Birchbox
|
Case Code: BSTR531 Case Length: 14 Pages Period: 2017 Pub Date: 2018 Teaching Note: Available |
Price: Rs.400 Organization: Birchbox Inc. Industry: Beauty and Personal care, E-commerce Countries: USA Themes: - |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The Beginning of Birchbox
In late 2009, in the final semester of their MBA program, Barna and Beauchamp were brainstorming possible ideas for a business. Beauchamp noticed that there were several premium beauty products lying around in Barna’s apartment. These products had been brought home by Barna’s roommate, a beauty editor who helped Barna try out and select the products she liked. Being consumers of beauty products, both the founders knew that women wanted to test samples of expensive beauty products before they made any purchasing decision. But the beauty market was flooded with a wide variety of products that arriving at a buying decision was difficult. Moreover, there was the touch, try, feel element to beauty products which made selling them online a challenge. The founders sensed a latent need. The idea was to cut through the clutter by delivering sample products to customers who were willing to pay. The value proposition lay in careful personalization of the products in accordance with the profiles of the customers who registered for the service. The attempt was to bring efficiency to the market as well as surprise and delight consumers...
The Business Model
Birchbox’s model lay in the domain of subscription commerce. But Beauchamp liked to call it discovery commerce, “It’s a new term we coined because there isn’t a proper category that describes what we do,” she said. The logic was that the buying process did not end with the box but transcended to the site where full-size products were displayed. Some bloggers liked to describe the concept as marketing which the customers paid for. A subscription box cost $10 per month and could be cancelled anytime. A year’s subscription was priced at $110. Every box was theme-based as for example, holiday, vintage, etc., and was designed accordingly...
The Rise of Clones
In 2011 – within a year of Birchbox’s inception– one of the first clones of Birchbox’s business model was launched by the Samwer brothers in Europe. The Samwers were the founders of Rocket Internet, a German Internet company known for developing business based on established business models.The clone was named GlossyBox and was launched in March 2011. Similar start-ups were started in Asia and Australia...
The Logistical Challenge
For its fulfillment operations, Birchbox had partnered with OHL, one of the largest 3PL (third party logistics) in the world. Birchbox’s warehousing and packaging operations were largely manual owing to mass customized nature of the subscription boxes. There were around 100 different combinations of boxes sent to over 1 million subscribers from the United States and Puerto Rico, France, Spain and the U.K. Such a scale of operations without automation was cost intensive. Workers had to be trained to do multiple jobs such as receiving, storing, assembling, and dispatching items...
Concerns
In 2016, Birchbox’s clones were eclipsing it in terms of growth and revenue. Ipsy, a California-based subscription service focused on make-up, was reported to have 1.5 million subscribers. Ipsy, launched in 2011, was able to raise around $100 million in round B funding in 2015, which made it an $800 million dollar company. The strength of Ipsy lay in the fact that before its round B, Ipsy had managed to drive growth with an initial funding of a mere $3 million . Ipsy’s founder Michelle Phan (Phan) was a YouTube sensation. Phan had used aggressive influencer marketing on YouTube to take Ipsy at this level...
Customer Views
Some of Birchbox’s customers were not happy with the company as the boxes delivered to them did not match the preferences which they had set while registering. Subscription box blogger Sarah Herrick of Bits and Boxes sarcastically commented that if Birchbox curated boxes based on a profile, “I must have written it in hieroglyphics.” Some customers received the same products month after month....
Looking Forward
By April 2017, Birchbox’s subscriptions had fallen by 7%. The drop was noticed across most of the subscription formats which mostly indicated lack of customer interest or crowding of competitors. Experts believed that the subscription retail model might be unsustainable and pointed out that several companies using the model had experienced failure. Others opined that it would not be long before Birchbox confronted the e-commerce giant Amazon (Refer Exhibit IV for the websites searched to buy beauty and personal care products). According to Liz Elder, research associate at digital think tank L2, ...
Exhibits
Exhibit I: Birchbox Points for Customer Loyalty
Exhibit II: Comparison of Birchbox and Competitors
Exhibit III: What Consumers are Looking for when Shopping Online for Beauty and Personal Care Products
Exhibit IV: Websites Searched to Purchase Beauty and Personal Care Products Online
Buy this case study (Please select any one of the payment options)
| Price: Rs.400 |
Price: Rs.400 | PayPal (9 USD) |
