Birchbox it Yourself

B.I.Y:

Birchbox It Yourself Personalized, organic and handmade: Taking the Birchbox business model from purchasing to creating bath and beauty products.

YMA Scholarship Competition 2016 Tyler Montana Anderson Business Case Study Fashion Marketing and Management

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From Birchbox to Discovery Box

Modern consumers across the global marketplace are beginning to question the impact of

the endless consumer cycle of buy, consume, throwaway that characterizes many of the products they buy. While their concern addresses the environmental impact of product consumption, their concern goes beyond the environment to include a concern for their own well being and a search for transparency in the products they purchase and use. For many consumers, this gives rise to a desire to explore their own ability as artisans to work with raw materials taken directly from the source to create products of their very own.

Introducing Birchbox B.I.Y. a new step forward for Birchbox in providing customers with innovative ways to explore the world of bath and beauty. Instead of sending customers samples of cosmetics to try and buy, Birchbox B.I.Y. will provide customers with the raw materials and the direction they need to turn their box into products of their own creation.

“B.I.Y: personalized, organic and handmade, all with just a few simple clicks.�

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BIRCHBOX CASE STUDY ANDERSON

ABOUT BIRCHBOX Strengths *Extensive variety of products for women and men *Ordered and shipped to the customer’s door step *Social media engagement across six platforms *Delivers to US, Europe, Spain and Canada Weaknesses *No option to customize a box with personal selection *Reward programs restricts opportunities for redemption *Customers may receive products damaged or defective Opportunities *Incorporating sustainability into the business model *Customizable boxes *Introducing an innovative choice of boxes including a D.I.Y box Threats *Director competitors: *Bespoke

*Julep Maven *Major cosmetics brands are entering subscription retailing, including Sephora COMPETITORS The major competitors of Birchbox include of Target, Sephora, Bespoke Post and Julep Maven. These competitors are taking advantage of the business model created by Birchbox to build marketshare.

BESPOKE POST (Mens) Strengths *Life style box that is tailored with men in mind *Box customization. Customers can select between 1-3 different boxes *Customers interact with box and the contents, D.I.Y. JULEP MAVEN (Womens) Strengths *Tailored for women *Box customization. Customers can select between1-5 different boxes *Main focus on nail polish, exclusive colors

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“Our target market isn’t a specific demographic, but instead a psychographic – we believed that Birchbox appeals to women of all ages and backgrounds as long as they are excited to try new things and learn through discovery.” - Birchbox Who is The Birchbox Subscriber?: *Women and men *Appeals to all ages, focus on 20-55 years old *Living in the U.S. or Canada *All ethnicities *Mid to Upper Income levels *Vals profile Experiencer, loves to explore and discover *Values innovation and sustainability The Decision to Buy

Image 3 The Birchbox B.I.Y. Customer Ava Harvey *26 years old *Married with no children *Graduated from New York University *PR Director at an advertising agency *Lives in downtown Chicago *$60,000 annually *Started her own blog: ACGIRL.COM to engage with the D.I.Y. community *Lives an organic and sustainable lifestyle *Loves to shop for new products at Whole Foods and Trader-Joe’s

Modern consumers enjoy shopping in

an omni-channel marketplace where they have access to the information they need to make informed buying decisions.

The Birchbox customer seeks out product

information, customer reviews, and blogs to gain insight into products before buying online or in store. Their major purchase influencer’s include their friends on social media and peer customers also browsing and shopping online. Birchbox customers may also be influenced by celebrity endorsements.

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Birchbox B.I.Y. Turning Customers into Artisans and Artisans into Customers

Birchbox B.I.Y. will provide existing Birchbox customers with the opportunity to

experience bath and beauty products in an artisanal way. Each month subscribers to Birchbox B.I.Y. will receive a custom box filled with up to five ingredients necessary for creating their own soaps, lotions, bath bombs, even their own blushes and color cosmetics along with directions prepared by professional artisans. Customers will experience the joy of creating products for themselves while gaining the confidence that comes from knowing exactly what ingredients they are applying to their bodies. In this way, Birchbox will turn customers into artisans and at the same time turn them into lifetime subscribers.

