Birchbox was conceived by Katia Beauchamp and Hayley Barna when they were both at Harvard Business School. They founded the company in September 2010. The company was built on the idea of charging customers a ten dollar monthly fee in exchange for a box of curated sample sized beauty products, with the aim of then getting these subscribers to purchase full-sized beauty products from Birchbox’s website. Birchbox turned $1.4 million of seed money into a company valuation of $500 million. Additionally, it now has one-million subscribers and has grown from just a two person team to over 300 employees. Though an ecommerce business, Birchbox has even opened a successful brick and mortar store in New York City.
However, Birchbox has recently hit stormy waters. In addition to cutting 15% of its staff, suspending operations in Canada, and its co-founder Hayley Barna resigning, it is struggling with an economic downturn. Katia is now the lone leader of Birchbox at a time it is struggling the most in its history. Wanting to see how Katia guides Birchbox during this difficult period, Farnoosh Torabi is following Katia to understand her approach to leadership.
Upon first meeting Katia, Farnoosh learns that her primary goal is for her subscribers to have a deeper relationship with the brand. This means that she wants the company to do more to get her subscribers to also buy products directly from Birchbox’s online store. Given that cosmetic products typically have profit margins of 80%, an increase in online sales would drastically increase the company’s revenue. What Katia is currently struggling with is how hard Birchbox should push its subscribers to use its e-store.
Currently, Birchbox’s homepage focuses on getting more subscribers and encouraging people to visit its store. Birchbox has begun introducing more elements to the homepage that offer a personalized experience for visitors. In addition to providing suggestions for what customers might be interested in based on their purchasing history, the website now has a rewards program. Katia’s idea is that by dialing back on the hard sell and focusing on building a better connection between Birchbox and its customers, they will visit the site more often and in turn buy more items.
To test this idea Birchbox will be offering this new personalized experience to half of its internet visitors and Katia will talk to customers in person at their brick and mortar store. With $120 million in revenue from subscribers and the additional income from online sales at stake, Farnoosh can tell that Katia is a leader that takes time to gather as much data as possible before making any decisions.
Meeting with a few loyal subscribers, Katia learns they enjoy the rewards program and other personalized features. It builds a level of trust customers want in a shopping experience. While Katia takes in the information, she makes it clear she wants to get more data before making any permanent changes.
Talking to Katia about the layoffs, Farnoosh learns Katia and her team understand the business better than ever. Moreover, if they can deliver a quality experience to their customers with a leaner team she has a responsibility to cut employees for the good of the business. A reason for the push to a leaner team also comes from the fact even though Birchbox raised $60 million from investors in 2014 it has yet to turn a profit. These layoffs trigged speculation the end of Birchbox was near. Yet, Katia sees this doubt in her company as an opportunity because she feels being underestimated by competitors provides them the chance to take everyone by surprise.
In a meeting with Birchbox’s marketing team Katia explains to Farnoosh they are moving resources from traditional marketing to social media marketing. Farnoosh also observes Katia is a source of strength for the company by constantly working to improve and maintain a positive morale in the company. Discussing their marketing strategy more, Katia shares the beauty industry typically focuses on only 20% of consumers. This leaves Birchbox with the opportunity to inspire a passion in beauty products for the remaining 80%. To accomplish this goal they are planning to include more personal testimonials from their customers as part of their social media campaign. A risk in this plan is that the overlooked 80% typically lack the disposable income beauty companies want in customers. Though Katia’s plan may not work, Farnoosh sees this value of Katia’s vision because it shows she knows her target market.
The next morning Farnoosh joins Katia as she meets with Dan Rosensweig, a board member of Birchbox and a former COO of Yahoo!. Katia wants to know what Dan thinks about changing Birchbox’s homepage so instead of centering on a hard sell it provides a more personalized experience. While Dan has concerns about this, he trusts Katia will thoroughly research the issue before making a decision. Additionally, Farnoosh sees Katia’s cultivation of mentors and her willingness to listen to them as another major component of her success.
As part of their new social media campaign Birchbox wants to pick a subscriber to become the face of their new marketing strategy. Narrowing the pool of applicants down to two, Katia finds that one woman is a loyal subscriber but doesn’t buy product through their website while the other person shared a personal story about how she turned to Birchbox for help buying products for a trip to Antarctica. This story showed Katia that the second applicant wasn’t just a subscriber but had the type of relationship with Birchbox she wants other subscribers to develop.
A later meeting with Birchbox’s tech team to discuss their analysis of how consumers are responding to the new homepage provides crucial information for Katia. An analysis reveals that though their new marketing strategy causes people to buy less from Birchbox every time they visit, it encourages them to visit the website more often which causes them to purchase more over a longer period of time. In short, Katia’s idea is a success. Moreover, Katia also learns their sales were so good that they beat their sales forecast for the month. It is news that fills her with excitement.
Ending her time with Katia, Farnoosh understands why she is willing to take the risk of changing the way Birchbox communicates with the company’s subscribers. Katia is a risk taker who isn’t afraid to make bold decisions as long as they are based on thorough research. It is the reason so many people want to follow this leader.