{"id":2811,"date":"2015-12-08T00:19:51","date_gmt":"2015-12-08T05:19:51","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/birchbox-opening-new-paths-for-beauty-e-commerce\/"},"modified":"2015-12-09T16:03:15","modified_gmt":"2015-12-09T21:03:15","slug":"birchbox-opening-new-paths-for-beauty-e-commerce","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/birchbox-opening-new-paths-for-beauty-e-commerce\/","title":{"rendered":"Birchbox: opening new paths for beauty &amp; e-commerce"},"content":{"rendered":"<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-banner.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-2798 aligncenter\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-banner-300x181.jpg\" alt=\"Birchbox banner\" width=\"431\" height=\"270\" \/><\/a><\/p>\n<p><strong>Birchbox: a success in redefining beauty<\/strong><\/p>\n<ul>\n<li>Since its founding in 2010, <strong>Birchbox has experienced significant success<\/strong> <strong>innovating consumers\u2019 behaviors with beauty \u00a0and e-commerce<\/strong>.\n<ul>\n<li>Birchbox is estimated to serve <strong>over a million customers, earning <\/strong>$<strong>170 million annually. <\/strong>The <strong>\u2018discovery commerce\u2019<\/strong> beauty company has<strong> raised $70 million+<\/strong> in venture funding, boasting an estimated valuation of $485 million.<a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a><\/li>\n<li>Organizationally, the <strong>company has grown to 150 employees,\u00a0<\/strong>while maintaining a <strong>positive reputation as an ambitious, \u2018work hard, play hard\u2019 culture<\/strong> that is <strong>attracting top talent such as ex-Sephora<\/strong> (Philippe Pinatel) <strong>and Apple<\/strong> (Ben Fay) <strong>execs<\/strong> for recent retail expansion.<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a><a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a><\/li>\n<li>The two co-founders (HBS MBAs \u201910) <strong>Katia Beauchamp and Hayley Barna have impressed investors<\/strong> (e.g., Viking Global) as well as young female entrepreneurs.<a href=\"#_ftn4\" name=\"_ftnref4\">[4]<\/a><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center\"><a href=\"https:\/\/www.youtube.com\/watch?time_continue=4&#038;v=9VTnYCSFU3E\">https:\/\/www.youtube.com\/watch?time_continue=4&amp;v=9VTnYCSFU3E<\/a><\/p>\n<ul>\n<li><strong>Birchbox is poised for greater growth<\/strong> \u2013 largely due to constantly assessing its business\/operating models\u2019 alignment with its vision \u2013 even amidst increasing <a href=\"http:\/\/www.buzzfeed.com\/michellerial\/is-your-startup-idea-already-taken\">competition<\/a>. It boldly aspires\u00a0<strong>to reach more of the 44 million US consumers<\/strong> in a $<strong>465 billion dollar global beauty industry<\/strong>.<a href=\"#_ftn5\" name=\"_ftnref5\">[5]<\/a><\/li>\n<\/ul>\n<hr \/>\n<p>&nbsp;<\/p>\n<p><strong>The idea \u2013 enabling \u2018beauty discovery\u2019 via redefined \u2018sampling\u2019<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-2796 aligncenter\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-FREE-Box-300x239.jpg\" alt=\"Birchbox-FREE-Box\" width=\"300\" height=\"239\" srcset=\"https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-FREE-Box-300x239.jpg 300w, https:\/\/d3.harvard.edu\/platform-rctom\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-FREE-Box.jpg 415w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/p>\n<ul>\n<li>It was an image women were used to: Sephora, a beauty retail powerhouse, and their <strong>\u2018free samples\u2019 with purchase<\/strong>; reps pushing perfume samples. <strong>Samples were relatively low cost ways retailers attempted to convert consumers<\/strong>. However, there was <strong>limited \u2018customization\u2019<\/strong> of samples, resulting in greater \u2018waste\u2019 (i.e., ROI estimates show over $100 million lost on unused samples)<a href=\"#_ftn6\" name=\"_ftnref6\">[6]<\/a><\/li>\n<li><strong>Enter Birchbox. <\/strong>The business model <strong>turned the previously tired \u2018samples\u2019 business on its head<\/strong>. The company centers on a <strong>subscription-based service that delivers a \u2018box\u2019 monthly<\/strong> (i.e., $10\/month for women; $20\/month for men), with samples curated for the subscribers\u2019 \u2018Beauty Profile.