For the last year, a slew of troubling headlines suggested the end was nigh for the beauty subscription industry: Memebox ceased trading in actual products in May, and instead became a K-beauty recommendation hub, Birchbox battled funding problems and cut 15 percent of staff and Essence shut up shop. Analysts were quick to predict a wholesale bubble burst for the ‘fad’, with doomsayers suggesting venture capital would dry up amid cooling sales.
But then Unilever got in on the game, buying up Dollar Shave Club, Birchbox turned it around, announcing a return to profit early this year – so much so that rumors have started circulating about a possible buyout – with Wal-Mart said to be one of the interested parties. An unexpected move given Walmart has already tried, and failed, to get its foot in the door of the subscription service market, with its WalMart Labs-developed Goodies shut down after just over a year in beta phase.
So while you’d have been forgiven for assuming established brands would steer well and truly clear of the whole shebang earlier this year, it now looks like one of the biggest retailers is gunning for a second shot and – hold the phone – both Lush and The Fragrance Shop are getting in on the act to boot. The Fragrance Shop’s Scentaddict is set to make the leap from beta-testing to official launch later this year, while, after its success in the US, Lush will provide a personalized service for UK customers looking to get products delivered direct to their door at regular intervals.
And it looks like personalization is the key to success for the beauty box business. Both Ipsy and Birchbox have tweaked their offer to allow a certain level of customization. “Over time, the most common question we hear has shifted from ‘What are the best products?’ to ‘What are the best products for me?’,” Jennifer Goldfarb, President of Ipsy told Fashionista. Ipsy greets new customers with a quiz comprising questions designed to personalize the customer experience – with over 200 configurations available for its popular Glam Bag, no wonder the company has grown its customer base 11 percent over the last 12 months and now accounts for 62 percent of all beauty subscription sales, according to Beauty Matter.
Trials of Birchbox’s Select service, which allows subscribers to tailor their boxes by needs-based category (dry skin, for example), or spend points on products in lieu of a box, have proved successful too: “The more and more that we see the user journey that goes to the shop, it’s very clear that it’s almost done counter to what you would think,” revealed Katia Beauchamp, CEO in an interview with Fashionista earlier this year. “The more she shops, the more she stays a subscriber.”
And therein lies the second factor influencing the beauty subscription consumer – perceived value. Exclusive discounts, coupons and expert advice are all crucial factors in keeping clients on board. Sephora, who launched its own subscription service Play! in the US in late 2015, has all of these cards up its sleeve – and what’s more, each box contains a physical card which grants the user a free one-on-one tutorial in store, plus 50 bonus Beauty Insider points. There’s also exclusive online content and subscriber-only in-store events.
Indeed, Sephora’s loyalty scheme proved the key to curating boxes that its customers love – and therein lies the true value of the beauty box business – data. The most successful use an AI-based recommender systemsand data analytics to drill down what the customer wants and encourage them to keep shopping. And that is almost certainly precisely what Wal-Mart is looking for in Birchbox, if the rumors are true – its been buying up e-commerce businesses like sweets this year in a bid to beat catch up with Amazon. She who knows her customer wins in both the beauty box and the e-commerce world.