Ipsy Is Making Big Changes to Its Ecommerce Subscription Business

brought to you by WBR Insights

Subscription model-based businesses have gone from strength to strength in recent years, having grown by more than 100% per year since 2013. The largest retailers in the sector generated over $2.6 billion in sales in fiscal 2016/17, compared to just $57 million at the beginning of the decade.

(Image source: forbes.com)

The concept is a simple one. Instead of shopping in the usual manner - choosing items, adding them to a basket, and checking out when finished - customers pay a fixed amount each month. In return for their money, they receive a package of goods, curated by the retailer, each month. While customers often don't get to choose their exact items, they can often register preferences on types of products, and the goods they receive will usually be valued higher than the monthly subscription cost.

There's a subscription company to suit most tastes, with various models dedicated to everything from merchandise from your favorite fandom, to sweets, clothing, and cosmetics. And it's in that last marketplace which Ipsy operates. Ipsy offers a "Glam Bag" selection of five sample-sized cosmetic products for $10 per month. While the business has already seen much success, it's looking to make some changes to help it grow even further.

Glam Bag Plus

The first of these innovations is an upgrade option to its existing Glam Bag. With Glam Bag Plus, Ipsy subscribers can pay $25 to receive a personalized selection of five full-sized beauty products. Ipsy claims the contents of the Glam Bag Plus will have a normal retail value of $120, compared to $40 in the regular Glam Bag.

"The original Glam Bags, of which Ipsy produces more than 10,000 variations a month, feature about $40 worth of merchandise, whereas the new Plus product, which is $25 a month, has a retail value of more than $120," said Ipsy CEO and Co-Founder, Marcelo Camberos. "You're basically getting $100 worth of full-size products for free. Furthermore, for launch, Ipsy is offering an extra, one-time-only sixth product for customers signing up. The Plus bags begin rolling out in October."

The Glam Bag Plus option serves two purposes from a marketing perspective. First, it offers an extra option for existing customers who have used the service for a while and come to trust Ipsy's recommendations - previously, they would have received the samples to try and then would have had to go online to purchase the full-sized versions of the ones they liked separately. Second, the strategy opens potential new revenue streams from consumers who may have, up until now, avoided the subscription service due to not seeing value in sample-sized products. Samples are often single-use and crudely packaged, which can make them unappealing to some consumers.

Ipsy has over 3.5 million subscribers presently enrolled in its Glam Bag service - one million more than its nearest rival Birchbox - so it will be interesting to see the difference Glam Bag Plus makes.

Shopper

The other part of Ipsy's strategy is to give customers who are already subscribed to the Glam Bag service somewhere to purchase full-sized products with the launch of a traditional ecommerce platform to run alongside the subscription model. "From the very beginning, we had half a service," said Camberos. "You could discover amazing beauty finds but had nowhere to buy them, so this was a logical next step."

Now subscribers to the $10 Glam Bag don't need to visit a separate store to purchase full-sized versions of the samples they've received through the service, and can instead stick with Ipsy to complete the experience. The store is presently only available to Ipsy members and includes over 200 brands including Bare Minerals, Smashbox Cosmetics, and Tarte Cosmetics.

Exclusivity and personalization are a big draw of the subscription box model, so making the store private will only serve to increase these factors.

Final Thoughts

Subscription boxes are a great way to offer consumers unique and personalized products on a monthly basis, while also enjoying the steady revenue stream which your business receives in return.

Implementing means to increase offerings in return for a larger sum of money and opening a traditional ecommerce platform to run alongside the subscription service are not often seen in this kind of business model. Nonetheless, they are both excellent ways to offer your customers something extra.

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You can hear Ipsy's President, Fernando Madeira, speak at eTail West 2019 this coming February at the JW Marriott, Palm Springs, CA.

Download the agenda today for more information and insights.