Reference

Subscription Box Glossary

Every term you'll encounter running or evaluating a subscription box business — explained in plain English with the formulas and benchmarks behind them.

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Annual Recurring Revenue (ARR)

Total subscription revenue expected over 12 months. ARR = MRR × 12. It is a simple way to describe business scale and growth trajectory.

Average Revenue Per User (ARPU)

Average monthly revenue per active subscriber. ARPU = total MRR ÷ total subscribers. Rising ARPU usually means subscribers are upgrading or tiering up.

CAC (Customer Acquisition Cost)

Total spend to acquire one new subscriber. CAC = total marketing spend ÷ new subscribers acquired. Healthy boxes recover CAC within 6 months.

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CAC Payback Period

The months needed to recover what you spent acquiring a subscriber. Payback = CAC ÷ monthly gross profit per subscriber. Under 6 months is healthy, while above 12 months is a warning sign.

Cancellation Flow

The sequence of screens and offers a subscriber sees when they try to cancel. A good flow can save 15-25% of would-be cancellations by offering pause options, discounts, or feedback prompts.

Churn Rate

Percentage of subscribers who cancel in a given month. Churn = subscribers lost ÷ starting subscribers × 100. It is the single most important survival metric for a subscription box.

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COGS (Cost of Goods Sold)

Every cost to produce and deliver one box. It includes product cost, packaging, inbound shipping, outbound shipping, fulfillment labor, and platform fees. COGS should not exceed 55% of your subscription price.

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Contribution Margin

Revenue remaining after all variable costs, before fixed overhead. It is the amount each subscriber contributes toward rent, software, and salaries.

Curated Box

A subscription model where the brand selects what goes in each box. It usually has higher perceived value than replenishment, but churn risk is higher as novelty fades.

DIM Weight (Dimensional Weight)

A carrier pricing method that charges based on box size, not just actual weight. Formula: length × width × height ÷ 139 for UPS/FedEx or ÷ 166 for USPS. If DIM weight exceeds actual weight, you pay the higher amount.

Dunning

Automated process of retrying failed payments and notifying subscribers. Payment failures cause 20-40% of all churn, and a good dunning setup can recover 50-80% of failed payments automatically.

FIFO (First In First Out)

An inventory method where the oldest stock ships first. It is essential for boxes containing food, supplements, or beauty products with expiration dates.

Fulfillment

The process of picking, packing, and shipping boxes to subscribers. It can be done in-house or outsourced to a 3PL. Most boxes switch to 3PL between 300 and 800 subscribers per month.

Gross Margin

Revenue remaining after COGS, expressed as a percentage. Gross Margin = (Price − COGS) ÷ Price × 100. Healthy subscription boxes usually target 40-50%, and below 30% is a danger zone.

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Involuntary Churn

Subscribers lost due to failed payments rather than active cancellation. It accounts for 20-40% of total churn and is recoverable with dunning and card updater tools.

Kitting

The process of assembling multiple products into a single subscription box. 3PLs charge a kitting fee per box, typically $1-$3, in addition to pick and pack fees.

LTV (Customer Lifetime Value)

The total gross profit generated by one subscriber over their entire relationship. LTV = customer lifetime × monthly gross profit per subscriber.

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LTV:CAC Ratio

A comparison of what a subscriber is worth versus what they cost to acquire. The minimum healthy ratio is 3:1. Below 2:1 means you are losing money on every acquisition.

MOQ (Minimum Order Quantity)

The smallest quantity a supplier will sell. It is critical for planning inventory buffer and cash flow before launch.

MRR (Monthly Recurring Revenue)

The total predictable revenue from all active subscribers in a month. MRR = total subscribers × monthly price. It is the core health metric for subscription businesses.

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Net Margin

Profit remaining after all costs including COGS, overhead, and marketing. Healthy subscription boxes usually target 15-25% net margin, while below 10% is fragile.

Pick and Pack

Warehouse work that involves selecting products and packing them into boxes. 3PLs usually charge per item picked, typically $0.20-$0.50, plus a base pack fee.

Replenishment Box

A subscription model that delivers consumable products subscribers regularly use up. It usually has lower churn than curated boxes because the product is a repeat need.

Retention Rate

The inverse of churn rate. It is the percentage of subscribers who remain active month to month. Retention = 100% − churn rate.

SKU (Stock Keeping Unit)

A unique identifier for each distinct product variant. Managing SKU count is critical for inventory accuracy, especially in kitted boxes with multiple items.

Spoilage Rate

The percentage of inventory lost to damage, expiration, or overstock. Budget 1-3% of inventory value as a spoilage buffer in COGS calculations.

Subscriber Lifetime

The average number of months a subscriber stays before cancelling. Lifetime = 1 ÷ monthly churn rate. At 7% churn, average lifetime is 14.3 months.

3PL (Third-Party Logistics)

An outsourced fulfillment partner that warehouses inventory and ships boxes. It is typically cost-effective above 300 to 800 boxes per month, depending on product type.

Voluntary Churn

Subscribers who actively choose to cancel. It is usually caused by subscription fatigue, poor value perception, or product quality issues, and it is separate from payment failures.

Win-Back Campaign

A marketing sequence that targets former subscribers to reactivate them. It is usually more cost-effective than acquiring new subscribers because former subscribers already know the product.

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