Birchbox, a pioneer in the field of subscription e-commerce, said that its model of letting men and women sample personal care products and then up-selling them to buying the full products in an e-commerce store is working.
While reaching 400,000 monthly subscribers, the startup helped inspire a wave of copycats with monthly boxes of products for pretty much every demographic and vertical you could possibly think of — fishing, food, kids, crafts, and on and on. However, the thing is that sending boxes every month for as little as $10 is not ultimately that profitable, even if the samples are provided for free or at-cost.
In Birchbox’s case, the startup was making a bet that some percentage of the company’s customers would leap to pay for full-size products after trying out the samples.
The company’s now sharing stats today that suggest this might be working. Birchbox says its e-commerce sales are on track to triple this year, with more than one-half of Birchbox’s monthly subscribers going on to make purchases from the company’s e-commerce store.
“When customers find a product that they love from Birchbox, we try to make it as easy as possible for them to shop and then transact,” said co-founder Katia Beauchamp. Stila, a pretty well-known upscale cosmetics brand, said that they saw an 11.2 percent conversion on sales after shipping a sample eye shadow palette.
There are also full-size e-commerce orders that come from non-subscribers. About 15 percent of the company’s orders come from customers who don’t get the monthly box of sample products.
Birchbox hasn’t raised any additional funding since the fall of 2011, but a good story about conversions to full-sized product sales would be something they could raise a growth round on. Beauchamp played down that possibility, though.
“We don’t have plans to raise,” she said. “We’re excited that we’re able to grow this business aggressively by ourselves.”
The company has been around since 2010, when Beauchamp co-founded it with another Harvard Business School alumna Hayley Barna. They were looking for a way to help women discover new cosmetic products and started shipping boxes of samples for about $10 per month. They eventually expanded into men’s products with a slightly more expensive subscription service full of lifestyle goods and grooming products. They also faced down a number of copycats globally in Asia and Europe, and eventually acquired a regional competitor from Paris called JolieBox, which let them expand into France, Spain and the U.K.