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Katia Beauchamp Co-founder and CEO of Birchbox
Beauchamp founded Birchbox while in business school at Harvard and has served as its CEO ever since.
Many credit Sephora with disrupting the traditional department store beauty model, bringing genuine service and a more playful atmosphere to the space than it previously enjoyed.
The effects of its model are still being seen today, with department stores like Macy's and Saks rethinking the way that they sell beauty, including through brand-agnostic advisers and engaging technology. Even drugstores have tried to up their game recently, adding in-store salons and partnering with younger brands to heighten the appeal.
However, founded in 1969 and acquired by LVMH in 1997, Sephora's model is now decades old, and while it's still dreaming up new ways to stand out, the young blood of the beauty market is angling for a bigger piece of market share.
Katia Beauchamp, co-founder and CEO of Birchbox, said it was exactly that lack of disruption that inspired her to hone in on the beauty market when she was dreaming up pitches in business school.
"Basically, the shift from department stores to specialty stores was the last disruption," Beauchamp said in an interview with Retail Dive. "And when we looked a little bit further, we saw that beauty was 2% sold on the internet, and it was 2010. So that was really how the Birchbox idea came about: We were very inspired by the opportunity to sell beauty on the internet."
In addition to the market potential, beauty also offered Beauchamp the opportunity to found a business in a space where she was an active consumer, a trend that's somewhat unusual in a very male-dominated industry.
Men blocking the beauty aisles
Despite its focus on female consumers, many of the top beauty companies are run by men. Sephora, for instance, is run by Christopher de Lapuente, while the CEO of Sephora Americas is Jean-André Rougeot. Tarang Amin is e.l.f. Cosmetic's CEO, Fabrizio Freda is the CEO of Estée Lauder Companies and Revlon just last year named its first female CEO in Debra Perelman. Ulta is a notable outlier. The business has been run by Mary Dillon since 2013.
While things are changing, it can still be difficult for female-focused brands to find the funding they need, even in an industry like beauty, which is so centered around that consumer. Beauchamp herself faced issues raising money for Birchbox, not just because of its female focus, but also because of its emphasis on samples.
"Everybody would say: 'No one buys samples.'"
Co-founder and CEO of Birchbox
"In the early days, trying to get people interested to fund the business, which was really hard, I really didn't ascribe any of the issue to being a woman," Beauchamp said. "I ascribed the issues to the fact that it was hard to invent a new reality for people. We couldn't point to anything and say: 'Here's what it is,' you know? We were like: 'We're going to sell people samples' and everybody would say: 'No one buys samples.'"
A breakthrough came later on in fundraising, when a high-up female executive saw the Birchbox pitch.
"We got three pages into the pitch deck and she was like, 'Yep. Get it. In,'" Beauchamp said. "So I think in retrospect, I understand that had there been more women leaders in these conversations with institutions or angels or anything, I'm sure it would have been less difficult."
That same obstacle has faced many women trying to raise money for businesses that solve female-focused problems. Not enough women in investor meetings means female founders often feel like they're pitching to men who don't always understand the problem they're trying to solve or exactly how big the market could be.
Then there's the fact that subscription boxes are now a crowded space. FabFitFun offers a seasonal box that frequently includes full-size beauty products, Sephora offers its own sample-driven monthly box, Play! By Sephora, which goes for $10, and even Target has a sample-based Beauty Box that retails between $5 to $7.
Up until a few months ago, that was directly competitive with Birchbox's own $10 box of samples, but the brand raised prices in March and introduced a tiered pricing structure to battle the rising costs of doing business and improve the customer experience.
Beauchamp said customers have been "vocal in their support" of the changes, despite the higher price tag, and added that the new price points allow for more value and innovation in the boxes.
"We're putting better products inside, we're getting the boxes to customers faster, and we're introducing several more customization options," she followed up with Retail Dive in an email later.
Nevertheless, price hikes always come with the risk of alienating customers, and while Birchbox is pinning its hopes on a better overall experience to offset any negative customer reactions, that doesn't take away from the fact that Birchbox still has challenges to face.
'How do you find a consumer who's not looking for you?'
Selling samples is essentially selling customers on the discovery of new beauty products every month in the hopes that they will purchase full-priced products and become replenishment shoppers.
Logically, this has to be happening relatively frequently for a shopper to keep putting money toward trying new products rather than just re-ordering the ones they know they like. According to Beauchamp, the solution is to give customers context around the product: "Why were we excited or how did you use it or who was the founder — whatever it was that your friend would say that would make you think, 'Oh, I'm going to actually take an action.' That was really critical."
In some ways, Birchbox is trying to be the brand agnostic, online equivalent of the in-store merchandising of hot new brands and products that Sephora and Ulta have staked their strategies on.
"If you were to ask yourself: 'Who's the customer of Walgreens?' I hope you would answer, like, everybody."