\u2019<a href=\"#_ftn7\" name=\"_ftnref7\">[7]<\/a> The belief is that with unique, customized samples, <strong>consumers <\/strong>are <strong>delighted with \u2018discovery\u2019 and trial of products, with relatively low commitment, <\/strong>and thus<strong> more likely to convert to full-sized purchases (<\/strong>which they can <strong>buy on Birchbox\u2019s site<\/strong>).\n<ul>\n<li><strong>The vision: <\/strong>to serve those who \u2018enjoy using the best products\u2019 but \u2018don\u2019t want to work too hard to find them,\u2019<\/li>\n<li><strong>For whom: <\/strong>young woman\/man 25-39 who loves beauty but \u2018isn\u2019t the MAC girl\u2019 (i.e., <strong>not someone well-versed in the universe of products out there, right for her\/him<\/strong>).<a href=\"#_ftn8\" name=\"_ftnref8\"><strong><strong>[8]<\/strong><\/strong><\/a><sup>,<a href=\"#_ftn9\" name=\"_ftnref9\">[9]<\/a><\/sup><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Screen-Shot-2015-12-06-at-10.46.26-PM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-2791 aligncenter\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Screen-Shot-2015-12-06-at-10.46.26-PM-300x172.png\" alt=\"Screen Shot 2015-12-06 at 10.46.26 PM\" width=\"398\" height=\"202\" \/><\/a><\/p>\n<ul>\n<li><strong>Revenue &amp; distribution channels: <\/strong>Initially, Birchbox relied on subscription fees and e-commerce to drive revenue. However, Birchbox has entered brick &amp; mortar retailing \u2013 with its flagship store in NYC t<strong>o better serve its mission and establish competitive advantage<\/strong>.<\/li>\n<li><strong>Data &amp; high quality service: <\/strong>both online and offline activity ultimately drive data and comparative advantage via\u00a0<strong>network effects<\/strong>\u00a0(i.e., more subscribers, more brands, more data)<\/li>\n<\/ul>\n<hr \/>\n<p>&nbsp;<\/p>\n<p><strong>How it works \u2013 aligning vision with business\/operating models<\/strong><\/p>\n<ul>\n<li>The business model hinges on three key operating model elements: a) solid <strong>infrastructure of beauty product suppliers<\/strong> (e.g., both \u2018indie and customer-favorite\u2019 brands) &amp; <strong>hooks to keep demand<\/strong>, b) content to encourage <strong>product trial-ability<\/strong>, and c) <strong>supporting organization.<\/strong>\n<ul>\n<li><strong>The brands\/products: <\/strong>partners are required to provide samples and sell full-sized products via Birchbox. Though this was a difficult term to \u2018sell\u2019 to partners initially, the founders\u2019 commitment to this has paid off (e.g., <strong>50% of subscription consumers purchase full-sized product on Birchbox<\/strong>, where credit card info is already stored, and represents <strong>30% of company\u2019s revenue<\/strong>).\u00a0<a href=\"#_ftn10\" name=\"_ftnref10\">[10]<\/a>\n<ul>\n<li>Partners are willing to collaborate given<strong> evidence of increased awareness\/sales after being featured <\/strong>(e.g., for niche luxury brands \u2013custom-perfume company Harvey Prince has grown 400% since partnering in 2010). <a href=\"#_ftn10\" name=\"_ftnref10\">[10]<\/a><\/li>\n<li><strong>Birchbox exclusives<\/strong> (e.g., partners co-brand products that are exclusively distributed on Birchbox\u2019s site)<\/li>\n<li><strong>Subscribers earn 10% <\/strong>on every purchase made on Birchbox\u2019s site (e.g., via Birchbox Points and Aces loyalty program)<\/li>\n<\/ul>\n<\/li>\n<li><strong>The content: <\/strong>there is heavy attention given to \u2018media\u2019 \u2013 i.e., contextualized selling of products via YouTube clips, Pinterest of more than 1 million followers. Birchbox\u2019s site also features:\n<ul>\n<li><strong>3 million+ customer reviews\u00a0<\/strong>help in decision making process and customer satisfaction<\/li>\n<li><strong>Expert articles and videos<\/strong> for featured products<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align: center\"><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Screen-Shot-2015-12-07-at-4.43.08-PM.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-2790\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Screen-Shot-2015-12-07-at-4.43.08-PM-300x161.png\" alt=\"Screen Shot 2015-12-07 at 4.43.08 PM\" width=\"415\" height=\"230\" \/><\/a><\/p>\n<ul>\n<li><strong>The organization: <\/strong>the founders first\u00a0focused on only two things \u2013 directly tied to business model and how they structured the org:\n<ul>\n<li><strong>Get the brands to feature <\/strong>(i.e., Partnerships)<\/li>\n<li><strong>Get consumers the products and make sure every customer gets a<\/strong>\u00a0<strong>response\u00a0<\/strong>(i.e., Customer Service\/Fulfillment)<\/li>\n<\/ul>\n<\/li>\n<li>As typical of start-ups of Birchbox\u2019s tenure, there have been <strong>shifts in operating model recently<\/strong> to better support the growing vision\n<ul>\n<li><strong>Opening of retail stores<\/strong> (trial and immediate gratification). In addition to its NYC flagship, it has a shop in D.C.