Comment by sindhya

Birchbox’s beauty and greatest vice is that they don’t pay for products from brands. Although Birchbox, which received $11.9M in venture funding, clearly has the cash to pay for the products, it engages in dangerous business practices which jeopardize the long-term viability of their core business model. I recently interviewed Suk Chan the founder and CEO of Soukenberi, an eco-friendly home fragrance and bodycare brand. Ms. Chan said, “Birchbox requested 300,000 units of a product for free; in return, they said that could offer a conservative purchase order of 400 units for that product if it was received well by their sampling audience.” Birchbox also requested a special sample size, which Ms. Chan would need to create, that would yield at least 3 uses of the product. After Ms. Chan negotiated with them, they lowered the amount of requested free product to 75,000 and then to 50,000 units (for a more targeted customer base). Birchbox only wanted to pay for a purchase order of 400 units after receiving 50,000 units for free. Ms. Chan decided not to do business with them since it was clear she wouldn’t get even a 1% return. Beyond a very conservative purchase order, Birchbox cannot quantify a significant return to brands despite their huge subscriber base. This is a flawed, inequitable method of doing business with brands since it puts many brands in financial jeopardy. Having a large subscriber base doesn’t necessarily yield a successful business. A successful business invests in its supplier ecosystem, it doesn’t destroy it.