Walgreens takes a minority stake in Birchbox, which will now come to its stores

Walgreens has entered into a strategic partnership with beauty-in-a-box startup Birchbox, which will involve building Birchbox experiences inside Walgreens’ stores so customers can shop and try new brands. The deal also sees Walgreens acquiring a minority equity interest in Birchbox, the companies said. The deal follows a change to Birchbox’s ownership structure reported earlier this […]

Walgreens has entered into a strategic partnership with beauty-in-a-box startup Birchbox, which will involve building Birchbox experiences inside Walgreens’ stores so customers can shop and try new brands. The deal also sees Walgreens acquiring a minority equity interest in Birchbox, the companies said.

The deal follows a change to Birchbox’s ownership structure reported earlier this year where Birchbox investor Viking Global took a majority stake in the New York-based beauty company. The deal wiped out Birchbox’s other VC investors’ stakes, including Accel Partners and First Round Capital, Recode had noted at the time. Those VCs walked away with nothing.

Birchbox had previously raised almost $90 million from VCs, and was once valued at nearly $500 million, but had struggled with growth and profitability, forcing it to make changes to its cap table after failing to find a buyer.

Despite having become a brand name in the space it helped to define – subscription box startups – Birchbox has been facing competition from IpsyGlossybox, Sephora and Allure Magazine. Even Target and Amazon do their own beauty boxes now. The company continues to report “over 2.5 million” active users – the same number it had in May.

The Walgreens deal will help Birchbox reach new customers by allowing it to establish an expanded brick-and-mortar presence.

Meanwhile, Walgreens benefits by bringing popular beauty brands under its roof, potentially attracting new customers to its stores – store which generally feature “drugstore beauty brands” like Covergirl, Maybelline, Revlon and others.

“This is an exciting time for beauty at Walgreens,” said Richard Ashworth, President of Operations at Walgreens, in a statement about the deal. “Our customers want to shop the most sought-after brands in a welcoming and accessible environment, and the addition of Birchbox to our growing beauty offering is a big step in delivering on our promise to differentiate and elevate the beauty experience at Walgreens. This collaboration will help enable Walgreens to continue to strengthen our beauty offering and build our prestige portfolio,” he added.

Walgreens says it will dedicate space in its stores to Birchbox experiences that feature its branding, which will include curated assortments of full-sized skincare, hair and makeup products from over 40 brands. Participating brands include Sand & Sky, Wander Beauty, Beachwaver, RMS beauty, Huxley, Davroe, Acure, IPKN, Embryolisse, Winky Lux and ARROW.

This rollout will begin in 11 stores across major U.S. cities. Six stores in Chicago, L.A., NYC, and Minneapolis will launch Birchbox experiences this December, followed by five stores in Chicago, Dallas, L.A. and Miami in early 2019.

At pilot stores, Birchbox will also offer subscriptions to its monthly delivery service of samples, and a “Build Your Own Birchbox” experience like it has at its own flagship stores in New York and Paris.

Embracing digital-first consumer brands is something all big players like to do these days. Target, for example, now stocks Casper mattresses, and just added two more digital-first brands to its in-store assortment with Quip toothbrushes and Native deodorant. Amazon dedicates a whole section of its site to startups, called Amazon Launchpad.

Walgreens, however, has been marketing itself more recently not as a place that embraces digital-first, modern brands and is looking forward into the future, but instead as place with a very long history. Its ad campaigns touted that it’s been “trusted since 1901,” and focused on the consistency of its experience over time.

Birchbox declined to share additional details about the deal.

 

Glossier CEO Emily Weiss on why the company won’t sell on Amazon

E-commerce beauty startup founder, Glossier CEO Emily Weiss, dished on stage at TechCrunch Disrupt SF 2018 this morning about some of the company’s top competitors in the e-commerce space, including Amazon as well as the forthcoming threat from Instagram – which is building out its own standalone shopping app, according to reports.  Glossier, founded in […]

E-commerce beauty startup founder, Glossier CEO Emily Weiss, dished on stage at TechCrunch Disrupt SF 2018 this morning about some of the company’s top competitors in the e-commerce space, including Amazon as well as the forthcoming threat from Instagram – which is building out its own standalone shopping app, according to reports. 

Glossier, founded in 2014 and backed by $87 million, has created a massive beauty brand that’s now a household name among women. And it’s done so without being on Amazon.

The company doesn’t work with Amazon, and Weiss said that it doesn’t intend to.

When asked if the company would sell into Amazon, she responded with an emphatic “no, no, no.

Glossier may have been acquisition target for Amazon, however – when asked if Amazon ever approached Glossier about about a deal, Weiss didn’t deny it, but instead demurred, “a lot of people have approached Glossier,” before quickly moving on.

Weiss, clearly, doesn’t think that Amazon is the best place for beauty brands.

“The interesting thing about Amazon and how they’ve addressed obviously one of the biggest consumer needs, which is solving buying, is that in the process, in some ways, they’ve kind of killed shopping,” Weiss said.

“I think in terms of breadth of product, obviously, no one will ever beat them. They have done the most phenomenal job,” she continued.

But going to Amazon for everything, every time doesn’t make sense, she believes. It’s only one kind of shopping experience.

And even though Amazon is massive, it doesn’t mean there’s no room for others outside of its shadow to grow.

