Subscription beauty retailer Birchbox Tuesday said it will lay off 30 employees, or 12% of its staff, Bloomberg reports, the second round of layoffs this year. The company also laid off 50 people in Feb.
The move comes weeks after co-founder Katia Beauchamp spoke with Bloomberg about the company’s ambitious brick-and-mortar plans and the possibility of going public.
Birchbox also halted its Canadian operations in Feb. this year, and in June pulled back plans for growth as it struggled to raise additional funds.
Birchbox’s struggles show what can happen when an upstart company is based on a novel, but easily replicable idea. Birchbox was among the first startups exploring subscription-based sales, but has been trying to expand to sell more full-sized beauty products. That has been tough, especially as the market gets crowded as more established retailers like Sephora seized on the subscription model, muting Birchbox’s market share while adding to its own sales.
Birchbox hired a range of retail veterans last year to help it realize its brick-and-mortar ambitions, including former executives from Sephora and Apple. But talk of an IPO has died down at Birchbox, and Beauchamp told Bloomberg that the company is now focused on profitability. After raising $71.9 million in venture capital funding, Birchbox has struggled to raise more funds in two years.
That’s an increasingly common story among startups that have depended on VC funding, which looks to be drying up somewhat as funders take a step back to see how their investments are doing and which areas continue to show promise—and profit. VC investment fell significantly in Q4 2015, dropping 30% to $27.2 billion, according to venture capital research firm CB Insights.
And, like flash sales, the subscription model may be a useful channel for a retailer, but not necessarily a firm foundation to build a business on.
"Expectations have been too high," Forrester Research analyst Sucharita Mulpuru told Bloomberg about the subscription model. "We've seen this story before.”