Birchbox: ‘Discovery,’ Not Deals, Is The Way To Scale E-Commerce

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When niche retail e-commerce gained steam about three years ago, deals, the focus was on flash sales and discounts on upscale items for fashion and restaurants. But the ground has slowly shifted as local deals site Groupon filed its IPO and a slew of like-minded sites started to crowd the space.

Two years ago, two recent Harvard Business School grads, Katia Beauchamp and Hayley Barna, started Birchbox as an online subscription service offering women a chance to sample – or “discover,” in the current lexicon of e-commerce – makeup and beauty products.

As the New York-based startup attracted nearly $12 million in venture capital funding from major investors like Accel, and has hit over 100,000 subscribers the company has looked to create a wider e-commerce platform with the introduction of Birchbox Men, which costs $20 a month to join ($10 more than the original women’s site). Co-CEO Beauchamp tells AdExchanger Birchbox plans to explore refining its marketing strategy with retargeting. But that’s still to come. For the moment, the company, which saw its offices closed due to the effects of Hurricane Sandy, says it has hardly been slowed down on deliveries. As of Nov. 1, the warehouse was open and shipping “full-size orders without delay.”

AdExchanger: The e-commerce space is increasingly crowded. How does Birchbox position itself? And as co-CEO, what is your role? 

KATIA BEAUCHAMP: Hayley and I split our roles pretty cleanly. I do more of the external side of the business, and she does more of the internal side of the business. We work, obviously, very closely together. First off, we define the business as being the first ever discovery retail company. That means that we create demand where there wasn’t demand, and then we are there to recoup and deliver on that demand. E-commerce at one point was defined by someone saying, “I know I want this, and I know where to go find it,” we think of e-commerce 2.0 as being defined by inspiring demand. We do that via the Box, plus content curation.

How did you and Hayley come up with the idea for Birchbox?

We came up with the idea when we were in business school. When we were in business school, we saw a lot of interesting, new retail models were coming out: the flash-sale model, the group-buying model, the renting model. We didn’t want to focus on deals or promotions. The way retailers are capturing attention in e-commerce is changing. It’s become very event-driven. The discounting-type model is one way to approach it. But it’s not the best way to address the beauty category, which is a $40 billion industry in the U.S. alone.

What are the challenges in selling beauty products online?

It’s very challenging to buy a beauty product online for the first time, because it’s a touch, try, and feel category. The industry, the prestige industry, does not work on a discounted model. So we thought that was an interesting problem, because more and more consumer behavior was shifting online, but the only thing people were really doing online for beauty was replenishing things they knew and researching product.

We thought what if we could figure out how to sell somebody a beauty product for the first time online, that was a pretty big opportunity. And that’s what inspired us to create this discovery-driven model. It starts with the subscription, and the box comes to you with offers that are curated based on your profile and your behavior.

It’s also tied to a theme every month, and then we create a lot of content around that. Every product that’s in the box is given an editorial coverage to help you understand, basically, what would inspire you about this product.  Everything is then available to buy in the shop. So the idea is try, learn, buy – that is our formula for creating new demand.

What’s the strategy around attracting shoppers? Is it search? Is it retargeting? Is it through word-of-mouth?  Is it through other social channels?

It’s so organic. When we started, we attracted customers by emailing our friends and asking them to email theirs. At first, nobody understood what Birchbox was, so once the boxes started coming into the market, there was a social virality of people creating content. People upload pictures of the boxes, post reviews to blogs, and make videos about what they get on YouTube – that’s has all been huge for us from a marketing standpoint.

Then there’s also a real-word social virality of people getting them at their office or in their apartment building and giving people the motivation to ask what that is.  When the boxes started arriving, that was basically when all of the organic growth started, and we continue to be just focused on producing organic growth and using PR to continue to get the word out.

You said you think of the site as not just commerce, but as curated content. With that in mind, do you see Birchbox as embodying the values of a publisher? Do you partner with mainstream partners?

We think of our content and our editorial as the twin pillars of the business. Editors and bloggers have a lot to do with what motivates demand. The problem is that there was a disconnect between the content and then the actual transaction, so we’ve tried to work to bring those aspects of the business together. Birchbox has an in-house editorial team that’s one of our biggest units. We use them in order to bring our samples and our brands to life for consumers.

As for partners, we’ve worked with several online/offline media companies, including the WB, with Gossip Girl. We’ve also partnered with Condé Nast’s Teen Vogue and Glamour magazines.  We partnered with Goop, Gwyneth Paltrow’s newsletter. We have done a lot of things with media brands who are looking at the discovery commerce base, and we will continue to do those kinds of hybrid e-commerce/editorial marketing projects.

How do you manage consumer data? How does it influence your marketing?

Data is at the core of what we do. We’re very much a data-driven company behind the scenes, and through our partners. We take in a lot of data about our consumers when they sign up and then we continue to learn about them as they trend back. It’s a huge way that we understand how to plan for our campaigns and how to create the most value for everybody in the ecosystem—consumers and brands.

We have two data scientists – including our CTO Liz Crawford who has a degree in machine learning – so we do all our data in-house. Obviously, privacy is a big issue, so while it’s important to use data as an over-arching, guidance tool we do not share any sort of consumer identity information. We keep it at a higher level, and we use it for insight, but we’re still working on helping to shape the story for our partners so that they can explore who their future customers could be, not just who they are today.

This summer, you launched Birchbox Man. You’ve only been around for two years and are just starting to get some mainstream notice. Were you worried about diluting the brand as women’s e-commerce company? 

Birchbox Man was something that we tested about a year ago, when we heard from subscribers and men that they really wanted the services. Subscribers, who were women, of course, told us that when the boxes arrived, the men in their lives would kind of crowd around, and they always were saying that they wanted some sort of experience that was similar.  We tested it with one box last holiday season, and it sold out very quickly – thousands of units, with no marketing at all. We’ll see where we can take it from there.

How is the men’s business different?

The big things that we realized for men was the value-proposition is similar and that we are able to take all the noise out and make it very simple. But the difference for men is that there are a lot fewer places for them to go and interact with these types of products. In many ways, there’s a lot of white space there.

The other big difference that we recognized early on was that there are obviously a lot fewer categories of products out there for men. We determined very early on that we wanted to make this about more than just grooming, but also a lifestyle experience for men so that we could keep things fresh and new and we didn’t have to always sample a shave cream.

With the men’s box, we wanted to make sure that we could give them fresh, new things. And also we wanted to make sure that men felt comfortable talking about Birchbox. We couldn’t imagine them feeling comfortable about face scrubs, for example. We asked them what they would talk about, and we came up with this idea of they would probably be willing to talk about things like headphones and even great socks.

The launch of Birchbox Man was at a different scale than what we launched for women. It was really exciting to see that. The men’s customers are incredibly loyal and excited about there being a service like this for them. We are eager about the men’s category, in part, because there is just a lot less out there for them right now and there are a lot of opportunities to aim at that segment. It also allowed us to expand from just consumable products, like this grooming and beauty category, into products that are lifestyle, where we’re sampling the actual product. But it’s also a great way for a brand to get consumers to focus on them and potentially buy other products from them.

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