I received my first Birchbox in the mail a couple of weeks ago. After a good friend worked there this summer and a few of my friends had signed up, I was curious to see what all the hype was about. While I was totally delighted to receive the pink box full of fun, new samples (a bronzer primer, facial cleanser, hair treatment, hand cream, and laundry detergent), I ultimately question the sustainability and scalability of this model for a few key reasons.

1)     1.  Stockpiling. Beauty consumers love to try new things, but they also eventually find tried-and-true favorites that they develop a loyalty for – particularly in tough economic times.  After a certain point in time, samples are no longer necessary and end up feeling more like stockpiling waste and clutter, rather than exposure to new products. In fact, the purpose of getting samples is to hopefully find the perfect product, and the joy comes when you actually end the tireless search!  Sephora addresses this issue well by allowing the consumer the ability to opt-in or out of sample receipt each month. (As a point of comparison, I opt-in to the Sephora sample option 1 out of every 5 times it’s offered to me, because I just don’t need or want five new samples each and every month.)

2)      2.  Lack of choice.  I love beauty products, but at the end of the day, I find the majority of items in the Birchbox to be supplementary nice-to-have’s (i.e. a bronzer primer?, laundry detergent?).  The value in these monthly packages is in the authoritative customization and curation of essential products that solve a real need. Taste-testing new items is important but at the end of the day (again, especially when money gets tough) people eventually drop the “nice-to-haves” and stick with the must-haves. The subscription commerce companies that will ultimately win a member for the long run is going to solve a real need with real products that are more personally customized to his or her needs.  Sephora also addresses this issue well by allowing you to choose the samples you want, so if you have no need for a new skincare item, you can choose the fragrance sample instead. 

3)     3.   Lack of conversion. Suppliers of Birchbox samples are primarily concerned with Birchbox member’s conversion to full-size products.  If this isn’t happening, they will no longer be willing to supply their items to Birchbox’s cause. To date, Birchbox is not offering its members enough incentive to purchase from their site.  The loyalty program is a start, but Amazon offers me free 1-day shipping, recommendations based on what I’ve previously purchased, reminders to purchase again, member ratings and reviews, 24-hour / 365 day-customer service, as well as a cheaper price for the product. It’s a no-brainer when it comes to the purchase decision.

4)      4.  Difficulties in expansion.  Birchbox’s current user base (at 45,000 members) is very small, and when considering expansion in to non-beauty verticals, economies of scope are also relatively non-existent.  Whether it’s food, clothing, stationary or jewelry, these verticals require completely new relationships to be formed, and the products likely require different handling and customer specifications.  Though Birchbox already has 45,000 paying members, as a point of comparison, Gilt had 2MM+ members in its core business before it expanded in to Gilt City, Travel, Taste, Man, etc.  Despite this larger user base, a number of industry articles have suggested that Gilt expanded too fast, and many elements of the culture, morale, strategy and product quality have consequently suffered as a result.

Given these issues, I suggest Birchbox focus on providing more value to its members by allowing more choice in both frequency of delivery (opt-in / opt-out) and in items included (skincare, fragrance, etc).  In addition, Birchbox should work to optimize its service model so that it is more customer-centric, providing free shipping, round-the-clock advice and expertise and additional product discounts for full-size purchase. Lastly, before expanding in to new non-beauty verticals, the company should focus on maximizing the value from its core beauty business, increasing its customer base through customer acquisition tactics (i.e. enhancing referral marketing), strategic partnerships (i.e. hotels, spas, airlines, bridal, fashion-related e-commerce sites like Gilt, RTR, etc) and promotions.  Once it has increased the size of its core member base through these partnerships and acquisition tactics, perhaps the company can consider a more essential, must-have category for its future expansion.