Birchbox dials down its expansion plans

Birchbox, a start-up with a subscription service for beauty products, puts its expansion plans on hold as it faces a lack of funds and competition from other companies.

No Chinese expansion

The company had major plans for the future: it wanted to open three physical stores in the United States and was working on expansion to markets like China. However, it will put a stop to all of these plans, because it does not have the means to pay for the expansion. Birchbox had asked J.P. Morgan to find new investors or a buyer, but nothing ever materialized.

It has been two years since Birchbox reeled in a major investment, when it acquired 60 million dollars (53 million euro). Its total value at that time was estimated to be 485 million dollars (430 million euro).

Altered approach

Investors are not as likely any more to give a lot of money to start-ups in order to enforce a quick expansion, which means start-ups have to focus on profitability much sooner. “It is all about showing how you can operate this business profitably and it has forced us to completely change the way we operate, the way we spend money”, CEO Katia Beauchamp told The Wall Street Journal.

Birchbox also has to deal with a highly competitive market: California-based Ipsy already has 1.5 million subscribers, while Birchbox only has 1 million.

Not only did Birchbox cancel its expansion plans, it also fired 50 employees (out of 300) and it downsized its main office in New York from two floors to one.