The opportunity also exists for Birchbox to reach out to the growing community of D.I.Y.

artisans and enthusiasts by launching Birchbox B.I.Y. on the internet through D.I.Y. websites, blogs and social media in ways that will turn artisans into new Birchbox subscribers. Birchbox B.I.Y. will continue the Birchbox tradition of bringing innovative strategies into the marketing of cosmetics, tapping into the consumer’s love of discovery and exploration in the spirit that created Birchbox in the very beginning.

Birchbox B.I.Y. Creating Customer Experience

Just as Birchbox takes advantage of personal profiles to customize the contents of boxes

for their monthly subscribers, Birchbox B.I.Y. will make a record of customer preferences and provide subscribers with a selection of unique boxes to explore. To support this initiative a product development team will be created within Birchbox with the mission of bringing forward exciting new Birchbox B.I.Y. selections each month. Also Birchbox will tap into the showcase provided by their New York Flagship Store to present a Birchbox B.I.Y. workshop bar which will be staffed during peak shopping hours with Birchbox-trained artisans working with customers to help them experience the joy of creating products of their very own. The barriers presented by this strategy include the cost of establishing a product development team, and the cost of providing storage for perishable ingredients.

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PART 2: Bring New Customers to Birchbox Through Productive Partnerships

Whole Foods has created a unique position in the marketplace through their commitment

to provide their customers with high quality, organic products with a focus on healthy lifestyles and well-being. Whole Foods operates stores across the United States, Canada and the United Kingdom and attracts a diverse range of customers of all ages and ethnicities who care about the products they consume every day. Last year Whole Foods Market generated net sales of $14.2 billion, growing sales by 4% over the prior year (Whole Foods Market, 2015). The large population of consumers who shop every week at Whole Foods Market present a major opportunity for bringing new customers to Birchbox

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To tap into this opportunity for new customers Birchbox will establish workshop stations

for Birchbox B.I.Y. in 25 stores in the market areas of New York, Boston and Philadelphia and Washington D.C. where customers will be able to create their own boxes of fresh ingredients with the help of trained associates while also having the opportunity to become regular Birchbox subscribers. The presentation of the Birchbox B.I.Y. workstations will be constructed with natural materials and will be located adjacent to the produce departments in Whole Foods stores. Customers who make a purchase of Birchbox B.I.Y. products while shopping at Whole Foods Markets will receive a complementary gift box from Birchbox mailed the following month.

Whole Foods currently offers a cooking class where customers shop for fresh

ingredients and learn how to cook healthy meals. Each Birchbox B.I.Y. workstation will create it’s own monthly class where customers can become familiar with the ingredients of bath and beauty products and learn how to create products of their own. Birchbox will post images of Birchbox B.I.Y. classes underway at Whole Foods Markets on their website and social media.

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Lush Cosmetics is the perfect partner for Birchbox B.I.Y. in that they share the value

Birchbox B.I.Y. places on natural ingredients that are produced entirely without any animal byproducts and that are handmade by real people. Lush Cosmetics operates stores in the United States, United Kingdom and Canada and was successful last year in generating revenues of $500 million and pre-tax profit of $25.6 million. In total Lush achieved a sales increase of 15% from the prior year (Burn, 2015). The target market for Lush Cosmetics is women ranging from 20-30 years old, who value social responsibility, who share a concern for the environment and who appreciate the creativity of artisanal work (Wilkison’s, 2012). The customers of Lush Cosmetics are a prime business opportunity for Birchbox to attract new customers and to build marketshare.

Birchbox B.I.Y. will work together with Lush Cosmetics each month to create an

exclusive box for their customers. Lush Cosmetics is known for their talent in working with natural ingredients to create exciting new products in cosmetics and beauty (Lush Cosmetics Our Story, 2015). Together, Lush Cosmetics and Birchbox B.I.Y will excite customers with a unique presentation of ingredients and products available to purchase exclusively through Lush stores and through the Birchbox website. Initially, Birchbox B.I.Y. boxes will be launched in 25 top volume Lush stores located in the United States with the opportunity to expand to Lush stores around the world. The launch will include Birchbox B.I.Y. workshops scheduled for each of the 25 opening stores where Lush professionals will assist customers to create their own products and build their personal Birchbox B.I.Y. box.

