Case Code: BSTR532
Case Length: 11 Pages
Pub Date: 2018
Teaching Note: Available
Organization: Birchbox Inc.
Industry: Beauty and Personal care, e-commerce
Abstract Case Intro 1 Case Intro 2 Excerpts
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 Birchbox was theme-based as for example, holiday, vintage, etc., and was designed accordingly...
The Rise of Birchbox 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 copycatting 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 Challenges
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 across the globe. Such a scale of operations without automation was cost intensive...
One of the inherent threats for the beauty subscription commerce business model was that once the customers had sampled the product, they were free to purchase full-sized products from any other retail or e-commerce platform. “Presumably they may help drive traffic to other stores,” Forrester Research channel strategy analyst Sucharita Mulpuru-Kodali said. “If you try something and love it, wouldn’t that drive you to whatever store has the product?”...
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. Customers felt that the boxes were not being curated based on their actual profile...
In 2016, Birchbox had 0.8 million subscribers and a turnover of $125 million. In FY2017, its revenue was expected to be around $200 million. Surprisingly, Men’s business had grown 15 times and contributed 35% to Birchbox’s revenues. On an average, men spent 10% more than women and converted faster than women...
Exhibit I:Beauchamp’s Open Letter to Address the Second Lay-Off in June 2016
Exhibit II: Birchbox Points for Customer Loyalty
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