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Beauty retailer Birchbox Is boosting the sales of competitors

June 11, 2015 10:05 AM

(Bloomberg Business) -- Each month, Birchbox ships out millions of beauty samples, neatly packaged in the company's namesake cardboard boxes. Just as the startup intends, the samples lead plenty of shoppers to buy full-sized goods from its own online store.

But Birchbox isn't the only shop benefitting from monthly blasts of body cremes, perfumes, and nail polish. Its competitors are too, according to a new study from research firm Slice Intelligence.

As you'd expect, Birchbox's customers spend a lot more on its website after signing up for the subscription service—38% more, in fact, according to Slice's data which was gathered from its panel of 2 million online shoppers and their anonymized receipts. Meanwhile, powerhouse beauty retailer Sephora sees a 5% boost in spending from shoppers who've signed up for Birchbox's subscription service, while Ulta experiences a 6% bump.

"Birchbox, they're basically removing the traditional barrier in online shopping: You couldn't try before you buy," says Kanishka Agarwal, chief data officer at Slice. "But guess what, now you can. And they're driving up actual purchases."

Before the rise of e-commerce, shoppers mostly acquired their samples of makeup and skin care on the beauty floors of department stores. Peppered with all the major brands, customers would peruse the booths and salespeople would recommend items to try out. The growth of specialty beauty stores such as Sephora injected more samples into the market. Now with Birchbox and similar businesses entering it, an avalanche of samples is being delivered straight to front doors everywhere. Other beauty box sample services popping up in recent years include Glossybox, which ships high-end prestige items, and Beauty Army, which allows subscribers to pick their own samples. Goodebox is focused on eco-friendly, sustainable beauty products, while Ipsy's boxes are curated by stylists. 

Katia Beauchamp, chief executive officer of Birchbox, says she's happy her samples are boosting business for all. Though Birchbox makes money from its sample business—it charges $10 per month or $110 per year—its online shop is also an important, sizable business. When subscribers opens boxes, pluck out the five samples, and try them out, Beauchamp needs to make sure they head to Birchbox.com before they visit rival sites. To aid with this, Birchbox has a loyalty program with referral bonuses and points that can be redeemed for future purchases.

"You have to believe that when you're growing the market, everybody benefits from it," says Beauchamp. "But don't get me wrong: We're really focused on how to keep that revenue coming back to Birchbox." 

 

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