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Innovation Agents

Opening The (Birch)box

Birchbox's popular beauty-product subscription service is now a major business. Here's what it's planning to unpack next.

Shipping magnates: Beauchamp (left) and Barna have expanded their company into a web of interwoven businesses.

[Photos: Jaesung Lee]

Katia Beauchamp’s eight-month-old twin boys both have colds. Birchbox’s co–CEO, wearing a dark monochrome dress that provides an understated canvas for her impeccable jewelry game, isn’t feeling well either, having spent the weekend dealing with her boys, their germs, and—ugh—the boogers clogging their nostrils. "You know how our parents used those little bulbs that you stick into your nose? Now it’s, like, a straw," Beauchamp explains to Hayley Barna, her co–CEO and best friend, who’s sitting next to her in a conference room in the company’s New York headquarters. "I don’t like it at all! But it’s really effective. You just go . . . sluuuuuurrrrpppppp!" Barna doubles over laughing. "She’s up close and personal with the bodily fluids of her babies," Barna tells me.

Beauchamp and Barna aren’t looking for quite that degree of intimacy with their customers, but they’re still unusually connected to the million- plus people who currently subscribe to their beauty e-commerce service. Founded in 2010, Birchbox has ballooned into a multifaceted, international retail business that has attracted $71.8 million in venture funding and pulls in an estimated $170 million a year. The company is mostly known for its oft-mimicked subscription concept: For $10 per package, Birchbox mails customers a monthly selection of five sample-size high-end beauty products. The model has proven popular—that aspect of the business alone generates a conservative estimate of $10 million a month—and has spawned imitators like BarkBox (pet products), Blissmo (organic snacks), and BlushBox (sex toys).

Beyond the box: Birchbox CEOs Katia Beauchamp (left) and Hayley Barna run a business that’s no longer sample-size.

But Birchbox is much more than those monthly pink cardboard cartons. According to the company’s CEOs, the subscription service has always been a tactical play—a gift-wrapped Trojan horse that lets Birchbox slip into its customers’ medicine cabinets and bedside vanities. The question now is what to do with that access. "The box," says Barna, "is just the beginning."

Birchbox is actually a web of interwoven businesses, each one crucial to the brand’s growth. In addition to the subscriptions, Birchbox runs a more traditional retail operation, selling products through its website and a brick-and-mortar store in Manhattan. In order to get into a Birchbox, partners have to be willing to sell their full-size products in Birchbox’s online store. "That’s been a really hard part about the business model for us," says Beauchamp, who met Barna on their first day as students at Harvard Business School in 2008. "We’d have great brands say, ‘We’d absolutely give you samples! But you can’t sell [full-size products].’ And I’d be like, ‘Sorry.’ " That strategy is paying off: 50% of subscription customers go on to purchase products from Birchbox’s site (where their credit cards are already stored), which moves 100,000 orders every month and is responsible for 30% of the company’s revenue.

Then there’s Birchbox’s media operation, which produces content that resembles what you’d find on the website of a women’s magazine. It also now creates increasingly valuable YouTube clips, is building a formidable presence on Pinterest (where it’s nearing 1 million followers), and has an active following on Instagram and Snapchat.

But showcasing brands is just a small part of the value proposition. Birchbox can offer its partners data on customers they otherwise wouldn’t have. If you sign up for a subscription, you’re prompted to fill out a detailed questionnaire about your intimate needs. Is your style more "classic" or "trendy"? Is your hair oily, curly, or straight? What about your skin type? And, if you wouldn’t mind, what’s your median household income? The info helps customize the contents of the boxes, of course, but it also translates into reams of valuable information.

For niche luxury brands like Dr. Jart+ or Baxter of California, this kind of targeting precision is crucial, giving them detailed demographic and psychographic info about who’s buying their stuff, as well as sales analytics that help them decide what products to keep, what products to drop, and how to stay a step ahead of the beauty world’s fast-moving trend cycle. It’s this sort of feedback that can really help vendors grow alongside Birchbox, says Eric Neher, senior lead merchant of brand partnerships. "We can select data about their brand and help them pick things like packaging, colors, or shades." Custom-perfume company Harvey Prince, for example, has grown 400% since partnering with the company in 2010.

Dude grooming: The Birchbox founders see men’s products as a big area for growth.Photo: Celine Grouard

Now that Birchbox has attracted a loyal customer base, it needs to figure out how to expand. One of its biggest growth areas is men’s products. Launched in 2012, Birchbox Man isn’t a huge part of the subscription business, but the category in general is booming and there’s far less competition in the space than in women’s beauty. Birchbox charges $20 for each men’s box—double what the company charges for female-targeted products. And men’s shopping habits are more consistent and predictable. "It’s very clear that it’s a major opportunity for us," says Beauchamp. "Men are relatively small from a subscriber perspective, but they’re meaningful from a revenue perspective. Also, guys are shopping more: They shop sooner and therefore more often." Barna looks at her and smiles. "It’s like they discover their new favorite bar soap," she says, "and then they’ll buy a dozen."

Editor's Note: A previous version of this story stated that Birchbox moves 100,000 items each month. The correct figure is 100,000 orders.

A version of this article appeared in the May 2015 issue of Fast Company magazine.