs. Gillette Shave Club: Round 3,” Category Five, July 15, 
2015, http://www.categoryfive.co/dollar-shave-club-vs-harrys-vs-gillette-shave-club-round-3/.  
Cratejoy, “Subscription box shipping cost calculator,” http://start.cratejoy.com/subscription-shipping-price-
calculator. 
Ebay, “Savings from the U.S. Postal Service,” http://pages.ebay.com/usps/uspssavings.html. 
Elizabeth Segran, “From socks to sex toys: Inside America’s subscription-box obsession,” Fast Company, 
April 6, 2015, http://www.fastcompany.com/3044527/most-creative-people/from-socks-to-sex-toys-inside-
americas-subscription-box-obsession. 
Erin Griffith, “Exclusive: Birchbox banks $60 million,” Fortune, April 21, 2014, 
http://fortune.com/2014/04/21/exclusive-birchbox-banks-60-million/. 
Liz Cadman, My Subscription Box Addiction, http://www.mysubscriptionaddiction.com/. 
Issue in Focus   
Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving December 9, 2015 
 
 
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Liz Cadman, “Target Beauty Box,” My Subscription Box Addiction, 
http://boxes.mysubscriptionaddiction.com/box/target-beauty-box. 
Mathew Lynley, “Makeup subscription delivery service ipsy raises $100 million,” TechCrunch, September 
14, 2015, http://techcrunch.com/2015/09/14/makeup-subscription-delivery-service-ipsy-raises-
100m/#.tlkc3l:cyQj. 
Meghan Casserly, “Birchbox proves try and buy: Half of all subscribers make full-size purchase,” Fortune, 
August 15, 2013, http://www.forbes.com/sites/meghancasserly/2013/08/15/birchbox-proves-try-and-buy-
half-of-all-subscribers-make-full-size-purchases/. 
SubscriptionBoxes.com, http://www.subscriptionboxes.com/. 
Subscription Commerce Insider, “Subscription Box Industry – An Introduction,” 
http://subscriptioncommerceinsider.com/subscription-box-industry/. 
Tom Cheredar, “Cratejoy grabs $4 million to give anyone their own monthly subscription service,” Venture 
Beat, October 14, 2014, http://venturebeat.com/2014/10/14/cratejoy/. 
 
 



Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving

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Subscription Box Services and the U.S. Postal Service: The Gift That Keeps on Giving

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