EIS Mini Project – Ecosystem Strategy BIRCHBOX
What is Birchbox?
Birchbox is the leading discovery commerce platform. We are redefining the retail process by offering
consumers a unique and personalized way to discover, learn about, and shop the best beauty, grooming,
and lifestyle products on the market. Headquartered in New York City, Birchbox launched in September
2010 and extended into men’s products in April 2012 with Birchbox Man.In September 2012, Birchbox
acquired Paris-based JolieBox, gaining business units in France, the UK, and Spain to take the company
global and become the international market leader in discovery commerce. Birchbox has been featured
in USA Today, The New York Times, Time, Bloomberg Businessweek, InStyle, and Marie Claire, among
other major national publications. Birchbox is a 360-degree process: try, learn, buy.
The Birchbox
Each month, you'll receive a selection of samples that we’ve tried (and retried) ourselves. We source our
samples from both well-known brands and emerging gems. The women’s subscription includes
everything from skincare to makeup, as well as fun non-beauty extras. The men’s subscription delivers
top-tier grooming products in addition to lifestyle accessories ranging from hip socks to tech accessories.
Check out the ever-growing list of products in our Women’s Shop and Men’s Shop.
The Content
Our original content helps you get the most out of your samples. We’re a source of inspiration, advice,
and information. We’ll show you how to master techniques and upgrade your daily routine with articles,
expert interviews, and videos. Dive into the Birchbox Magazine and explore the The Guide.
The Shop
When you are ready for more of the products you sampled, you can purchase full-size versions directly
from the Birchbox Shop. We have a generous loyalty program that rewards you every time you shop,
refer friends, and give feedback on your monthly samples. You can redeem Birchbox Points and save on
any full-size or gift purchase.
“About Us”
at www.birchbox.com
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Danielle Mosse & Diana Vaughn
EIS Mini Project – Ecosystem Strategy BIRCHBOX
Value Vision
Direct to Consumer Sales
Traditional beauty product sales are through a retailer, such as a large department store, single
brand store, or specialty store. The supply chain from beauty product manufacturers to
distributors to retailers and consumer was the “norm.” Birchbox changed the way in which
customers purchase beauty supplies. The direct to consumer sales concept is a not a new one in
beauty; Mary Kay is a classic example of success direct sales model. What differentiates
Birchbox and creates value for the customer (and the ecosystem) is that the interaction
between customer and retailer in Birchbox’s involves much more than simple sales. To
understand how the Birchbox direct to consumer sales creates value, it is necessary to
understand the entire Birchbox concept.
Invitations
After a friend of mine continually raved about her Birchbox subscription all summer, I went
online to sign up. I instead submitted my name to a wait list. Once a subscription opened, I was
invited to join Birchbox. Three weeks later, I was invited to join. Was there really a wait list? Did
someone else really close their subscription three weeks after I added my name to the wait list?
Even though my rational head told me this was a genius marketing ploy to make customers feel
like they’re joining an exclusive network of beauty-subscribers, I let out a joyous “Yay!!!” when
my email invitation finally arrived. While researching the evolution of Birchbox, I realized this
invitation system has legitimate roots. The company was founded at Harvard Business School
and launched with about 600 subscribers. Social media (particularly Facebook and YouTube)
provided the marketing mechanisms for members to invite their friends to join.
Beauty-Editor Products
Birchbox was founded on the principle that women need a personal beauty editor (think Elle,
Allure, and Style magazine beauty editors) to cut through all the clutter of the marketplace.
More specifically, they need a friend who is a beauty editor who receives beauty samples all the
time and can pass them along to her friends. These samples may or may not be available to the
public. Established beauty brands may send samples out to test new products or promoted
classic products. New beauty brands may not have the advertising budget to market products in
a major magazine, but they can send a sample of a fantastic product and beauty editors may
add it to their column. Unfortunately, few women actually have a friend who is a beauty editor.
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Danielle Mosse & Diana Vaughn
EIS Mini Project – Ecosystem Strategy BIRCHBOX
The next best thing is Birchbox: A company that negotiates receiving all these new and
otherwise unavailable samples from established and new brands and mails them to customers.
High Quality Product Selection
The new product from an unknown brand that makes it into the Allure Beauty Editor’s page will
be a “Must Have” product for millions of women. It’s the best advertising a product can get
because it’s based on actual usage, not paid advertising (established brands and products that
make it into the list are also generally very high quality, however there is sometimes suspicion
around selections for brand that also advertise on 10 pages throughout the magazine). The
beauty editor has actually tried the product and actually recommends it. Birchbox replicates
this quality assurance. The products are selected because they’re high quality.
Personalized Product Recommendations
The additional benefit of modeling Birchbox as a “personal beauty editor friend” system is that
no two boxes have to be identical. Anyone who has put together goodie bags for a party knows
that it’s nearly impossible to get the same number of all the items you’re putting in each bag.
Birchbox has solved this problem, too, and solved it with the customer in mind. The specific
products that are shipped to customers are selected to match the customer’s online profile.
The profile includes product type preference, level of “beauty knowledge,” reason for signing
up, personal beauty style, hair type/color/condition, complexion, ethnicity, and top skincare
concerns. Of course, it also includes basic demographic information such as age, income and
gender.
A “Gift” to Every Customer
Brichbox boosted it’s recognition through several YouTube videos of women opening a
Birchbox. These women were so happy and excited. It literally was a gift to themselves. This
concept is valuable to customers for several reasons.
First, it’s an inexpensive. The monthly subscription is only $10 a month. That’s less than 2 Venti
Lattes a month. Second, it’s very easy. It’s all online and the Birchbox is shipped to your door.
