eCommerce

The Cuts Just Keep On Coming At Birchbox

Times continue to be tough over at Birchbox, the online makeup peddler, which has just fired an additional 30 staff members. The cuts come at a particularly unfortunate time, as a few weeks ago Katia Beauchamp was touting plans for the firm that she was hopeful would end in an IPO and invigorated online sales.

Birchbox was one of the pioneers in the commerce by subscription model, sending consumers mystery boxes each month full of various beauty supplies in sample sizes. Ideally those subscriptions with their teaser goods lead consumers back to the Birchbox online store with full-size products, or to its actual store in SoHo. That actual store was initially planned to be one of many, but those expansion plans have been tabled in the face of faltering growth and the pressing necessity of needing to be profitable.

And that climb has been extremely steep thus far. Birchbox already cut 50 positions earlier this year. The latest round saw cuts across departments and severance packages. All in, there are 220 Birchboxers left.

"We thought we did that in January, but the cuts were not deep enough to get us where we need to go in the time frame we want," Beauchamp said in a statement. "I wish I had been less conservative."

In many ways Birchbox was a victim of its own success. It spawned many imitators in beauty and beyond with its subscription box idea. And VCs loved that idea, dumping  $1.6 billion into subscription-based eCommerce since 2011. But that love has grown a little cold since investors aren't scoring big paydays. The only significant exit was men’s fashion subscription service Trunk Club, which Nordstrom Inc. bought for $350 million in 2014.

Birchbox has raised $71.9 million in VC funding, but its last round was in 2014 and was for $60 million. And it has become pretty clear that no more is in the offing for Birchbox until profitability is achieved.

"Expectations have been too high," said Sucharita Mulpuru, an analyst at Forrester Research, of this corner of the online retailer space. "We've seen this story before."

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