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.
Please refer to the correction at the bottom of the article. I have no problem admitting when I'm wrong. True&Co. doesn't not have a subscription. But isn't the Warby of the bra world and they have not proven that their algorithm works. 1) True does NOT make the process of bra shopping easier. That's what Warby does best while offering a great product at a very affordable price. Warby has great branding. In fact, True takes a traditionally feminine and sexy product and makes shopping for it a BORING and painful experience. 3 minutes of questioning was boring. 2)There is no animosity towards the team. My post is no different than an article on Pando - actually it's no where as snarky some of the articles I've seen. Pando can be really, really snarky. Check out this article: http://pandodaily.com/2012/11/21/dominatefund-badly-misses-t.... 3) If True's algorithm works, they should really show proof. Have they done any claims testing? That's what consumer brands do when they have $ and they are trying to prove that their tech works. Otherwise, it's flimsy, BS marketing ==> No true fit, no true fitting algorithm. 4) Where are the panties? I could not find them after 10 minutes. It's worse that True says they sell them, but I couldn't find them after 10 minutes. The founders don't understand basic business, marketing or branding. That's key for a consumer goods business like a lingerie brand. 5)It's a shame because I do know several other BETTER lingerie startups that should have gotten funding which presented at DecodedFashion Lingerie Startup Showcase. One founder is in serious debt trying to get funding. Unfortunately she isn't a former VC, so fundraising is a lot harder for her.
The funding was closed well before the posting of that article. Also, $1M is more than enough to launch more than a 3 "stock" razors bought from China which what Dollar Shave is doing.
VCs that funded True&Co. just say that the founder is a friend when asked why they invested. Nothing more. If it had a compelling business model, they would say that. They didn't. In fact, no one even have would ask. Being a friend wouldn't matter. Clear #VCCronyFunding. It's sad.