Third, it’s a “set it and forget” model; the subscription renews automatically. Fourth, it’s low
commitment. The samples are just that: samples! Easy to test out on yourself, give to a friend,
or throw in your makeup for later. Likewise, if you receive a sample you don’t like, it’s no big
deal. It was just a sample. You didn’t have to pay $26 at the beauty store to then find out you
hate the product.
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Danielle Mosse & Diana Vaughn
EIS Mini Project – Ecosystem Strategy BIRCHBOX
One additional benefit of the sample-model that Birchbox may or may not have predetermined, is that it appeals to a very specific, very lucrative, market: women who travel a lot.
Over the summer, when I heard about Birchbox, I was working as a consultant. I was flying
across the country every week. I had to ration my beauty routine to accommodate FAA carry-on
regulations (because when you flight that much, you never check your bags). A company like
Birchbox fills a niche need for women who prefer sample sizes of high quality products picked
just for them. These women are also spenders. They have high disposal income, are usually
aged 24 – 35, and pay attention to current trends. My recommendation to Birchbox would be
to create subscription levels and offer additional samples per month to “elite” members.
Product Feedback & Data
Customers and beauty product marketing managers alike want to know what consumers think
of a product. Birchbox incorporates customer reviews into their website for the benefit of all.
However Birchbox also has objective data on products. Customers who like a specific sample
can go online and easily order a full size version of the product. This ability to “test” a product is
beneficial for the customer and for the company. It is a metric by which to measure the success
of the product within a specific, confined market. If 1,000 samples are sent out to Customer
Segment A (who all share concerns about puffy eyes and dark circles) and 170 customers come
back to purchase the full size product, you have a 17% customer return. Collecting this data in
the real world would require additional work on the part of beauty product marketing
managers. With Birchbox, it’s a simple data pull.
The Birchbox Ecosystem
Promoters
(Specialty retailers, beauty
magazines and editors)
Sample
Design
Product
Birchbox
Retailers
(Mass, department and specialty)
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Danielle Mosse & Diana Vaughn
End Customer
EIS Mini Project – Ecosystem Strategy BIRCHBOX
Innovation Strategy: Minimal Viable Footprint
Birchbox is an industry disruptor by creating a new minimal viable footprint to bring samples
and products to customers. Before Birchbox, samples were sent to promoters for review. A
few samples would then be provided to customers but at the promoters discretion of what
would sell to the mass public and not what a particular customer would need. End customers
purchased products through retailers and could only gain product knowledge through
promoters instead of testing the product themselves. As a result, brands only made money
from the retailers but relied on the promoters to selectively educate the end customer.
Birchbox revolutionized this ecosystem by selling samples directly to the end customer. For $10
a month, end customers can try samples products selected for them and subsequently make
the decision to purchase the product through Birchbox. By removing the promoters and
retailers, Birchbox gives both well-established and new brands the opportunity to reach
targeted customers. In addition, customers are able to gain knowledge on various products
through samples without being forced to purchase the full product.
Adoption Chain Risk
Today, when a makeup brand Stila sends a sample to 7% of Birchbox users they see 12% of
these users subsequently go online to purchase the product. This sales lift is more than 10
times what specialty retailers and department stores deliver when offering a sample product.
Birchbox currently offers more than 4000 brands online and continues to focus its core value on
the first-time customer and not becoming the next big retailer. However, when Birchbox began
it faced the challenge of getting customers to buy-in and brands to provide samples.
Understanding that big brands would not provide samples without a strong customer base and
that customers would not pay for samples unless Birchbox offered a variety of samples
including ones from well-established brands, the creators of Birchbox tested their concept in
business school before fully launching the company. Facing adoption chain risks from both
brands and customers, Birchbox used the testing period to determine whether brands would
continue to provide samples and if customers would be willing to continue to pay money for
samples.
The success of Birchbox occurred when the marketing department changed how customers
perceived samples. Previously, customers only received sample products after promoters had
deemed the product to be appealing to the general public. Samples were provided to
customers as a part of loyalty programs with retailers with all customers receiving the same
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Danielle Mosse & Diana Vaughn
EIS Mini Project – Ecosystem Strategy BIRCHBOX
sample product. When Birchbox captured 200 customers, they launched a YouTube video
shower a customer opening her sample package as if it was a present. Her visible excitement
over products that were selected just for her went viral. After the video, cosmetic brands
clamored to use Birchbox to not only reach customers with new products but also be a part of
the fun and excitement for the customer. With additional services such as online tutorial on
how to use the products, customers were finally able to “discover” products just for them
without having to buy first or follow promoters.
Final Thoughts
Although Birchbox is an industry disruptor, it achieved its success by being the first mover. This
business model can be imitated as customers will follow the company with the most brands and
brands will follow the customer base. Customers are not dependent on Birchbox and can easily
switch to another provider as long as the service offerings are marginally better. While
Birchbox utilizes a loyalty program to retain customers, the program is a basic retailer model
with points for referrals and purchases. If Birchbox wants to remain relevant in the cosmetic
retail industry it will need to continue to innovate.
References:
1. Birchbox website (www.birchbox.com)
2. Birchbox customer profile page (Diana is a member)
3. Drell, Lauren. Beauty Delivered: How Birchbox Is Disrupting the Cosmetics Industry,
8/16/11, http://mashable.com/2011/08/16/birchbox-katia-beauchamp-interview/
4. Lutz, Ashley. Business Insider: Birchbox is Really Effective Marketing, 08/15/13,
http://www.businessinsider.com/birchbox-is-really-effective-marketing-2013-8
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Danielle Mosse & Diana Vaughn