Busy, busy, busy- the epitome of modern life. For those on the go, the ever changing face of the beauty industry presents buyers with more options than sense. Enter Birchbox.
Established in 2010, the beauty box has taken the American market by storm, growing its reach through acquisitions and continuous innovation. Birchbox now operates in six countries, has over 800 brand partners and more than a million subscribers (Chhabra, 2015). Its purpose is clear: customers subscribe, receive a personalised box once a month, review products and then have the option to buy the products they like on the Birchbox website.
Becoming Birchbox
Birchbox was founded by Katia Beauchamp and Hayley Barca, with the intention to disrupt the stagnant online beauty market; in 2010, only 2% of beauty sales were made online, so they set about developing a subscription service which targeted the gap in the market (Retail Gets Real Podcast, 2019).
So, how has Birchbox grown from $1.4 million in seed money to a successful business which funds its own growth and that remains in the top 5 of subscription e-commerce sites (O’Connor, 2017; Chen et al., McKinsey Analysis, 2018) ?
Lets take a look at the evolution of Birchbox to shed some light on its success…
However, Birchbox is not without its problems. Its innovative business model has attracted several ‘copycat’ competitors, such as Ipsy and Sephora Play. Despite this, Birchbox’s investment in data has become its greatest advantage, as it has harvested information for their consumers and their clients (Chhabra, 2015). Birchbox has also grown in other markets through acquisitions, such as Joliebox in 2012, allowing it to monopolise the French market for subscription beauty boxes (Casserly, 2012).
Below is an outline of the Birchbox Business Model, argued by Chhabra (2015) to be the secret to its success.
Lets dive deeper into the business model canvas and look at the specific blocks which have contributed to Birchbox success.
Revenue Stream
1) Birchbox was the first of its type to integrate a subscription beauty box and an online retail site where customers could purchase their ‘box favourites.’ This element of its innovative business model was what initially drove Birchbox success.
2) Subscriptions, i.e. the must have for the uber busy and the uber trendy, have soared in popularity. Now, individuals can subscribe to almost anything, from recipe boxes to razors to vitamins and video games. Over the past 5 years, the subscription e-commerce market has grown by over 100%, with 15% of online shoppers subscribing to an e-commerce service from 2017 to 2018 (Chen et al., 2018).
Why? Well, millennials seem to be at the root of the subscription rise, holding 92% of all active subscriptions. Is it because we have never known a time without the internet? Or that we have never shopped without smartphones? Either way, millennials are driving the subscription market and our reliance on peer review as opposed to advertising is also what makes the Birchbox model so successful…
Key Resources
Birchbox’s key resources include the ability to read reviews and witness influencers and social media stars using the box- according to Kelton Research, 84% of millennials turn to user-generated content to shape their decisions, making Birchbox our generations dream. (Nelson, 2012). This is also reflected in its channels, where collaborations with organisations and individuals bring Birchbox into the forefront of multiple different platforms
Channels
As mentioned above, Birchbox uses multiple channels to market its products and the business does this very successfully. Over 75% of its traffic in 2017 came from mobile and Thomas (Birchbox’s UK Marketing Director) attributes Birchbox’s relationship with Facebook as a key driver in their success (The Retail Bulletin, 2018).
Value Proposition
Value proposition is a key element in Birchbox’s business model canvas. Part of Birchbox’s success is linked to its adaptation and innovation in a changing marketplace, drawing in new customers and retaining current ones.
Accessibility– in terms of both affordability and its appeal to the average individual. The standard subscription is about $10 a month, making it affordable and its brand appeal makes it a fun subscription that is inclusive to anyone who wants to try new products before they buy.
Personalisation– dry, combination, oily, interested in skincare, haircare or make-up. These are just a few of the options that customers can input in order to receive a fully customised box that is unique to their needs. You can also choose your box design, making it truly one of a kind.
Where Should Birchbox Go?
Looking to the future, how should Birchbox differentiate itself and build on its innovative business model? For subscription service business models, there is “room to grow” (Chen et al., 2018). Please see the video below for an insight on how the business can develop.
Birchbox’s success has undoubtedly been down to its business model and innovative strategy that leaves space for adapting to the market. It embodies SMAC (smart, mobile, analytics, cloud) (Rouse, n.d.) (please see diagram below for more information) and its investment in data has proven to have paid off.
With ‘out of the box’ thinking, Birchbox disrupted a stagnant market, establishing itself through its unique business model.
References:
Bazaar Voice. (2012). Talking To Strangers: Millennials Trust People Over Brands. Bazaar Voice.Retrieved from http://media2.bazaarvoice.com/documents/Bazaarvoice_WP_Talking-to-Strangers.pdf.
Birchbox. (2017, April 11). Birchbox: Beauty Discovered. Retrieved from https://www.youtube.com/watch?v=3jxajdPkreE#action=share.
Birchbox. (2017, April 21). Birchbox May 2017: Sample Choice & Curated Box Reveal. Retrieved from https://www.youtube.com/watch?v=nJsFEYm2QGs.
Casserly, M. (2012, September 13). Birchbox Goes Global, Acquires Paris-Based Copycat ‘JolieBox’. Forbes.Retrieved from https://www.forbes.com/sites/meghancasserly/2012/09/13/birchbox-goes-global-acquires-paris-based-copycat-joliebox/#1ced69095049.
