How Subscription Beauty Boxes Are Using Millennial Spending Habits to Cash In

How Subscription Beauty Boxes Are Using Millennial Spending Habits to Cash In
Sephora
Sephora

Hayley Barna knows firsthand the benefits of having a best friend in the beauty industry — and she wants to share the love with you.

In 2010, Barna — who worked previously as a Bain consultant and Katia Beauchamp — a self-proclaimed "numbers whiz behind large corporate real estate deals" — decided to start a wide-scale subscription service that shows its customers just how good it is to have the ear of a beauty industry insider.

Their product? A curated package of top-shelf beauty products custom-tailored for each individual subscriber, delivered straight to her or his door every month. 

Little did Barna and Beauchamp know that, six years later, their company would grow to have over 1 million subscribers globally.

Since 2010, Birchbox has turned into a mini-conglomerate. It boasts partnerships with premium companies such as Keds and Estée Lauder, the launch of two lines of its own in-house products and — perhaps most impressively of all — the opening of a brick and mortar store in New York City. 

Although the subscription beauty boxes may be what the brand is known for, it was never the only item on Birchbox's agenda. "We wanted to help our customer navigate the beauty community," a Birchbox spokesperson said in a phone interview. "The industry can be intimidating and overwhelming so we wanted to create an enjoyable experience to shop with."

Birchbox subscription box, Birchbox SOHO store, LOC Source: Birchbox
Birchbox subscription box, Birchbox SOHO store, LOC  Birchbox

The Birchbox experience was apparently so enjoyable that, soon after its launch, other companies that offer almost exactly what Birchbox offers began popping up everywhere. Liz Cadman, the founder of subscription box blog and directory My Subscription Addiction, estimates that she receives an overwhelming 30 beauty boxes a month.

Because business seems to be booming, Mic decided to investigate how these companies have managed to differentiate themselves in a claustrophobic market of similar concepts. 

The secret to their success might lie heavily in one target demo: millennials. As Karen Grant, a global beauty industry analyst at market research company NPD noted in a phone interview, boxes are marketing towards millennials between the ages of 18 to 34. 

"They are extremely curious about new beauty products," she said. "The younger consumer, especially with makeup products, is a frequent shopper and more likely to spend more." 

Source: Instagram
Source: Instagram

Besides mere curiosity, boxes are an easy way for consumers to reward and gift themselves every few weeks on a set schedule. "This business is about the art of giving to yourself," Marshal Cohen, chief industry analyst at NPD, explained to Fast Company last year. "Millennial consumers, in particular, love the idea of self-indulgence, and subscription companies really understand this." 

Mastering social media is key to roping in customers. Taking full advantage of millennials spending habits and the fact that five out of six connect with companies through these platforms, brands have created exclusive communities further perpetuated by its members.  

"The online space allowed for brands to be able to market themselves and promote themselves in ways that they didn't in the past." Grant said. "They have a lot of social-relevance success of creating buzz and awareness. They're able to get into the hands of consumers they wouldn't reach otherwise." 

GLOSSYBOX, a beauty box made up of five full-size products, embraced social media to communicate directly with customers while also promoting itself to those who might be on the platforms, but not subscribing.

Ipsy, Love Goodly, GLOSSYBOXSource: Instagram/Love Goodly
Ipsy, Love Goodly, GLOSSYBOX  Instagram/Love Goodly

"Customers use social media platforms, like Instagram, Facebook and Snapchat to look for beauty products and to learn about brands," Britta Fleck, the brand's president and managing director explained in an email. "It functions as a branding and educational tool." 

With a growing community of box fans on Instagram, many have taken their blogs onto the social networking service. One example of this is My Subscription Addition.

"Instagram is a tool to verify whether different boxes have variations or not," she explains. For example searching #walmartbeautybox brings up all of the different products that people got in their boxes that month. If two people receive the same box, Cadman says that some will comment "oh we're box twins!"

