How to Set Up a Subscription Club for Your Craft Business

A few weeks ago my daughter, Josephine, turned four. We planned a birthday party for her at the local community center and she couldn’t wait. We bought paper plates and a dinosaur balloon, but the most exciting part of the preparations was putting together the goodie bags. Choosing each item and assembling them was so thrilling!

There’s something wonderful about making a goodie bag, and something equally wonderful about being part of a group that receives one. This specialness isn’t just reserved for children, either.

As adults, getting a special package in the mail is such a treat, and being part of a club whose members all receive that same treat and can talk about it? Well, that’s just excellent.

Craft-based businesses that offer subscription clubs create this feeling for their customers month after month. The anticipation of receiving the box, and the excitement of opening it and sharing it online, generates a buzz that can’t be matched in any other way, while also generating a sustainable income for the business.

I’ve always admired subscription clubs, but I’ve never created one myself so I reached out to someone who’s done it successfully for years to find out more about what’s involved in setting one up.

Stephanie Alford is the owner of SpaceCadet yarns. She has been fascinated by fiber ever since she first took spinning lessons at the age of 11. She taught herself to knit at 19, went back to spinning (and actually got the hang of it) ten years later and, along the way, picked up a bit of experience in weaving, a smidge of crochet, and a degree in Textiles and Clothing. But it was when she began dyeing that she felt she’d really found her calling. She has lived half her life in the US and the other half in the UK. She now lives in Pittsburgh, PA, with her husband and two daughters, and a stash so big it’d bring tears to your eyes.  She’s SpaceCadetCreates on Ravelry, @SpaceCadetYarn on Twitter.

Here’s Stephanie to explain the ins and outs of creating a subscription club for your craft business:

It was probably three or four years ago when a friend in my knit group turned to me and said, “You know, you should start a yarn club.” I laughed and shook my head because, at the time, SpaceCadet was a tiny operation, just me dyeing yarn in a stolen corner of my house, and I felt like running a club was too big and grown-up for a company as tiny as mine.

Fast forward to now and SpaceCadet is a real, grown-up company, with several employees and a dedicated dye studio, running not just one but three clubs that send beautiful hand-dyed yarn to hundreds of customers every month. And I can honestly say that those clubs played a huge part in my company’s growth.

Now, if you don’t know what I mean when I say “yarn club,” just think of a Fruit of the Month club — it’s more or less the same thing, but with yarn instead of fruit. They’re pretty standard in the knitting and crochet world and, though they might not be as common in other crafting industries, at their core, they’re really just a subscription service that can apply to all kinds of businesses. Whether you sell digital products (such as pdf sewing patterns), or physical products (maybe needle-felted animals), or provide some sort of service (like business coaching), all of those can be adapted to include a subscription based product — and that product can be hugely beneficial to your business.

Why? Because unlike regular sales where the customer has to make a purchasing decision each and every time he or she hits the “Buy” button, a subscription requires that decision only once. Instead of chasing individual sale after individual sale, a well designed subscription service can create a steady cash flow that provides a company with a reliable financial baseline. It completely changes your relationship with your customers as well — instead of being anonymous buyers, they become people you know and welcome back month after month. For me, that’s impacted way more than just the finances — I love the relationships it created, and I think of my club members as my own special community of friends that I get to dye for each month.

But in order to make subscriptions work, you’ve got to understand what it is that would really motivate your customers to make that commitment. In other words, what makes the subscription more special than just buying off your site? Magazines tempt you with a discounted price; CSA subscriptions are offering straight-from-the-farm freshness; at SpaceCadet, our club yarns come in exclusive colourways and with fabulous gifts that non-subscribers can’t get their hands on. If you do it right, a subscription service gives you the chance to look at your regular product with fresh eyes and transform it into something extra special.

So, ok, how do you set up a subscription service? At SpaceCadet, we use two different club models: a set subscription that’s prepaid, and a pay-monthly model. Both of them are great in their own ways, but both have pros and cons to consider.

For our set-subscription clubs, the InterStellar Yarn Alliance and the SpaceMonster Mega Yarn Club, customers choose either a six-month or twelve-month option, and we send out the parcels every other month. Depending on your product, a subscription service could be for a different length of time (six weeks? three months? two years?), and you can send out your product once a month, once a week, every other month, or every quarter. It’s really customisable to whatever will work best for your business. Once you’ve decided on your subscription set-up, all you have to do is create a sales page on your website and add a PayPal “Buy Now” button — and then keep track of the customers who sign up and start sending out their parcels!

And there are advantages to a set subscription: the roster of subscribers is stable — they’re in for the duration of the subscription period — and, because they’re paying up-front, the finances are more stable too. But the flip side is that those up-front costs mean the customer has to make a bigger commitment — for a pricier product, they might hesitate to join. At SpaceCadet, we take that as a cue to be doubly careful with our finances too, because the money we receive from our customers has to not only cover the costs their parcels until their subscriptions end, but also all be available for refund if that should ever become necessary (what my husband calls the “Stephanie Gets Hit By A Bus” scenario). For me, that means I keep all our club money in a second company bank account, completely separate from our working capital, and release it back to the company in segmented amounts only as the corresponding product is shipped to the customer. I won’t lie, that’s a pretty tedious process, but it ensures our customers never have to worry that we’ll be in the nightmare position that other club managers have found themselves in, having run through the club funds too soon and unable to deliver product or refund the customers’ money. When our club members are trusting us to hold their money for a year, I take that responsibility very seriously!

We also have another subscription service, the SpaceCadet’s Mini-Skein Club, which is set up as a pay-monthly subscription, and we facilitate this through a PayPal “Subscribe” button. When a customer joins this club, PayPal automatically deducts a set amount from their account (or their linked credit card or bank account) on the same date each month, and then notifies us that we’ve been paid. We track those payments and send the club members a parcel every month that they continue their membership.

There are great advantages to a set-up like this. Because the subscription is broken up into monthly payments instead of a large lump sum, it’s easier for a lot of our customers to afford and so they don’t hesitate to try it out. And this kind of subscription allows them to join and leave any time they like, which means it doesn’t feel like such a big commitment, especially for newer customers. I love offering that kind of flexibility to our fans, but of course it has a flip side as well: because customers are joining and leaving constantly, the club roster changes each month, which can be really confusing and hard to keep track of if you’re not well organised. And, as the roster changes, so too does the income, so this set-up can be significantly less stable from a financial point of view. The flexibility is great, but just make sure you’ve got your systems in place before picking this option!

One last and very important thing to keep in mind: if you receive payment this year for supplies you won’t purchase until next year, the IRS might view the entire payment as net profit. Make sure you check with your accountant before setting up any subscription service, to ensure you design it in a way that doesn’t cause you any tax headaches later. Ask me how I know…!

Our subscription clubs have been completely transformative to SpaceCadet. We have tons of fun creating yarn — and community — for our club members, and their commitment to the clubs gives us so much freedom and scope to grow. I can remember as clear as a bell the day my friend said, “You should start a club.” I thought she was crazy, but she was so right.

Tip from Stephanie: How to Set Up PayPal Buttons

1.  In PayPal, click on the Merchant Services tab
2. And then click on “Create payment buttons for your website”
3. That takes you to a page with really great step-by-step tutorials for each type of button. Just pick your button and follow the steps. Easy!

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If you have any questions about how to set up a subscription club for your business, please leave a comment and Stephanie will be happy to respond.

Have you been part of a craft-based subscription club? What did you enjoy about it? What ideas do you have for clubs like these?