Written by: Amelia Hoge
After months of discussion around selling Birchbox (a popular startup known for its monthly beauty subscription boxes) to big potential buyers such as QVC and Walmart, the company was ultimately rejected. Thankfully, as of last week, Viking Global Investors stepped in to invest $15 million into the company, giving them a majority stake in the business.
Birchbox launched in 2010 and shortly became a pioneer in the startup beauty industry. The company is also responsible for kickstarting the subscription box craze and as of today, there’s a subscription box for just about anything–beauty, clothing, coffee, crystals, tampons, dog toys, socks, you name it. There’s something for everyone.
Although Birchbox was founded 8 years ago, the company just turned a profit for the first time last year after two rounds of layoffs and budget cuts. Prior to their first profitable year, the company struggled to stay afloat, with 2016 being their worst year in business.
One of the core issues with Birchbox’s business model is there is no incentive or streamlined process for customers to buy their full-sized items. The ultimate goal in the company’s business model is to get customers to buy the full-sized products on their website or brick and mortar locations after trying out the sample sizes through their subscription boxes. The problem is that since there is no clear process or incentive, customers could just as easily buy the full-sized products from other companies such as Sephora or Ulta, which have very strong e-commerce and a lot more physical locations.
Another issue is with the company’s customer service experience. After doing some digging on my own, I noticed a very large quantity of negative customer reviews that addressed issues with the e-commerce process and with the product selection process. E-commerce in today’s world provides customers with the freedom of choice. If you are unhappy with the online experience from one company, chances are there’s another company that sells the same products. If you had to choose, would you stick with the company with terrible customer service or a company of equal value with high-quality customer service?
The company is now facing competition from major beauty brands that have launched their own subscription boxes (such as PLAY! by Sephora). With this new infusion of cash, Birchbox’s CEO Katia Beauchamp hopes to improve and fine-tune the company’s business model in order to stay in the lead. In her words, “We are prioritizing product innovation, the evolution of our digital experience, and scaled partnership opportunities.”
We would love to hear from you–do you currently use any subscription box services (beauty or otherwise)? Let us know in the comments!
Thanks for reading this week’s Monday Reads!
National Retail Federation Student Association @ FIT
Fast Company | Elizabeth Segran (May 4 2018): Here’s Why Nobody Wants To Buy Birchbox, Even After VC’s Spent $90M