LOG ON AND RSVP ASAP! DISCOVER MORE AT OUR B.I.Y PARTY!

when

April 15th | 7-8 pm

where

Walnut Shop and Spa 1525 Walnut St Philadelphia, PA 19102

facebook.com/LUSHWalnutSt

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(215) 546-5874

Birchbox App

Invitation to Lush opening

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Marketing Birchbox B.I.Y.

The holiday season presents the perfect opportunity for launching the new partnerships

between Birchbox, Whole Foods Market and Lush Cosmetics. Holiday is a peak season for customers to visit the stores of Whole Foods Market on a frequent basis. January is the time of year for New Years resolutions, a time when many people resolve to live healthier lifestyles.

Timing the launch of these partnerships during the holiday season will also maximize the potential for gift-giving. The activities associated with the launch of Birchbox B.I.Y. including the introduction of exclusive new products and boxes and the staging of workshops in stores will be broadcast through the Birchbox website, app and social media. Customers will be encouraged to post photographs of the products and boxes they create on Instagram. Videos of the workshop underway will be posted to Youtube. During the launch of the new partnerships, customers will be provided with the opportunity to enter a contest through Pinterest where each month customers with the most interesting Birchbox B.I.Y. boards will be presented with $100 gift certificate valid toward the purchase of any product on the Birchbox website.

The customers who are attracted to Whole Foods Market, Lush Cosmetics and Birchbox

B.I.Y. share a common concern for the environment and for sustainable business practices. The launch of our new partnerships will provide customers with the opportunity to return empty boxes and containers received from Birchbox to be recycled and re-purposed at all Birchbox B.I.Y. locations.

Social Media will provide the primary venues for maximizing the visibility of the new partnerships created for Birchbox Whole Foods Market Social Media Profile:

Lush Cosmetics Social Media Profile:

Instagram: 602 K Facebook: 1.8 M Twitter: 535 K

Instagram: 1.7 M Facebook: 935 K Twitter: 355 K

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Market Size Analysis

There is a major opportunity for Birchbox to grow market share given the sales volume

and geographic reach of Whole Foods Market and the explosive growth of Lush Cosmetics. These partnerships will bring to Birchbox a diverse range of new customers with a broad demographic reach including millennials entering the marketplace and customers of all ages who care about natural products, the environment, healthy lifestyles and artisanal creativity.

The following financial plan presents the impact of the new marketing strategies brought

forward for Birchbox for the six month period of August 2016 to January 2017 including the new customers created each month, th new monthly revenues they will generate and the expenses incurred in their implementation: Financial Plan

August

New Customers per Month

3,000

3,750

3,000

4,500

6,000

Whole Foods Market (25 Stores)

2,000

2,500

2,000

3,000

Lush Cosmetics (25 Stores)

1,000

1,250

1,000

New Monthly Revenues

$90,000

$112,500

Expenses

$22,500

Whole Foods Market (25 Stores) $13,500 Lush Cosmetics (25 Stores)

$9,000

September October November December January

Total

Annually

3,000

23,250

46,500

4,000

2,000

15,500

31,000

1,500

2,000

1,000

7,750

15,500

$90,000

$135,000

$180,000

$90,000 $697,500

$28,125

$22,500

$33,750

$45,000

$22,500 $174,375

$16,875

$13,500

$20,250

$27,000

$13,500 $104,625

$11,250

$9,000

$13,500

$18,000

$9,000

$69,750

BIRCHBOX CASE STUDY ANDERSON

The following customer life time value analysis presents the financial impact of the 46,500 new customers my strategies will bring to Birchbox in their first year including revenues, retention costs, profits and the net present value of profits for a period of five years: Customer Lifetime Value Analysis

Year 1

Year 2

Year 3

Year 4

Year 5

New Customers

46,500

37,200

30,225

25,575

20,925

Retention Rate

100%

80%

65%

55%

45%

Revenues Retention Costs

Total

$9,300,000 $7,440,000 $6,045,000 $5,115,000 $4,185,000 $32,085,000

$1,860,000 $1,488,000 $1,209,000 $1,023,000

$837,000

$6,417,000

Profits

$7,440,000 $5,952,000 $4,836,000 $4,092,000 $3,348,000 $25,668,000

Net Present Value

$6,888,889 $5,087,179 $3,838,095 $3,008,824 $2,277,551 $21,100,538

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Appendix A. Theme Inspired Pulling inspiration from holidays, summer activities, and back to school could help create a more innovative experience. Making the B.I.Y themes play along with major events as the year progresses can create a positive predictability.