Co-founder and CEO of Birchbox
Both of those retailers have put considerable effort into building out relationships with up-and-coming brands to drive foot traffic to stores, with Ulta nabbing exclusive deals from the likes of Morphe and Kylie Cosmetics and Sephora rolling out dedicated endcaps to feature new makeup brands to all stores by the holidays.
If you ask Beauchamp, though, they're after different consumers. Sephora is well-known for its prestige cosmetics for beauty lovers, and Ulta for having a mix of both high and low-end brands, so shoppers can pair their prestige hair product with a mass cosmetics line. Birchbox is after something entirely different.
"We're focused on a customer who's not obsessed with beauty, and who is less focused on brand as an indicator of product being good," Beauchamp said, which she believes is most consumers. "But it's not the way the industry has really designed the user experience … Given that we are trying to be there for this different consumer, one of the biggest things on our mind is: How do we go to them? How do we go to the place where they are? Because one of the questions that could come to mind, as you hear me talk about who we're building for, is: How do you find a consumer that's not looking for you?"
The answer? A neighborhood drugstore with a friendly red 'W' in its logo.
"If you were to ask yourself: 'Who's the customer of Walgreens?' I hope you would answer, like, everybody," Beauchamp said in discussing the partnership, which was announced in October.
Planned for just 11 stores currently, though the two companies are "talking about 2020 plans," Beauchamp says the pairing works well to capture consumers who are often shopping for beauty as they're doing other things.
She sees Birchbox as an appropriately-priced "appetizer" for consumers who aren't crazy about beauty to figure out what they like before making a big investment.
Walgreens also seems to have answered some of the brand's questions about its own physical footprint. Birchbox closed its SoHo store when the lease was up in part to focus more on the brick-and-mortar relationship it was building out with Walgreens, though it's unclear if the performance of the standalone location factored into that decision as well.
Beauchamp also hinted vaguely at a "little thing" opening in 500 doors, which could suggest another retail partnership for the brand, but the company wouldn't be more specific as to what that is.
"It was just a matter of managing basically two different retail experiences," Beauchamp said of the decision to close its standalone Birchbox store, noting that the brand had one of its own stores and several more incorporated into Walgreens. "We just decided if we want to open another store, once we decide how big into physical we're going, we can at any point."
Everybody needs me time
Birchbox's partnership with an established brick-and-mortar retailer also gives it more time to do some soul-searching on what Birchbox means to customers, and the evidence of that journey is already apparent.
A year ago, Birchbox revamped its website experience, and in the past month or so, the brand has made additional changes to what kind of stories it wants to be telling. June saw the launch of a new campaign centered around "you time," which urges self-love and encourages customers to take time to focus on themselves, and also a rebrand of the company's Birchbox Man business to Birchbox Grooming.
"I think we understood that it's a pretty polarizing thing to have a brand that has such a strong, gender-normative name."
Co-founder and CEO of Birchbox
The latter had been on the table for a while, according to Beauchamp, and was the result of a couple bad decisions on naming the business.
"I think we understood that it's a pretty polarizing thing to have a brand that has such a strong, gender-normative name," Beauchamp said. "The way we came out with Birchbox Grooming, then Man, in the early days was we just called it Birchbox — and that didn't really work, either. So I think we made a move that wasn't the best … and then just decided that it was time, that it was tired, that there was no reason why we couldn't just pull the name and change it."
The gender-neutral name better reflects the brand's values, Beauchamp said, noting that there was "no reason" either beauty or grooming had to be gender normative.
"It isn't something that we want to project," she said.
And while self-care is already well-established in beauty, Beauchamp sees room to grow in the grooming side of things, which has been somewhat ignored in the past.
"It hadn't been considered as needing it to be a very different user experience and explored with all of the nuance of what that is," Beauchamp said. "Not just like: 'Oh, if it washes your hair, your body and everything, then: Perfect, that's what that customer wants.'"
The "you time" campaign was another push toward a more inclusive brand message — a call for consumers to love themselves and their daily me time. The video shows customers of all types going through their daily routines or pampering themselves, and is aimed at showing that no matter how they get ready or what products they use, everyone deserves to have some personal care time.
Birchbox is hoping to improve that personal care time with the samples it sends every month, with the goal that consumers can spend less time searching for products to try and more time discovering ones they like. The goal is to fit right in during whatever period of time a customer already dedicates to beauty or grooming — that's what Beauchamp sees as the company's sweet spot.
"You have a right as a consumer to enjoy this," Beauchamp said. "That's what Birchbox is here to facilitate is enjoying it, even if you spend 10 minutes a day getting ready. Or if you have time, sometimes even 30 minutes, having a little fun, feeling smart, feeling confident, feeling beautiful — all of those things. We can do the hard work of that, and you can consume better."