Buy­ing a Box

An 11-store pi­lot will launch in De­cem­ber in six U.S. cities.

WWD Digital Daily - - Front Page - BY FAYE BROOKMAN

Wal­greens has taken a small stake in Birch­box and is test­ing shops in 11 of its stores.

Birch­box is mov­ing into Wal­greens.

The drug­store chain and on­line beauty sub­scrip­tion pur­veyor are team­ing up for an 11-store pi­lot of 400- to 1,000-square­foot Birch­box shops within select stores. Wal­greens has also taken a mi­nor­ity stake in Birch­box.

Start­ing in De­cem­ber, and rolling out through early 2019, branded Birch­box bou­tiques will be trans­planted into hand­picked doors in Chicago, Dal­las,

Los An­ge­les, Mi­ami, Min­neapo­lis and

New York. The lo­ca­tions were se­lected to road test the con­cept in a cross-sec­tion of mar­kets. The pres­ence of Birch­box builds upon and sup­ports Wal­greens’ Beauty Dif­fer­en­ti­a­tion pro­gram where about 3,000 stores spot­light ex­clu­sive brands, im­proved store am­bi­ence and am­pli­fied ser­vice.

“We think that by bring­ing this dig­i­tal and ex­tended as­sort­ment of brands into our Wal­greens’ Beauty Dif­fer­en­ti­a­tion en­vi­ron­ment, it’s go­ing to pro­vide a real pop for beauty cus­tomers by bring­ing the best of those or­ga­ni­za­tions to­gether,” said Richard Ash­worth, pres­i­dent phar­macy and re­tail op­er­a­tions at Wal­greens.

The move also for­ti­fies Wal­greens’ com­mit­ment to beauty, which he said is tightly knit with well­ness. “We can help you not only feel good, but look good, too. We feel just as pas­sion­ate about beauty as health.”

The heavy lift­ing Wal­greens has done to pol­ish its beauty po­si­tion set the ground­work for the Birch­box col­lab­o­ra­tion. “We’ve been work­ing very hard and felt that now is the right time to make a big­ger step into ex­pand­ing the as­sort­ment with more indie and pres­tige brands,” said Lau­ren Brind­ley, group vice pres­i­dent of beauty and per­sonal care at Wal­greens and the ar­chi­tect of the on­go­ing im­prove­ments. “Work­ing with a part­ner like Birch­box en­ables us to cre­ate some­thing re­ally new and fresh in the U.S.”

There is a pay­off in beauty, Ash­worth added. “Over the past few years, ev­ery time we’ve in­vested in beauty, we’ve got­ten a re­turn — not only fi­nan­cially but also more cus­tomers.” The beauty cat­e­gory is said to com­prise about 9 per­cent of Wal­greens’ to­tal re­tail sales — a num­ber con­sid­ered higher than in­dus­try av­er­ages.

The Birch­box shops will of­fer 40 brands not tra­di­tion­ally found in the mass mar­ket, in­clud­ing pres­tige lo­gos and dig­i­tally na­tive lines that are ex­pected to court new cus­tomers. “It is re­ally an edited and cu­rated as­sort­ment,” said Brind­ley. “It isn’t that we’re bring­ing in hun­dreds and hun­dreds of one brand. Through Birch­box, we’re able to bring in the best items of the best brands. We can build brands and bring new brands into the space based on what cus­tomers are ask­ing for. The dig­i­tal world has changed beauty, we need re­tail mod­els that are more flex­i­ble. Birch­box will give us the chance to of­fer that.”

In turn, ex­po­sure in Wal­greens can help bring Birch­box’s sub­scrip­tion model to even more con­sumers (there are 2.5 mil­lion to­tal ac­tive cus­tomers). Ka­tia Beauchamp, co­founder and chief ex­ec­u­tive of­fi­cer at Birch­box, sees big po­ten­tial in what she calls “ca­sual” beauty shop­pers. “She’s ac­tu­ally the ma­jor­ity of con­sumers, rep­re­sent­ing 70 per­cent of the pop­u­la­tion,” said Beauchamp. While they are in­ter­ested in beauty, they aren’t the ones gaz­ing at in­flu­encer tu­to­ri­als. They like new and ex­cit­ing, but like to be pre­sented with edited choices, she ex­plained. Two-thirds of Birch­box cus­tomers don’t con­sider them­selves pro­fi­cient in beauty when they sign up for a sub­scrip­tion.

