Birchbox, the wildly successful beauty subscription service, didn't start in a dorm room, but it wasn't far off.
Katia Beauchamp was visiting Hayley Barna’s apartment and brainstorming possible businesses to start together after they completed their MBAs at Harvard Business School.
Beauchamp noted that there were always upscale, interesting beauty products in the apartment’s bathroom. Barna explained that her roommate, a beauty editor, brought home the samples and helped Barna, a self-described "tomboy," find products she loved.
"We thought, okay, there’s a huge opportunity here to create a new kind of shopping experience for beauty that was about more than replenishment and really inspired consumers in a way that would make them buy beauty products they hadn’t bought before as a first-time purchase," Beauchamp says.
As beauty product consumers themselves, they knew that women typically wanted to try products before they spent much money on buying them. The idea clicked: Their business would be the equivalent of Barna’s knowledgeable roommate culling through the onslaught of new beauty products on the market each year and recommending the right ones for each customer, based on her profile and preferences.
In September 2010, they launched Birchbox, which ships individualized boxes of samples and products to customers a subscription fee of $10 per month. (The fee is $20 per month for the men’s service because it includes more full-size and lifestyle products.) In addition, the website offers a comprehensive beauty product shop where consumers can buy more of the products they receive and in-depth editorial featuring beauty products and related content.
Growth came fast and they hit their five-year sales projections in seven months, turning their $1.4 million round of seed funding into a Series A investment of $10.5 million more. But with that success came the copycats. In roughly six months, they began to see other subscription services cropping up, first in the food sector.
While imitation might be sincerest form of flattery, it can be a problem in the business world. The newbies were well-funded spin-offs of the concept. Beauchamp and Barna wondered what it meant for their company. But they were working long hours on their fast-growing company and had little time to fret too much.
"We always say, now, to each other and to our employees, it’s really important to pay attention, it’s always important to learn, but at the end of the day, the most important thing is to focus on what we are, who we are, and what we can deliver uniquely to both our consumers and to our brand partners," Beauchamp says.
As they examined the copycats, they found most had "a watered-down, simplified box," Barna says. Subscription-box services were emerging with products for men, pets, craft enthusiasts, people with special dietary needs, and those who like to get new shipments of socks each month. It became a distraction Beauchamp says. The first wave of copycats was confusing for both investors and customers.
But, soon, the duo realized that they had some distinct advantages. While the wannabes were using the subscription-box model, few were putting in the time and attention necessary to customize selections according to individual preferences and tastes. In addition, they weren’t devoting resources to high editorial quality or offering an enjoyable online shopping experience.
One thing the copycats did do was accelerate the company’s expansion internationally. While similar services were cropping up in Europe—an important beauty market—and the Birchbox team wanted its foothold there before others were too established. They moved their plan from "someday" to go-time and made their entry by acquiring Paris-based JolieBox in 2012.
Within a year of launching a relatively new business model, Beauchamp and Barna saw "hundreds of millions of dollars" being poured into copycat services. But instead of panicking, the founders let their imitators be their motivators.
They doubled-down on their customer service and quality content, while expanding more quickly than planned into new geographic markets and market sectors, such as products for men. The company landed a Series B funding round in April 2014, bringing total investment in the company to nearly $72 million. Birchbox is also unveiling its first television commercial in late May 2014 and is working on further expansion and adding new employees, especially on the editorial side.
Bottom Line: "It can be really healthy to have competition, but most importantly, keep your head down and focus on your brand and your service or your product and what makes it unique and special. Don’t take too much time obsessing over what somebody else is, versus what you really saw and started, because nobody can copy your vision," Beauchamp says.