Birchbox bounces back

- In 2009, a huge conversation was happening around consumer products and disruptive innovation, but nobody was talking about it for beauty, Katia Beauchamp says. That is when she and her Harvard Business School classmate Hayley Barna came up with the idea for Birchbox, a subscription service that sends monthly beauty samples.

Katia says their idea was simple. They decided to take everything that's out there for beauty, curate it, personalize it, and figure out how to get people to buy it online. They launched Birchbox in September of 2010, just a few months after graduating, jumpstarting their own business and igniting a subscription box frenzy.

Seven months into Birchbox, Katia says they already had huge copycats. Globally, other people had raised tens of millions of dollars against the idea while, she says, they had raised just $1 million.

The brand took off, eventually attracting more than 1 million subscribers, raising more than $70 million, valued at nearly $500 million. Katia says the company hit its 5-year revenue target in those first seven months.

They launched Men's Birchbox in 2012 and opened their New York City flagship in SoHo in 2014, rethinking the way beauty stores are organized. While most beauty retailers organize products by brand, Birchbox merchandises its stores by category, grouping different brands together. So when you're looking at eye products, you'll see all of the eye products together. If you need a serum, you can shop all the different serums in one place.

It seemed like they were on a roll. Then 2016 hit. Katia says the market shifted in terms of favorability and interest in ecommerce and retail in general declined. Less capital was out there. They knew they needed to be prepared to go it alone.

Birchbox cut staff, cut back on marketing, and changed its loyalty program to reward customers for actual purchases. Katia says the most value came from operational savings. They decided to automate more of their box manufacturing so they could produce more personalized boxes and more variation without increasing their costs.

A lot of critics thought it was the beginning of the end for Birchbox, but Katia says it was just the beginning. The company had its best holiday at the end of 2016. December was the biggest business Birchbox had ever seen. Birchbox improved on that in January and then again in February. Katia says they knew it was an upward trend.

The company became profitable for the first time this year. Birchbox even opened a brand-new store in Paris in April, catering to a consumer that is very knowledgeable, especially about skincare.

Now Birchbox is proving to the naysayers that the brand isn't just a subscription fad.

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