Once these con­sumers join Birch­box, their beauty spend­ing dou­bles. “The chal­lenge is find­ing these cus­tomers. Wal­greens gives us a way to reach her. We want to be the des­ti­na­tion for the ca­sual con­sumer to buy beauty and we’ve known it wasn’t go­ing to hap­pen as a sin­gle chan­nel com­pany. This ac­cel­er­ates our plans to be with her. Their [Wal­greens] cus­tomer is Amer­ica.”

Beauchamp said Birch­box brand part­ners were con­vinced of the merit of adding Wal­greens to their dis­tri­bu­tion be­cause of the in­cre­men­tal, full-size sales op­por­tu­ni­ties. “It will grow the pie be­cause they aren’t reach­ing this cus­tomer base,” she said, adding she had lit­tle push­back. “Brands have come a long way in their think­ing. The world has changed since I started Birch­box. Putting brands into a mass or pres­tige bucket is no longer help­ful,” she said, not­ing di­rect-to­con­sumer brands have blurred the lines.

Wal­greens has also mor­phed into a new breed of mass re­tailer. Brind­ley har­nessed her ex­pe­ri­ence with pres­tige brands dur­ing her time with Boots to con­vince beauty com­pa­nies to broaden their dis­tri­bu­tion. “Af­ter the past two years and bring­ing in No7 and Soap & Glory, the cus­tomer is ready for this,” she said. “And brands we work with know we un­der­stand what it takes to be suc­cess­ful and that’s given them the con­fi­dence.”

Rose-Marie Swift, makeup artist, pioneer in green beauty and founder of RMS

Beauty didn’t blink an eye­lash. “We have been part­ner­ing with Birch­box since 2011 and have been able to gain mean­ing­ful, mea­sur­able ac­cess to a new au­di­ence by in­tro­duc­ing our or­ganic non­toxic beauty prod­ucts to their sub­scribers,” Swift said. “It is a great op­por­tu­nity to scale RMS Beauty with Birch­box and reach mil­lions of women in a re­ally smart, effective way. I em­braced Birch­box and Wal­greens’ vi­sion and see this as an ex­cel­lent ex­pe­ri­ence for to­day’s con­sumer. I be­lieve that this part­ner­ship will cre­ate a re­ally im­pact­ful chan­nel for pres­tige beauty.”

Lee Peter­son, a for­mer re­tail and ex­ec­u­tive vice pres­i­dent of thought lead­er­ship and mar­ket­ing at WD Part­ners said he’s pleased to see re­tail­ers mak­ing an ef­fort to try some­thing new. “If it works, higher-end brands will want to be a part of it. The more eye­balls you can get, the bet­ter you are go­ing to be.” Even learn­ing sim­ple things from Birch­box like light­ing will ben­e­fit Wal­greens, he said. “Any in­cre­men­tal changes you can make in 10,000 stores is go­ing to bring mil­lions of dol­lars to the bot­tom line.”

Wal­greens will also ac­quire a mi­nor­ity eq­uity in­ter­est in Birch­box. If the con­cept res­onates with shop­pers, more stores could im­ple­ment the Birch­box ex­pe­ri­ence. “I don’t see any lim­i­ta­tions in scal­ing a model like this. But I would say the cus­tomer is in charge of that,” said Ash­worth. “The cus­tomer will de­ter­mine whether we scale it or not. We have the fi­nan­cial and op­er­a­tional ex­per­tise ca­pa­bil­ity to go as fast and wide, but the re­al­ity is we want to take di­rec­tion from the cus­tomers. That’s what the pi­lot will do — get feed­back.”

Stephanie Wissink, eq­uity an­a­lyst for Jef­feries LLC, added the col­lab­o­ra­tion is an ex­am­ple of on­go­ing phys­i­cal and dig­i­tal con­ver­gence. The model also gives Birch­box an av­enue to mon­e­tize be­yond its sam­ple model.