\u00a0where visitors can \u201cBYOB\u201d (Build Your Own Birchbox) and receive makeup services\u00a0<a href=\"#_ftn11\" name=\"_ftnref11\">[11]<\/a><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><a href=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-store.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\" wp-image-2803 aligncenter\" src=\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Birchbox-store-300x169.jpg\" alt=\"Birchbox store\" width=\"413\" height=\"235\" \/><\/a><\/p>\n<ul>\n<li><strong>Change in top team: <\/strong>In August 2015, Barna stepped down as co-CEO when it became clear that long-term success (and ability to keep a clear vision and message) required a single CEO.<\/li>\n<li><strong>Category expansion <\/strong>(e.g., men. food) \u2013 Birchbox Man launched in 2012; there are rumors that more categories may be on horizon, similar to Gilt\u2019s expansion (e.g., Gilt Home).<a href=\"#_ftn12\" name=\"_ftnref12\">[12]<\/a><\/li>\n<li><strong>Global operations <\/strong>(e.g., operations in the UK, France, Spain, Canada, and Belgium)<\/li>\n<\/ul>\n<blockquote><p><em><strong><q>Brands spend money to connect with consumers, and consumers want the best product. We were asking both sides to change their behavior and it has really amazed us how willing they were.<\/q>\u00a0 &#8212; Katia Beauchamp<\/strong><\/em><\/p><\/blockquote>\n<hr \/>\n<p>&nbsp;<\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> http:\/\/mashable.com\/2014\/04\/21\/birchbox-raises-60-million\/#KO3iPEEtysqd<\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a> http:\/\/www.fastcompany.com\/3044266\/innovation-agents\/opening-the-box<\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> http:\/\/www.bizjournals.com\/newyork\/news\/2015\/12\/01\/birchbox-hires-ex-sephora-apple-execs-retail-grow.html<\/p>\n<p><a href=\"#_ftnref4\" name=\"_ftn4\">[4]<\/a> http:\/\/www.huffingtonpost.com\/laura-dunn\/women-in-business-qa-with_b_5811374.html<\/p>\n<p><a href=\"#_ftnref5\" name=\"_ftn5\">[5]<\/a> http:\/\/fortune.com\/2015\/08\/11\/birchbox-ceo-hayley-barna\/<\/p>\n<p><a href=\"#_ftnref6\" name=\"_ftn6\">[6]<\/a> Interview panel with Katia Beauchamp (November 9, 2015)<\/p>\n<p><a href=\"#_ftnref7\" name=\"_ftn7\">[7]<\/a> http:\/\/www.forbes.com\/sites\/hollieslade\/2014\/06\/02\/the-pitch-that-launched-birchbox-the-485m-stuff-in-a-box-business\/<\/p>\n<p><a href=\"#_ftnref8\" name=\"_ftn8\">[8]<\/a> http:\/\/www.slideshare.net\/Yelenastarikova\/birchbox-the-future-business-model-of-ecommerce<\/p>\n<p><a href=\"#_ftnref9\" name=\"_ftn9\">[9]<\/a> Interview panel with Katia Beauchamp (November 9, 2015)<\/p>\n<p><a href=\"#_ftnref10\" name=\"_ftn10\">[10]<\/a> http:\/\/www.fastcompany.com\/3044266\/innovation-agents\/opening-the-box<\/p>\n<p><a href=\"#_ftnref11\" name=\"_ftn11\">[11]<\/a> https:\/\/www.birchbox.com\/<\/p>\n<p><a href=\"#_ftnref12\" name=\"_ftn12\">[12]<\/a> Fireside chat with Hayley Barna (November 17, 2015)<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Birchbox = &#8216;the smartest way to shop for beauty and grooming products.&#8217; We&#039;re opening up its secrets to success.<\/p>\n","protected":false},"author":411,"featured_media":2812,"comment_status":"open","ping_status":"closed","template":"","categories":[186,537,219,538,535,534,536,94,46],"class_list":["post-2811","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-beauty","category-curation","category-ecommerce","category-female-entrepreneurs","category-grooming","category-hbs-founders","category-personalized-commerce","category-startup","category-subscription-model"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Birchbox: opening new paths for beauty &amp; e-commerce - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/birchbox-opening-new-paths-for-beauty-e-commerce\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Birchbox: opening new paths for beauty &amp; 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