What is Kitting and How Can it Boost My Sales?
With the invention of subscription boxes, kitting has become all the rage. If you run a small business, you may be wondering: what is kitting, and how can it boost my sales? Kitting can range from a super simple process to a complex, time-sensitive operation. Let’s dig into what kitting is and how it affects your relationship with your 3PL partner.
What is Kitting?
Technically speaking, kitting is a warehouse service that combines multiple SKUs into a single SKU. What does that mean in the real world? It means combining several related products into a kit or bundle for customers to use and enjoy.
Kitting can range from simple bundles to extensive sets. Let’s take a look at two different examples of kitting for businesses.
Bundles are simple kits that allow you to provide customers with options when selling multiple products together. Say you sell pajamas, and offer tops, bottoms, and slippers in men’s, women’s, and children’s sizes. In the beginning, you may offer them as simple sets, where customers can choose one size and one style. This would allow you to give the pajamas a single SKU.
But what if a customer wants to order their top and bottom in different sizes? Maybe you’d like to offer further customization for slipper size, instead of “one size fits all”? Or perhaps you want to allow customers to mix and match tops and bottoms? Now each product needs its own SKU, and in turn, your business needs to bundle the products with kitting.
Simple bundles can benefit your business greatly by providing customers with more choice in their purchase.
There are over 3,500 companies in the United States currently selling subscription boxes. The rise of subscription boxes has complicated assembly and kitting, but it has also given customers more choice in what they buy.
Much like with bundles, subscription boxes combine multiple products or SKUs into a new product or SKU. The products change on a regular schedule, typically each month. Customers may also have the ability to customize or approve what goes into their box.
For example, say you sell a family Bible story subscription box. Each month, families receive a box with a Bible story, a craft, and a workbook. The box only needs one copy of the Bible story to share but needs separate crafts and workbooks for each child. There are also two options for the craft each month.
On top of that, families are able to change the size of the box each month, as they may only want to receive materials for school-aged children during the summer. This is where advanced kitting for subscription boxes comes into play.
Assembly and Kitting
The biggest complication when it comes to kitting is assembly. Once you begin combining products, you now need someone to provide packaging and assembly services for your kits. This is the point where many home-run businesses look to a 3PL partner for assistance, because it adds a level of complexity to fulfillment.
The Kitting Process in Warehouses
Kitting is typically handled one of two ways in third-party fulfillment warehouses. Some warehouses opt to kit packages ahead of time, so that the actual fulfillment process is faster. They may use forecasted sales to guess how many of each box type or customization will be ordered. This process is best for simple kits and bundles with high order volumes.
The other warehouse kitting process is assembling kits on the fly. As each order comes in, the SKUs are combined and assembled. Essentially, these boxes are made to order. This process is best for more complex kits with irregular or unknown order volumes.
Which Kitting Process is Better?
In addition to the obvious benefits of both processes, there are a few downsides. Kitting in advance means that any unused kits will have to be disassembled. For this reason, many 3PL companies kit in batches, so that they don’t end up with leftovers when a client stops selling a certain kit.
The downside to kitting on the fly is that it consumes more time per order and may be more costly. However, if you have complicated kits or subscription boxes, it may be the best process for you. While complex kits may be more expensive to assemble, they are often extremely profitable once sold.
Kitting for Subscription Boxes
Subscription boxes add a new factor to the complexity of kitting: time. Typically, your 3PL partner will provide you with a cut-off date each month to provide your current subscription list by. This cut-off date will launch the kitting process in the warehouse.
Subscription Box Inventory Management
Inventory management for subscription boxes can get complicated quickly. When beginning a subscription service, it’s important to consider which category your box will fall into:
- Standard – These boxes are bundles that allow no customization. Every customer receives the same box, but the box contents change each shipment.
- Customized – These boxes allow customer “approval” or full customization of contents and change each month.
- Sequential – These boxes may be standard or customized, but stem from a start date, rather than changing each month. Examples of sequential boxes include boxes for each month of pregnancy, as well as learning boxes where each box builds upon the last.
- Restock – These boxes are for ongoing, regular shipments of the same item, like toothbrush heads or dog treats. In many cases, these are not even considered subscription boxes, just subscription goods.
Once you know what type of box you’d like to offer, you can begin to discuss subscription box inventory management with your 3PL partner. They will most likely provide you with stock amounts that you will need to provide each month, and they will help you come up with a back-up emergency plan if you run out of one product or order too much of another. They’ll also help you figure out storage options if you sell something with specific storage needs, like dry goods.
Subscription Box Fulfillment Services
As your subscription box becomes more complex, so does your fulfillment. Sequential restock boxes are relatively simple to fulfill. But, when you add customization, even a simple box can become logistically complex.
Fulfilling complex boxes at home can take lots of space and be very time-consuming. For this reason, most subscription box offerings are fulfilled by 3PL partners, rather than by the company itself. Choosing a third party will allow you to focus your time on the contents of the box, which is what will keep customers coming back for more.
Subscription Box Fulfillment Costs
It’s important to remember that you need to make up for any assembly and kitting costs with your box sales. Planning for over-ordering losses and extra costs when you price your box will help you keep your boxes profitable. A good 3PL partner will be able to help you with pricing, as well as with developing a fulfillment plan that is efficient and accurate.
Subscription Box Shipping
In comparison to inventory and fulfillment, shipping may be the simplest part of the subscription box process. In fact, for standard, sequential, and restock boxes, it may be even easier than normal shipping because it can be planned for in advance.
Most likely, your 3PL partner will stagger your subscription box shipping so that they won’t have to make an enormous shipment once a month. However, they can help you stagger your mailing list as well so that customers receive their box around the same time each month.
Cancellations and Customer Service
Online subscription services are notoriously difficult to cancel. One way you can stand out online is by making sure that cancellations and customer service are only a click away. If you don’t have 24/7 customer service available to them, you should have an automated way for customers to cancel their subscriptions on your website. While you may see drops in your subscription numbers, a positive company experience means that customers may re-subscribe at a later date.
It is also important to provide excellent customer service with your boxes. Subscription boxes are in a grey area between goods and services, which means that keeping in touch with your customers is crucial. A good 3PL partner can help manage refunds, returns, and customer communication to help your subscription list grow.
Am I Ready to Start a Kit or Subscription Box?
If you were wondering “what is kitting?”, hopefully, you now have a better understanding of what it is and why you might need it for your business. If you’re considering starting to offer bundles or subscription boxes, here are a few good ways to know that you’re ready:
- Do you have a steady order volume? Will it allow for pre-assembly or will it require assembly on the fly?
- Do your customers desire further options or customization? Do you have information on what options they’d like (from customer service or reviews)?
- Is there a small group of consistent, dedicated customers that you market to regularly? Can you count on them to purchase your new bundle or box?
- Do you have a broad enough product offering to support a subscription box? Will you continue to develop enough new products to sustain it?
- Do you have a reliable 3PL partner with kitting and assembly experience that can guide you through the process?