Customers know some type of holiday will be Image 7

coming the next month and the anticipation will

1.October: It’s finally Fall and

increase, creating buzz and excitement when the

acceptable to smell like a pumpkin,

box arrives at their door.

from a pumpkin dry sugar rub.

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Image 8 2. September: (Back To School!)

3. February: Vanilla roses bath

WAKE UP with the sweet smell of

bomb to get ready for that date

Vanilla coffee suds!

you’ve been waiting for!

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BIRCHBOX CASE STUDY ANDERSON

Appendix B.

Subscribers will be able to discover more about the products they receive by easily accessing Birchbox’s website through the app, where they can reorder or order the products of their choice. Subscribers can also share photos and comments with other users. Shown above are mock images showing the digital foot print that would carry customers through the app to subscribe to B.I.Y boxes.

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BIBLIOGRAPHY Birchbox - Behind the Box: Birthday Thoughts. (2011). Retrieved November 4, 2015.

Whole Foods Market Company Info. (2015). Retrieved November 4, 2015.

Burn, R. (2015, February 20). Lush defies currency turmoil to post sweet-smelling profits.

Retrieved November 4, 2015.

Wilkison’s, K. (2012). LUSH-Target Market (with images) · kwilkison. Retrieved November 4, 2015.

Lush Cosmetics Our Story. (2015). Retrieved November 4, 2015.

Matz, Jacqueline. “Top Five Beauty Rewards Programs.” The Odyssey. Lookbook, 23 Mar. 2015. Web. 23 Oct. 2015.

Smith, Elizabeth. “Small Steps Add Up: Gimme 5 Recycling.” Whole Foods Market.

Whole Foods Market, 12 Apr. 2012. Web. 23 Oct. 2015.

Moran, G. (2011, October 25). Maker Faire and the Growth of Do-It-Yourself. Retrieved

Moran, G. (2011, October 25). Maker Faire and the Growth of Do-It-Yourself. Retrieved

November 12, 2015, from http://www.entrepreneur.com/article/220527

November 12, 2015, from http://www.entrepreneur.com/article/220527

Morin, B. (2013, July 2). What Is the Maker Movement and Why Should You Care?

Retrieved November 12, 2015, from http://www.huffingtonpost.com/brit-morin/ what-is-the-maker-movemen_b_3201977.html

BIRCHBOX CASE STUDY ANDERSON

Clayton, L. (2012, April 5). How I Fixed My Skin by Making My Own Beauty Products.

Retrieved November 12, 2015, from http://magazine.good.is/articles/how-i-fixed-

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my-skin-by-making-my-own-beauty-products

Frauenfelder, M. (2010, May 28). The Courage to Screw Up: Why DIY Is Good for You. Retrieved November 12, 2015, from http://www.huffingtonpost.com/mark-frauenfelder/ home-diy-the-courage-to-s_b_589371.html

Elliott, R. (2008, May 4). Why Do It Yourself? Retrieved November 12, 2015, from http:// sound.westhost.com/why-diy.htm

IMAGE Cover Page: https://pbs.twimg.com/media/CQzbhGSUcAAmLM9.jpg Image 2: https://www.lushusa.com/ Image 3: https://stylesnooperdan.wordpress.com/ Image 4: Created by Tyler Anderson Image 5: https://www.pinterest.com/pin/102527328993039934/ Whole Foods Logo: https:// deals.smartcanucks.ca/ Lush Cosmetics Logo: https://www.lushusa.com/ Image 6: Created by Tyler Anderson Image 7: https://www.pinterest.com/pin/456833955930564493/ Image 8: https://www.pinterest.com/pin/456833955930568411/ Image 9: https://www.pinterest.com/pin/456833955930564497/ Image 10: Created by Tyler Anderson