“E-commerce is 10% of global commerce – that’s nothing,” Weiss pointed out. “We are at the dawn of e-commerce, and this is one user experience,” she said, referring to Amazon.

Plus, Amazon’s user experience may not be the best fit for beauty and fashion products – even though Amazon is quickly ramping up in those areas with its own private labels, Amazon Fashion, Prime Wardrobe, beauty boxes, and other initiatives.

“I think it’s exciting that we are really at the dawn of  e-commerce, and that there’s going to be so many paradigms. What we’re focused on building is an emotional commerce experience which is focused on a breath of connection, and not a breath of product,” Weiss explained.

While Glossier may not be on Amazon, it does leverage Instagram to reach customers, possibly making Instagram’s shopping app a bigger rival, if launched.

“It makes sense,” Weiss said, when asked her thoughts about Instagram’s plans in this space. “72% of millennials make their purchasing decisions for beauty and fashion products through Instagram,” she said.

Glossier itself has a long history with Instagram. It launched on Instagram before it even had its website up, for example. They also just hired Keith Peiris, who led DMs and Camera at Instagram, as Head of Product.

“Instagram’s an incredible tool,” Weiss admitted, but also cautioned that it could still face difficulties as a shopping app.

“I think of the challenges might be these platforms were not built around specific topics, they were built around specific media expressions,” said Weiss.

That said, Instagram could have more potential in the beauty market than Amazon.

“When you look at a platform like Amazon, no woman has ever told me that their criteria for best mascara was what was fastest or cheapest. That’s not how people are buying emotional things – like a fashion or beauty product,” said Weiss. “But the leading paradigm of what an e-commerce experience gives you is one of efficiency, and one of breadth of product. When what users are actually doing and wanting is one of breadth of connection,” she said.

 

Ipsy’s new subscription delivers full-size beauty products, not samples

Ipsy, the beauty box subscription service and e-commerce site founded in 2011 by YouTube creator Michelle Phan, is expanding its business beyond sample-sized products. The company today is debuting a more expensive “Glam Bag Plus” subscription, which will ship customers five full-sized products for $25 per month. The move aims to capitalize on Ipsy’s established customer […]

Ipsy, the beauty box subscription service and e-commerce site founded in 2011 by YouTube creator Michelle Phan, is expanding its business beyond sample-sized products. The company today is debuting a more expensive “Glam Bag Plus” subscription, which will ship customers five full-sized products for $25 per month.

The move aims to capitalize on Ipsy’s established customer base who now trust Ipsy’s beauty products recommendations to the point they’re willing to pay upfront for full-sized products, instead of only samples with the option to later shop online for the products they liked.

It may also help attract a new customer who doesn’t find value in samples – which are sometimes one-use products, or packaged poorly compared with their full-size counterparts, making them difficult to travel with or throw in a purse.

So far, Ipsy’s curation has been succeeding – it touts over 3 million subscribers, compared with rival Birchbox’s over 2.5 million.

Ipsy, for what it’s worth, tends to offer better samples than Birchbox, now majority owned by hedge fund Viking Global Investors, after some financial struggles.

Birchbox shipments are often too reliant on less valuable items, like single-use makeup wipes, tiny eyeshadows without a reliable protective case, or totally hit-or-miss perfume samples, for example. Ipsy, meanwhile, sends out full-sized makeup brushes and other full-sized items along with samples on a regular basis. It also prioritizes makeup products over hair and skin care items in its curation.

Plus, it ships products in a reusable makeup travel bag (which, frankly, is great for when you need to unload some of your less-loved samples on friends).

With the new Glam Bag Plus, customers will have the option of paying a little more – $25 per month instead of $10 – for a selection of full-sized products, which would normally retail for $120.

The company says it will work with brands like Sunday Riley, Ciaté London, Purlisse, Morphe, Tarte Cosmetics, Buxom, and others.

As before, the exact mix of products shipped will be based on subscribers’ beauty profile. Today, Ipsy creates over 10,000 different makeup combinations in its monthly Glam Bag memberships, it says, because of this personalization.

The Plus service will also ship out a deluxe (read: larger) makeup bag on the first delivery, then every third delivery afterwards, as part of its subscription.

The new service will better cater to skin and hair care companies, and especially to newer brands that may not offer a wide ranges of samples at this time, but still want to be able to reach Ipsy’s millennial subscriber base.

Initially, existing Glam Bag subscribers will be able to switch over to the Plus tier of service, which will ship its first bag in October.

However, the company is advising customers that it has limited quantities of Glam Bag Plus products, so if they choose to later downgrade back to the sample Glam Bag, they may end up on a waitlist if they decide later they want to re-join Plus.

Ipsy also says it’s not set up right now to handle customers who want both memberships, so those who do should create a second account as a workaround.

Ipsy’s co-founder Michelle Phan left the startup last fall to run online makeup site EM Cosmetics, but Ipsy itself remains profitable – and it has been for several years. The company’s real value is not the money to be made on the subscription business itself, but rather in helping beauty brands reach social media influencers and YouTube stars, whose makeup tutorials and recommendations help them to gain exposure.

While Ipsy, like many in the subscription business, won’t talk about its critical business metrics like churn or margins, the company believes the Plus subscription will do well because it’s something members have been requesting for some time. It also surveyed the user community and ran focus groups ahead of this product’s launch, it told Glossy.

The subscription will become available to more customers in the future, says Ipsy.