The try-and-buy online beauty company is up and running in SoHo. Here's what went into Birchbox's expansion into the offline business.By Graham Winfrey (Staff Writer, Inc.com)
Online beauty retailer Birchbox opened its first brick-and-mortar store Friday, a move that probably has some Web entrepreneurs scratching their heads.
The e-commerce site has grown rapidly since its founding in 2010, generating more than $90 million in sales last year, Fortune reported. It goes to show that Birchbox's try-and-buy subscription model--where customers receive monthly boxes of sample-size beauty products they can later order in full-size--works. The company says its subscriber base stands at more than 800,000 today, up from 400,000 in 2013.
Birchbox's investors include Accel Partners, First Round Capital, and Viking Global Investors, and its latest VC funding round values the company at $485 million.
So why go the brick-and-mortar route with a fancy store in SoHo?
Part of the answer is that Birchbox's existing customers have expressed interest in a physical location. The storefront concept comes from "the insight and feedback from our hundreds of thousands of [digital] customers to better understand what makes them tick, and create a customer-first, holistic offline shopping experience," Birchbox Co-CEO Katia Beauchamp told AdWeek.
"[Our online platform] uses artificial intelligence and machine learning to personalize product recommendations and samples for subscribers and shoppers--and this same model will be applied to the offline retail experience." In-store, iPads will direct customers to products that match their physical attributes.
Of course, Birchbox is not the first previously online-only retailer to introduce a flagship store in SoHo. As Inc. previously reported, eyewear company Warby Parker opened a SoHo store last April. Speaking at Internet Week shortly after the opening, co-founder Neil Blumenthal explained the decision this way:
"We believe the future of retail is at the intersection of e-commerce and bricks-and-mortar," he said. "People think it's crazy that we went and signed a 10-year lease in SoHo, next to Ralph Lauren, across the street from the Apple Store. But we have actually been dabbling in bricks-and-mortar for about three years, almost as long as we have had the website open."
As you might expect, Birchbox also tested out the brick-and-mortar model with a handful of pop-up stores in New York City and the Hamptons before signing a lease in SoHo. Other e-commerce businesses with retail locations include Bonobos and eBay.
Just because your online business is killing it doesn't mean you shouldn't consider an offline business as well. But do as these brands did, and test before you sign a lease.
What other online-only retailers do you think would succeed by opening a flagship store?
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About the guest blogger: Graham Winfrey is a staff writer for Inc.com. He previously covered alternative investments at "Private Equity International" magazine, prior to which he worked at "Business Insider" and msnbc.com. He lives in Brooklyn, New York. Follow him on Twitter at @GrahamWinfrey.