Brands have capitalized on the power of social influencers. Many send their boxes to bloggers with clout to try and reach this person's followers. "With Pinterest, social media is moving towards discovery," Tim Barrett, a retailing analyst at Euromonitor, said in a phone interview. He says smaller influencers have a "limited audience but substantial pull." 

One popular avenue for this is YouTube. Many vloggers post "unboxing videos." While watching someone open a box might seem low-arousing, these videos pull in staggeringly big numbers. The women behind the blog Eleventh Gorgeous, Tracy and Stefanie, received over 100,000 views within a few days on just one unboxing video

Source: YouTube
Source: YouTube

This tactic actually seems to work as this is exactly how Elisabeth Foust, the blogger behind Everything & Nothin', started subscribing to boxes. 

"I remember watching Michelle Phan [on YouTube] talk about a beauty subscription called My Glam Bag (now called Ipsy)," Foust explained in an email. "I immediately signed up because it was only $10. My subscription box addiction truly took over and I started a blog to share my boxes." 

The growing group of millennials looking for convenience isn't limited to one gender. While men and women could easily purchase any beauty subscription box on the market, two companies — Harry's and Dollar Shave Club — in addition to Birchbox's male box equivalent, realized a gap in the market for grooming boxes specifically targeted towards men. 

"Guys want control over their grooming regimens, but they don't want to spend too much time searching or buying products that don't work," Michael Dubin, Dollar Shave Club's CEO, said in an email. "Subscription not only makes our service more convenient — eliminating the inconvenience of going to the drugstore — but also makes for a better shaving experience. Guys get lazy, and if they have to go to the store, they will milk their old blades longer than they should." 

Harry's, Dollar Shave ClubSource: Harry's, Dollar Shave Club
Harry's, Dollar Shave Club  Harry's, Dollar Shave Club

But is it worth it in the end? Depends. If you love testing luxury or indie brands for a fraction of the price, then yes. As Cadman explains, one might want to further research the more expensive boxes, but the lower-price ones (like Play! by Sephora and Birchbox) are worth the gamble. 

"Part of the allure is the value," she said. "The price point is so low but you are able to try out high-end brands before purchasing." For example, as she notes on her most recent GLOSSYBOX review, the box was $40 but filled with $148 worth of products. While the most recent Ipsy glam bag she reviewed, which retails for $10, was valued at $74. 

If you are looking specifically for well-known, cult products and not interested in having an overflowing makeup cabinet full of items you would never use, you might want to stick to Sephora or Ulta. 

Source: GLOSSYBOX
Source: GLOSSYBOX

"Subscription boxes have to cater to a wide variety of people. Not everyone will be happy every single month," Foust said. "But, if you are buying them because you love being surprised and constantly trying new products, then you will be thrilled." 

Your favorite box might have a grim future. While Barrett believes that sampling beauty products in stores will never go away, he thinks the subscription boxes bring a novelty to finding and testing products. 

"Being able to incorporate the treasure hunting component to a shopping experience really helps makes things fun," he said. 

Grant agrees, referencing two companies that have long brought products directly to the customer's door: "Companies like Mary Kay and Avon have been around now for 100 years because of this being able to go right into your home and give you advice." 

Source: Giphy

Avon, which had women going door-to-door selling products, calls itself "the original social network." But this "social network" was very limited to an Avon Lady's own social circle or neighborhood. Now, with actual social networks, subscription-box companies are able to reach a wider demographic that includes younger generations and people that just simply might not be home during the day to answer a doorbell. (Do millennials even own doorbells?) 

It's difficult to gauge whether this is a sustainable business, as many companies do not release any numbers and consumer researchers don't have any data.  But, as seen with these straight-to-your-door boxes and subscription services such as Netflix and Hulu, we're living in a society where people desire to have what they want when they want it. 

Subscription boxes is makeup on demand — and for now this is how customers want to shop within the beauty industry. 

Source: Giphy