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[10 comments]

Online subscription service gets physical

July 16, 2014

While many e-tailers have been setting up stores or showrooms to support their online businesses, Birchbox has apparently become the first subscription service to open a physical space.

For $10 a month, Birchbox sends four to five deluxe beauty and lifestyle samples to each subscriber customized to their profile. Founded in 2010, Birchbox has about 800,000 monthly subscribers. Full-sized versions of the samples are available for sale on the company's site.

The new two-level, 4,500-square-foot store in Manhattan's SoHo neighborhood at 433 West Broadway is expected to boost e-commerce sales of full-sized products, which presently accounts for only 30 percent of Birchbox's business. The opening follows pop-up tests in New York and the Hamptons. Co-founder Hayley Barna told The New York Times, "We saw some clues along the way — wow, it's really powerful to interact with our customers."

According to a statement, the store features:

  • Curated product assortment featuring 2,000 products from 250 brands including Smashbox, Caudalie, Jouer, Supergoop! and Art of Shaving. Testers are available for all products.
  • A vertical merchandising strategy that allows consumers to shop by category instead of by brand. For example, a shopper looking for red lipstick could compare different types in the makeup section of the store.
  • A dedicated "B.Y.O.B." (Build Your Own Birchbox) section where shoppers can handpick five sample size products of their choice for $15.
  • Editorial content, videos and product reviews supported by touchscreens throughout the shop to help customers learn and self-navigate.
  • A "Try Bar" where customers can experiment with different beauty trends and find the products that are right for them.
  • Beauty services available by appointment (and for walk-ins when available) for hair, nails and makeup.
  • Group classes on makeup and skin care tricks, and services like hairstyling — free for Birchbox subscribers and $30 for non-subscribers.

"Our goal with Birchbox has always been to make it easy, efficient and fun for people to discover new brands and products fit for their lifestyle," said Katia Beauchamp, the other co-founder, in a statement. "We have learned so much about how we can drive customers to change their behavior online, and we see an opportunity to extend into offline retail to evolve with our customers' needs."

Monthly subscription services, also known as mystery boxes, can be found across categories but are particularly popular in the beauty category. Birchbox's competitors include Popsugar, Glossybox, Julep, MyGlam and Ipsy.

Discussion Questions:

Is there a big brick & mortar opportunity for monthly subscription services? How does it work similarly and differently to e-tailer showrooms?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What's the likelihood that more monthly subscription services will be opening brick & mortar stores over the next three to five years?

Comments:

It's not just an opportunity, but a necessity. The most critical path to growth for any retailer is to expand the size of its customer base, and there's only so much expansion that one can achieve online. Bonobos and Warby Parker are just two of many that have proven this point, and there's no reason why Birchbox is any different in this regard.

Want more evidence? Read the excellent book "How Brands Grow" by Byron Sharp. There is no doubt that broader/deeper customer penetration is the key to growth—and that requires a brick-and-mortar presence.

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Peter Fader, Professor of Marketing, The Wharton School of the Univ. of Pennsylvania

The trial bar and classes provide a valuable customer experience which creates value. And did you see their "wow" comment? Interacting with customers is powerful?! Really? Customer interaction provides value for the retailer. With the right in-store experiences, brick-and-mortar opportunities provide value for both parties.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Birchbox has really honed their offering and parlayed it into what sounds like a really nice retail concept. Notice, though, that their pop-up stores and this store are in affluent/tourist areas. The real test will be if they can expand out to middle America and malls.

Although it would be great to see these types of "new retailing" infusions from web-only companies, It's unlikely that many other subscription services can make a successful go of it. One category that I think can work, but don't know if there's a subscription-type service, is in the maker space, where there are parts and kits that people would probably enjoy getting hands-on access to before purchase.

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

Subscription services for physical goods differ from those that focus on digital products like media. They have product to touch and feel, and they recognize that there are challenges in getting customers to physically peruse and "bond" with the products. It's kind of funny to read the quote from the co-founder: "We saw some clues along the way wow, it's really powerful to interact with our customers."

As e-tailers realize the benefits of physical interaction with customers, and physical retailers continue to navigate the strategies for embracing digital, the collision of these worlds is going to be exciting.

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Matt Schmitt, President, Chief Strategy & Innovation Officer, Reflect

I believe Walgreens, etc., may have started this trend by providing monthly prescription/refill service to patients, but haven't connected the dots yet to realize they can each Birchbox lunch by expanding to cosmetics.

A similar model was explored five years ago, and one of the challenges identified was spreading the service by word of mouth. Right now, this model appear to support one person/one order interactions and sales.

What was decided was this model had to be augmented with a social draw. In 2009, Sample Lab Ltd. partnered with L Cafe in Tokyo to operate a cafe, to draw in a social crowd of women to discuss products among themselves, which increased traffic. This model was called "tryvertising" and I believe this was expanded to Brazil. I personally flew to Tokyo to see the business model in action, and saw self-driven groups of women trying out and peer-selling to each other on the sample products.

So while I understand the concept of "touch screens" and "professional staff," this model appears to work when an environment for peer-to-peer selling is encouraged.

Ed Dunn, Founder, (Stealth Operation)

You are starting to see many traditional retailers offer a subscription service for certain items. Nothing better than recurring revenue streams.

There is definitely a brick-and-mortar opportunity for subscription services. In the beauty category, it will be helpful for the consumer to touch and feel some of the product line, then have the chance to curate a box just for their needs.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

This is all about the consumer experience. This example is a great one to leverage for most any consumer service, even across industries. Media and entertainment, automotive, even energy and utilities can take advantage of potential subscription service members and provide a "genius bar" for them to select personalized options.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

I am not sure there is a big opportunity for subscription services to move into brick & mortar in general. This category has a tremendous amount of trial and experimentation, as well as an excitement level around new discoveries. Those characteristics make the Birchbox a good retail fit, and an outlier in subscription services.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

There is an opportunity for a showroom for a monthly subscription service - if it is a cohesive offering with a well developed consumer base like Birchbox, a great retail concept. Consumer experience is always a powerful driver for loyal consumers; think of the American Girl stores and the powerful engagement and profitability.

Understanding the core consumer, responding to evolving wants and needs, executing well are all key—shoppers want to touch the products and appreciate the suggestions.
Think the measure of success will be the shoppers—if they truly get the concept and have become loyal fans, and how well differentiated the experience is with unique products, great service, excellent value. Shoppers need a reason to go the extra mile.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

For companies like Birchbox, I think this is a great idea. Not only are you driving more traffic into your store, but you are building an invaluable bond with your customer base. That being said, not every e-tailer or subscription service can do this. Clearly this wouldn't work for digital or SaaS offerings—the product needs to be physical.

Many e-tailers are starting to see the opportunity that surrounds pop-up stores and showrooms and I have no doubt they will start making moves accordingly. As Birchbox's experience shows, e-commerce can be a great way to test out a new concept. The bigger concern is with brick-and-mortar retailers who rely primarily on the in-store venue: if they don't break into omni-channel, they risk dying out of retail altogether.

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Alexander Rink, CEO, 360pi

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