Chen, T., Fenyo, K., Yang, S., & Zhang, J. (2018). Thinking inside the subscription box: New research on e-commerce consumers. McKinsey & Company. Retrieved from https://www.mckinsey.com/industries/high-tech/our-insights/thinking-inside-the-subscription-box-new-research-on-ecommerce-consumers.
Chhabra, E. (2015, September 23). Key To Success: Beauty Box Company Birchbox Say It’s Not Just About The Box. Forbes.Retrieved from https://www.forbes.com/sites/eshachhabra/2015/09/23/key-to-success-beauty-box-company-birchbox-says-its-not-just-about-the-box/#47d6129d6511.
Emily Schuman. (2015, April 25). Collaboration with Birchbox. [Instagram Post]. Retrieved from https://www.instagram.com/p/13LKbhteU7/?hl=en.
Kurt, D. (2018, September 7). Who Are Millennials and Why Do They Matter? Investopedia.Retrieved from https://www.investopedia.com/articles/investing/071715/who-are-millennials-and-why-do-they-matter.asp.
O’Connor, C. (2017, April 12). Pioneering Beauty Start-up Birchbox Turns Profit After Tough 2016. Forbes.Retrieved from https://www.forbes.com/sites/clareoconnor/2017/04/12/pioneering-beauty-startup-birchbox-turns-profit-after-tough-2016/#4eeab2f26fd5.
Rouse, M. (n.d.) SMAC. Tech Target.Retrieved from https://searchcio.techtarget.com/definition/SMAC-social-mobile-analytics-and-cloud.
The Retail Bulletin. (2018, January 8). Birchbox enjoys record year for growth. The Retail Bulletin.Retrieved from https://www.theretailbulletin.com/news/birchbox_enjoys_record_year_for_growth_08-01-18/.
Thorne, B. (Producer) (2019, February 4). Birchbox CEO on the evolution of the disruptive beauty brand. [Podcast]. Retrieved from https://www.nrf.com/blog/birchbox-ceo-evolution-disruptive-beauty-brand.
Katharine's Blog 
Hi Katharine, an interesting breakdown of Birchbox’s digital business model. Personally, I love the company and am a subscriber myself. You point out in one of your figures that a key advantage of Birchbox over other cosmetics subscription services is its supply chain and its management. I agree with you and think that maintaining strong relationships with key digital supply chain suppliers and stakeholders is what keeps Birchbox afloat. Being the first to market with its digital business model, Birchbox created a great brand position and brand for itself. However, even with these advantages, I feel that Birchbox are losing revenue when providing free or heavily discounted boxes to lure in new customers. Do you think it is a sort of marketing strategy and is actually a good investment or do you think Birchbox should change this part of their strategy to rake in more revenue from full priced boxes?
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Hi, thank you for taking the time to read and comment!
I agree with you in the fact that Birchbox is certainly struggling more in a crowded market, however I don’t think that discounting their boxes will negatively affect them in the long-term, purely because its personalised approach to boxes (through its data collection) means that consumers quickly ‘fall in love’ with the service. I think this is highlighted by the fact that in 2017 Birchbox’s profit grew as it enjoyed a record year for growth, showing that its strategy isn’t limiting its profit (https://www.theretailbulletin.com/news/birchbox_enjoys_record_year_for_growth_08-01-18/) ! Overall, I think Birchbox needs to continue to balance its approach but its up-to-date collaborations and global reach makes it a trendy and present competitor in the marketplace.
Thank you,
Katharine
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Hi Katharine.
Thank you for sharing the story. This is very interesting topic for me and it is my first time knowing about Birchbox and business model like this. I rarely purchase cosmetic online because of uncertainty if those products would fit me, so I usually try at the store before making decision. I feel that this is very clever business idea that collect all customer profile such as skin type and then manage products that would suit with each individual. This business idea will also allow customer to discover new brands that they have never used before.
However, I wonder if customers got a beauty box and do not like the product that company sent as they never known what they would get from the subscription services. Do you think it will be problem for Birchbox in the future? Or do they have an option for subscribers to choose
products that they want to try by themselves?
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Hi Micky, thank you for reading and engaging with this post!
It is a very interesting business model, but I definitely agree with you about the uncertainty of ordering cosmetics online. I think the key with Birchbox is that it’s all about trying new products that might work for the individual, so in some boxes there may be a product that doesn’t match with what the customer needs or wants. One thing that makes Birchbox successful is its reviewing service. Basically, after the customer has used the products in the box, Birchbox asks them to review the products. This means that Birchbox gets more information about what the individual wants and what other individuals with the similar skin types/ hair type etc might like.
Presently, I don’t believe they have an option that allows customers to select products, however, it is something that they could potentially investigate in the future!
Thank you,
Katharine
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Hi Katharine, I think that the whole idea of Birchbox is a great business model with a personalised box for customers. I think they definitely tapped into the subscription service market at the right time, as you point out that it has been increasing in popularity in the past few years. Their interaction with social media influencers and their presence on different platforms definitely helps tap into the younger market. I was shocked at how cheap the subscription box was compared to other subscriptions I have known of and I am actually considering subscribing myself! Personally I feel the personalised touch that birchbox gives its subscribers helped with the success of their business model more than anything.
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