Year Six

Birchbox has evolved and adapted many times; this is a requirement when you experience so many stages of company development. The early product-market fit and roller coaster of hyper-growth in our first five years has been well documented, but what follows here are learnings from year six — a period where things were uniquely hard and where we found new, stronger footing. You might have read some of the stories, but here is the overview: after seeing the beginnings of big shifts in the market, we had to completely change our operating behavior to fast-track profitability. We removed tens of millions of dollars of costs by improving efficiency in operations and logistics, but the changes also required layoffs-this is the opposite of what you ever set out to do when you start a company. Austerity is challenging, but it is not what makes the Birchbox story powerful (and in my opinion, remarkable).

We went into 2016 deciding that we would have to make changes that made profitability our first priority. After a year that marked our biggest challenge and transformation to date, I’m proud to share that Birchbox is now profitable, self-funding accelerated growth and standing on our most solid ground ever. We had a record-breaking December, a trend that continued in Q1 with our best January ever, our best February ever, and best March ever. This is our new reality. In addition, we didn’t take a step back in leading the market on the evolution of subscription in the beauty industry; more on that below.

Transformation isn’t just a project, it’s an operating principle. We are now on the other side of 2016’s obstacles, but today I appreciate those hard times deeply; it’s a critical aspect of building something lasting. The hope is that our learnings extend beyond this one experience and beyond Birchbox in general. To that end, I’ve distilled (and simplified) our experience as follows: 1) The ability to navigate this rests on the entire team; our team successfully overcame any and every obstacle in order to execute both quickly and effectively; 2) Strict prioritization is a game changer, and it builds shared sense of goals and wins to fuel each step forward; 3) Customer love is a powerful thing, and reciprocating by showing a commitment to evolving with their needs is important to deepening the relationship.

1) Resilience is a superpower.

I have always been in awe of the power of optimism, but I now realize that it comes from a more powerful characteristic — resilience. Resilience breeds a much deeper, unshakable belief that the impossible is possible… and probable!

Last year I witnessed my team find new reserves of strength and ability, despite having fewer resources and bigger goals to achieve. In order to push forward, we had to acknowledge and embrace the need for real change in every way we operated. Ultimately, the challenge helped us dig deeper and bring conviction to the everyday work. Together we discovered new potential, driven by strong will, fearless execution and unparalleled collaboration. I could never have anticipated that 2016 would be a year where we shipped the most Birchboxes ever (yes, while decreasing expenses by tens of millions of dollars). But that’s what happened.

The learning: When you pick up and get back in the game, you will be even stronger; you need the fall to unlock the resilience. When you own your mistakes, without letting them take over, you gain a new level of confidence grounded in humility.

2) Focus and prioritization- believe the hype

Q4 2016 was a critical time. Holiday is always important for Birchbox, but in 2016 we had just executed on operational changes and knew it was time to reaccelerate. Despite having a significantly smaller marketing budget and a much leaner team in 2016, we managed to have our strongest holiday season ever. December was actually the best acquisition month in our history, and the reason is because of strict prioritization that allowed the team to focus energy and realize big outcomes.

One key example of this was prioritizing mobile (something we always said we did, but this time we made real tradeoffs). Mobile had already grown to account for over 70% of our traffic and half of our revenue, but our technology and product teams knew that improving conversion there would be hugely important to our future. Over the course of a few months, they re-architected the mobile site to improve speed, performance and design. The results were phenomenal: mobile transactions surpassed desktop, and conversion on mobile improved 35%, saving us millions of dollars in acquisition costs.

Another area of prioritization was self-subscription. Typically our holiday focus is entirely on gifting, but we decided to put new efforts in place to encourage and capture customer demand to shop for themselves too. We saw the same velocity of gifting, but drove a 35% increase in self-subscribers from holiday 2015, and a 60% increase in people signing up for annual subscriptions (a full year of Birchbox instead of the monthly rebillable subscription).

The learning: Doing fewer things allows people to more clearly understand where to invest their time; it also helps create a flywheel where concerted effort has a meaningful impact, and that in turn re-energizes the next priority/initiative. It is powerful to understand the potency of coming together in a focused manner to accomplish our objectives.

3) When your customers want you to win…

This is my main point- when your customers want you to win it creates an incredible dynamic that makes space for a company’s evolution and even for mistakes. It also comes with an expectation of deeper consideration, reciprocity and other “human” relationship dynamics. At a basic level, we have always believed that if our customers love our product, they will drive growth for the business, and that their love/advocacy will do more for us than any other growth initiative we can execute. At a deeper level, we have always worked to show the human side of us, including showcasing the people who make Birchbox what it is. Given that we are a brand born on social media, there is a lot of exposure to any dissatisfaction — we treat that sentiment as a gift that shows how engaged and entrenched our customers are in the relationship as well as a tool to help us understand customer expectations.

We’ve always listened to our customers and anticipated the needs they don’t yet know they have. We recently invested more resources in customer research to refine our vision for the Birchbox product evolution, and their insights helped us launch a beta version of Birchbox Select last month. Early results have far surpassed expectations, but we are still in learning mode and will continue to work with customers to iterate and ensure we are successful in setting a new standard.

The learning: like any good relationship, you need to put real energy and resources into caring for your customers. If you build that human-like connection, customers will be willing to tolerate imperfection, and support growth and change. At its best, this dynamic will give you space to innovate and test new ideas or evolutions of your business that the customer deserves. Never lose sight that they (not the product) are the “why,” and you will build a forever business together.

That was the “how;” this is the “why:”

We didn’t start Birchbox to sell samples, or to build a subscription business (more on that here). We started because we saw a real pain point for consumers — shopping for beauty was not fun or enjoyable for most of us. The endless choices were overwhelming, and figuring out which products were best for your needs was a guessing game. We set out to address everything about beauty discovery that felt like a chore and aimed to make the journey delightful through both the standard elements of delight (a present in the mail!) and by delivering an efficient experience.

Our approach worked — we were able to make a real impact on women who had never connected with the beauty industry. Within six months of subscribing to Birchbox, these customers doubled their spend on prestige beauty and had a new perspective on their relationship with it. This group represents the majority of women and yet no other beauty company is addressing them. Instead, the industry focuses on a small minority of the most engaged, passionate beauty consumers who spend the most. At Birchbox we believe that you not need to be obsessed with beauty in order to have a great experience buying beauty, and that belief drives us.

We’ve shifted our efforts to squarely serve this underserved consumer. We want her to know we respect her and prioritize her — that we are for her. We’re motivated by the progress we’ve made so far, but we know this untapped group represents an enormous opportunity and we’re just at the tip of the iceberg.

It is our team’s unified passion for our customer, our “why”, that gave purpose to the operational changes we had to make. Knowing our customer and our mission also provided clarity around where to prioritize our efforts. It motivated us to push through the uncomfortable parts and get to the other side. Today we are profitable, growing and energized by the fight.