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Summary:

While subscription startups generally have attracted a good deal of criticism, New York-based Birchbox shares some data suggesting its model is on the right track.

birchbox

Subscription commerce has taken a lot of knocks for being over-hyped and over-funded. But New York-based Birchbox claims its data shows that its model of subscription commerce is actually getting consumers to buy more.

The company, which launched in 2010, ships monthly boxes of sample-size beauty products to more than monthly 400,000 female and male subscribers around the world and in parts of Europe. To date, it’s shipped 5 million boxes. But in addition to charging subscribers for the monthly, personalized boxes, it also sells full-sized versions of the products in its online store, which includes 4,000 products.

For the first time, this week the company shared a key conversion rate, disclosing that more than half of monthly subscribers go on to purchase full-size products from its e-commerce store. Interestingly, while women and men convert to full-size purchases nearly equally, Birchbox said men are slightly more likely to go on to buy a full-size product. E-commerce now represents more than a quarter of the company’s business, with revenue from the online store quadrupling in 2012 and on track to triple in 2013.

In the past couple of years, throngs of subscription commerce companies have hit the web, peddling everything from ice cream and candy to underwear and razors. While some offer a better price for a recurring purchase commitment, Birchbox’s model, which it calls “discovery commerce,” views the monthly boxes as a way to educate and market to consumers, with the goal of enticing them to make additional purchases down the line.

If it works, it’s not just a win for Birchbox, but the beauty brands looking for effective ways to reach consumers online. And it’s encouraging news for other startups that have more recently moved into the space.

“The idea behind it is to help you discover products and shepherd you from the first product to a transaction” said CEO and co-founder Katia Beauchamp. In addition to the monthly boxes, she said, hundreds of thousands of reviews and social media comments from users can lead subscribers and non-subscribers to make purchases.

In the nearly three years since its launch, Birchbox has raised $11.9 million and now sells merchandise for more than 500 top brands like Lancôme, Kiehl’s and Stila. Last fall, it made its first acquisition: Paris-based clone Joliebox, which gave it a foothold into France, Spain and the U.K.

We’ll be looking at how experience design is shaping e-commerce at our RoadMap conference in San Francisco in November. At our 2012 RoadMap event, Birchbox co-founder addressed these themes.

  1. So at 400K subs, it should ship 5 million boxes in a year, but it’s shipped 5 million boxes in 3 years? I realize they are growing, but that means churn is >prodigious<.

    I'm not sure this proves the model works.

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    1. mrogowsky, I agree and their conversation rate is not that great.

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      1. Bish Bash Box Friday, August 16, 2013

        no, it’s all about growth. If they are growing at a decent rate, they haven’t had 400k customers for 3 years. More likely something like 50k customers after a year, 200k customers after 2 years and 400k customers after 3 years. So throwing rough numbers at it (.5 * 50,000 + 50,000 *2) + (.5 * 150,000 + 150,000) + (.5 * 200,000) (multiplying by .5 to average for the first year and then adding the subsequent years entirely) we come to a figure of 450,000 “subscriber years” which if we multiply by 12 because it’s a monthly service gives us 5.4 million boxes sent out.
        Obviously just random numbers, but they illustrate the process better.
        I’ve thought a lot about subscription commerce, I’ve just launched a startup in the space http://bishbashbox.com it’s a “shopify for subscriptions commerce” basically a quick way to get a subscription commerce website up and running.

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