Boxycharm – Case Study

Boxycharm

History of Boxycharm

Joe Martin was no stranger to growing a business when he launched Boxycharm in 2013. The entrepreneur saw a trend in the beauty industry and decided to invest $500K from his first business to start the subscription beauty box. Fast forward seven years, Boxycharm demonstrates the brands’ resilience and Martin’s clear expertise in this market; the company survives both the plateauing demand for beauty subscription boxes and an unprecedented economic shut-down fueled by a pandemic[1]. The company’s ability to weather storms and offer their customers a compelling value proposition is what attracted competitor Ipsy to acquire them in a $500M deal.

The Beauty and subscription box industry

Boxycharm sits between the beauty retail and subscription box industries. In the United States, the beauty retail industry alone is an estimated $25.6B industry. From 2015 to2020, the industry grew at 2.3% annually[2]. Beauty retail companies typically reach their customers through physical stores. When the pandemic hit, these companies were negatively. This fuelled e-commerce to drive the sales in the industry. For companies that had strong e-commerce platforms, such as Sephora, they were able to continue serving their customers despite stay-at-home orders.

The subscription box industry and boom began in 2010. By October 2018, there was an estimated 3500 subscription box services in the industry, representing a 40% YoY increase. Companies were offering everything from meal kits, clothing, wine, and tech gadgets. They were estimated to have generated sales of $2.6 billion in 2016 alone.

Competitive landscape

In the beauty subscription box industry, Boxycharm has many competitors, such as Birchbox, Fabfitfun, and Glossy box. Each box offers slightly different variations or take on specific themes, such as luxury products, clean beauty, etc. Some offer products beyond makeup and skincare, while others focus exclusively on specific products.

Boxycharm’s business model

Boxycharm generates revenues by charging customers a monthly subscription fee for a box of specially curated products. Customer value this type of service because it offers them an opportunity to explore new beauty products without bearing the risk of paying full price. Additionally, they create content, such as tutorials and reviews, within their ecosystem, allowing customers to explore different ways to use their new products while gathering valuable review and feedback.

Boxycharm differentiates themselves from their competitors by offering full-size luxury products while their competitors offer sample sizes. This becomes attractive to customers as the price paid for the box is often less than buying any single product at regular price in the beauty retail market. Furthermore, Boxycharm seeks feedback from their customers about the products sent in each box. This valuable data becomes key insights for tailoring future boxes and or products and services.

Boxycharm’s success factors

One of Boxycharm’s key success factors is differentiating themselves through full sized highly sought-after products. While other subscription boxes offer sample size products from brands that may not be of interest to their customers, Boxycharm continues to deliver on their original value proposition to their customers – full sized products from premium and high-end brands. Customers who are looking to explore new luxury products while minimizing risk are able to get the benefits of trying and using a product through its full cycle.

Another success factor of Boxycharm is the fact that Martin delayed any venture capital funding. Start ups typically engage in venture capital funding in the early stages of their business to help drive growth. Venture capital and other types of funding typically come with many strings attached. Martin was able to fund the venture with his own savings from his first business. This gave the business autonomy to grow Boxycharm in the way they want without pressures from VCs. When they finally took on funding, it was primarily to help them weather a rain day. Since then, the business has gone on to generate cash.

Finally, Boxycharm’s ability to cultivate deep insights about their customers allows them to anticipate what their customers want. Subscription boxes can lose their allure fast, leading to customers cancelling their subscriptions. This can result in companies being unable to recuperate their customer acquisition cost. By developing a deep understanding of their customer base, Boxycharm is able to continually be attractive to their customers and deliver on what their customers actually value.

Looking ahead

As Boxycharm, newly joined with Ipsy, looks ahead to the future, they should leverage the data resources they have by joining Ipsy to gain deeper insights to their target customers. This will enable Boxycharm with the information they need to offer new valuable services to their customers. Additionally, they will want to continue forging even stronger relationships with their suppliers and vendors to maintain the quality of their existing offering in an overcrowded market.

[1] Beauty Subscription Boxes Show Resilience During Corona Virus – https://www.glossy.co/beauty/beauty-subscription-boxes-show-resilience-during-coronavirus/; retrieved April 10, 2021

[2] Cecilia Fernandez, “Beauty, Cosmetics & Fragrance Stores in the US,” IBIS World, December 2020

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