In­side the Birch­box ex­pe­ri­ence is a cu­rated prod­uct as­sort­ment fea­tur­ing full-size skin- care, hair and makeup prod­ucts from no­table brands in­clud­ing RMS Beauty, Em­bry­olisse, Wan­der Beauty and Sand & Sky. The Birch­box space was de­signed to be warm and invit­ing so shop­pers feel at home and cared for, ac­cord­ing to Beauchamp. “Yes, we’re bring­ing all-new pres­tige brands to Wal­greens, but we didn’t want the space to feel ‘pre­cious’ — like some­thing you couldn’t touch. We want it to have a fun, yet com­fort­able vibe.” That’s car­ried out by fix­tures that feel like fur­ni­ture, framed Birch­boxes as art­work and pow­der-roomin­spired san­i­ta­tion sta­tions.

A unique twist de­signed to help shop­pers cut through con­fu­sion is that prod­ucts are mer­chan­dised by use or need rather than by brand. A grid-style for­mat breaks down the key steps in a beauty rou­tine, along with spe­cific goals or con­cerns (such as dry skin or hair break­age), with Birch­box-trained Wal­greens Beauty Con­sul­tants on hand to of­fer ad­vice and guide the cus­tomer through the ex­pe­ri­ence. “We’re re­ally mer­chan­dis­ing by ‘ what’s the job that has to get done,’” said Beauchamp.

Ad­di­tion­ally, within the Wal­greens pi­lot stores, Birch­box will of­fer sub­scrip­tions to its monthly de­liv­ery ser­vices of per­son­al­ized sam­ples and a “Build Your Own Birch­box” ex­pe­ri­ence, which is a sig­na­ture el­e­ment of Birch­box’s flag­ships in New York and Paris. The BYOB sec­tion will fea­ture sam­ples from ad­di­tional Birch­box brand part­ners such as Amika and Winky Lux. Each space will also have other fea­tures, in­clud­ing prod­uct tu­to­ri­als, san­i­ta­tion sta­tions and ar­eas to test and play with prod­ucts. Birch­box sub­scrip­tion gift cards will be sold within the depart­ment. Ad­di­tion­ally, a cu­rated Birch­box shop will be in­cluded on Wal­greens dig­i­tal prop­er­ties.

Through its Look Bou­tiques, ini­ti­ated in its Duane Reade stores, Wal­greens has shown it can move pre­mium lines.

The com­pany said the Birch­box con­cept does not re­place Look Bou­tiques. “They can live side by side, it is a com­pletely dif­fer­ent ap­proach,” Ash­worth said.

“Look Bou­tique is an­other ex­am­ple of us in­no­vat­ing in beauty.”

Brind­ley added that the move into pres­tige doesn’t negate Wal­greens’ com­mit­ment to her­itage mass lines. “The brands we have to­day are just as im­por­tant. We rec­og­nized our cus­tomers are ask­ing for ex­tended choice and dif­fer­ent price points and the chance to discover indie brands, but that doesn’t mean ex­ist­ing brands are not a fun­da­men­tal part of our story go­ing for­ward.” She said space for Birch­box was cre­ated by us­ing ex­ist­ing footage more ef­fi­ciently rather than dra­matic cut­backs in other beauty brands.

The mass mar­ket is gear­ing up to halt the mi­gra­tion of shop­pers to on­line com­peti­tors and spe­cialty stores. The most re­cent Nielsen data through Sept. 22 puts mass makeup and nail flat on a 52-week ba­sis with skin care. Although skin care is up 6 per­cent, fra­grance is down 4 per­cent.

Re­tail­ers are try­ing to change the tra­jec­tory. Last month, CVS an­nounced it linked with Glam­squad to of­fer ser­vices in an el­e­vated beauty ex­pe­ri­ence called Beau­tyIRL. CVS also made an in­vest­ment in Glam­squad. “The part­ner­ship mind-set seems to be emerg­ing among drug­store chains,” said Wissink. “There ap­pears to be an eco­nomic and strate­gic ra­tio­nale for both par­ties.” With Wal­greens in­vest­ment in Birch­box, the re­tailer joins Vik­ing

Global, which se­cured a stake in the com­pany ear­lier this year.

The new Birch­box space in Wal­greens.

The BYOB dis­play to build cus­tom­ized sam­ple boxes.

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