- According to private capital data company PitchBook, 2018 saw a record $1.2 billion in capital dedicated to the subscription box industry.
- Katia Beauchamp is the founder of Birchbox and Henrik Werdelin is the cofounder of BARK, both successful subscription services.
- The two founders talked with Business Insider about how they keep their companies relevant in an ever-changing market — advice that can be applied to any entrepreneur looking to get their business off the ground.
- Their secrets to success include looking at the trees, not the forest, and embracing uncertainty.
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When Katia Beauchamp launched her subscription beauty box service, Birchbox, in 2010, she was one of the first entrepreneurs to explore the idea of sending subscribers sample products on a monthly basis.
Her business took off fast, inspiring a wave of other subscription box services in its wake. In 2016, there were a record high of 70 venture capital deals for subscription box companies, according to private capital data company PitchBook. Those numbers dropped slightly in the following years (just 50 such deals were recorded in 2018), but 2018 still saw a record $1.2 billion in capital dedicated to the subscription box industry, PitchBook notes.
Sometimes it seems like you can’t even click open a new browser without seeing an ad for another new box. According to a 2018 report by McKinsey & Company surveying thousands of US shoppers, Dollar Shave Club, Ipsy, Blue Apron, Birchbox, and even Amazon Subscribe & Save were 2018’s most popular options, although thousands of other companies are angling to catch up.
As the subscription box market matures, major players like Birchbox (which had raised a reported $90 million in funding as of May 2018, according to TechCrunch) and BARK, makers of BarkBox, (which forecasted $250 million in sales for 2018, as reported by Digital Commerce 360 author April Berthene) have made big moves to stay relevant and top-of-mind for consumers. This often means thinking outside of the traditional box model to offer new and innovative products in new and innovative places, all in the service of keeping customers happy.
Beauchamp’s most recent pivot has been to introduce Birchbox products into Walgreens stores, in the hopes of reaching the everyday beauty and grooming consumer, or “someone who doesn’t love beauty, is not passionate about beauty, and is not putting time into updating or changing the routine,” Beauchamp told Business Insider. The partnership officially launched in October 2018.
The customer Beauchamp is describing is a classic Walgreens beauty customer, but they might not be attracted to a Birchbox subscription — and that’s exactly the point.
“Research shows us that the everyday consumer is often buying beauty and grooming as a part of another shopping trip, versus beauty as the destination.” Beauchamp explained. “Our idea was simple: Go to where our customer already shops, and surprise and delight her with how we show up there. We created an efficient, intuitive, fun experience that leverages the care and convenience of Walgreens to really enhance consumer expectations for shopping beauty in that channel.”
Although she was unable to share data about the expansion’s success with Business Insider, given the venture’s newness the partnership seems to be driving a “meaningful increase” in Walgreen’s total beauty sales, according to Birchbox representatives.
BARK’s cofounder Henrik Werdelin has seen similar success with his company’s first subscription product BarkBox, which is targeted at dog lovers. When he and his cofounders launched the company in 2012, they “just wanted to make something nice for our dogs,” Werdelin said, “and there weren’t a lot of products out there in the world.”
BarkBox found traction very quickly, as people got excited about the prospect of monthly treats, toys, and other deliveries for their dogs. But the brand has also evolved a lot since day one. Werdelin specifically highlighted the importance of their customer service team and the dialog they have with their customers about what they like, need, and want from a pet-oriented subscription box.
“Now we build the products ourselves, and we build 35 new products every month. Then we start from scratch again, which means 430 new toys every year,” Werdelin said. “From the outside, we look like a box business. But from the inside, we’re more future-leaning. We’re an organization that knows how to talk to their customers often and in an intimate way, and then rapidly create products and services [that fit their needs].”
Listening to their customers led to BarkBox’s Super Chewer line of extra-durable toys for extra-tenacious dogs, which now has over 100,000 active subscribers and recently launched in Target stores all across the country. In the coming months, the company is also rumored to be leaning into even more unfamiliar territory: dog wellness.
Both Wedelin and Beauchamp shared their advice for other founders looking to stay relevant or pivot their business to greater success.
First, Werdelin said, it’s important to see your business as being built not like a forest, but like a set of trees. In other words, you shouldn’t just stop when you’ve made one good product; be versatile and think about how else you can offer value to the people you serve.
“I think the word pivot sounds like something is going wrong, but I wouldn’t say anything was going wrong with Apple when they launched the iPhone,” Werdelin added. “When you see maturity in your business, it’s time to do more for your customers and solve more of their problems. This requires internal agility, but is necessary.”
Start by identifying customer problems and actually speaking to the people you serve, Werdelin recommended.
Beauchamp makes sure she’s clear on her goals when she sets out to try something new, both in terms of who she wants to reach, why she wants to expand, and how to implement that expansion.
“Keep the goal simple and big,” she said. “Think about your unique point of view. What is your vision? Why does this business need to exist? What is the value to the customer?”
For both Beauchamp and Wedelin, success came from piloting new ideas and testing them before they went live. As Werdelin noted, you can’t know what you need unless you’re testing a lot of ideas and gathering data about how well those ideas work.
“You have to set up new product teams that are trying these things on,” he explained. “For example, with [a new, upcoming line of] products, we had to run them in the wild under a different brand name first, to make sure the product would work.”
Beauchamp also tries to maintain a sense of curiosity during testing, as this can lead to new discoveries.
“Come up with a simple way to test the idea and prove your hypotheses,” she said. “Don’t spend a ton of time perfecting the business plan; dive right in and get started. Ultimately, embrace your naivety — it can give you the freedom to tackle massive opportunities.”
Beauchamp believes that her stamina for the shifting and changing elements of her business comes from embracing uncertainty. She often teachers younger founders to stay curious and embrace the idea that challenges will always come your way.
“I believe uncertainty is a constant,” she said. “My comfort with the uncomfortable — or excitement for the unexpected — is what makes me able to enjoy it all. I’m very intellectually stimulated by the hard things and managing in uncertainty. You are never done understanding the needs of the customer. The context is always changing, so your job will always be evolving.”