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The rise of beauty boxes and subscription models

Posted on 22 October 2021

Demonstrating that innovation is not always about technology, beauty buyers' clubs and other new models are gaining increasing traction with consumers and disrupting traditional sales channels.

'Beauty Box' subscriptions have been around for some time, but they are increasing in popularity. For the uninitiated, the concept is this: customers pay a subscription fee and receive a curated box of cosmetics and skincare products (usually monthly).  For beauty lovers this is an appealing way to discover new brands and stay ahead of trends, with the joy of that "Christmas morning feeling" unwrapping a known and loved product. Prices range from £15 to £70 per box, and there is huge variation within the model. Most include a mix of sample-size products, but some exclusively feature a new brand for each box, or include full-size products. Some boxes profile their customers and try to tailor products; there are also vegan and cruelty free options.

Appeal to Brands

A key appeal for consumers is the net retail value of the products being higher than the subscription fee – but it’s a win for the featured brands too. In a crowded marketplace, for those brands confident in the quality and efficacy of their formulas, getting customers to test and sample their products – and hopefully fall in love with them – is key. The potential reach of beauty boxes to new customers who are already known to be interested in the sector is obvious.

For the same reason, single-purchase beauty boxes outside the subscription model are also going from strength to strength. Leading bloggers and influencers frequently collaborate with top retailers on boxes featuring their pick of the latest products. However, the pinnacle of this trend has to be the seasonal beauty "kits" sold by industry powerhouse Caroline Hirons. These kits are the beauty world equivalent of Glastonbury tickets – they sell out within hours. The appeal is twofold: value for money on top-brand products, but also endorsement of the products within by the indomitable Ms Hirons, one of the most respected voices in the industry (she is famously said to have saved a cleanser from being discontinued and turned it into a bestseller with a single review).

In a similar vein, the trend of beauty advent calendars shows no signs of abating. Whilst there are many own-brand advent calendars, the real hype is around the premium options sold by upmarket beauty retailers, which typically retail for around £200 but claim to have a staggering retail value of around £800 or higher, and which are usually sold out by October.

To be selected for these limited edition kits and advent calendars is a privilege for the brands. It represents powerful endorsement of the products and elevates the brand profile significantly. Whilst this does entail selling a certain amount of stock at a significantly discounted rate, there is tremendous value in the resulting PR and consumer reach. Earlier this year, cosmetics stalwart MAC (part of the Estée Lauder group) reported a 7% monthly increase in Earned Media Value (EMV) thanks to its collaboration with former Love Island contestant Molly-Mae Hague, who included MAC’s 'Ruby Woo' Lipstick in her collaborative box with leading beauty box brand, Cosmetips.

Alternative subscription models

Returning to the subscription model, variants are beginning to emerge. The first is the disruptive model of Beauty Pie, the brainchild of beauty entrepreneur Marcia Kilgore (who also founded Soap & Glory). As a buyers' club, Beauty Pie differs from the curated subscription services mentioned above. Instead, customers pay a monthly subscription fee for the ability to shop online at Beauty Pie – the greater the subscription fee committed to, the greater the customer's "allowance" for purchasing. The benefit is that Beauty Pie aims to cut out expensive marketing costs and retailer mark-ups, so that subscribers can enjoy "insider prices". It claims to purchase its formulations directly from the same Swiss, French, Japanese and Korean laboratories which supply leading brands, and the products are shipped in Beauty Pie's own brand (minimal yet stylish) packaging. By way of illustration, a "world-class, high-performance Swiss anti-aging cream" said to have a typical retail value of £100 is available for £15.90 at Beauty Pie.

Beauty Pie's founder has described the model as "sourcing as a service" and second movers are expected to follow off the back of its success (it claims to have has doubled its membership and raised £72m in Series B financing over the past 12 months). However this model raises a number of potential issues which require careful consideration. Kilgore herself has acknowledged that discounted pricing can lead to suspicions that such services are scams, and Beauty Pie has been careful to emphasise that its products are not duplicates or "dupes" of existing branded cosmetics.

Beauty Pie's founder has described the model as "sourcing as a service" and second movers are expected to follow off the back of its success (it has doubled its membership and raised £72m in Series B financing over the past 12 months). However this model raises a number of potential issues which require careful consideration. Kilgore herself has acknowledged that discounted pricing can lead to suspicions that such services are scams, and Beauty Pie has been careful to emphasise that its products are not duplicates or "dupes" of existing branded cosmetics.

In a further variation, department store Liberty has recently announced its own beauty subscription service which is about to be launched. Customers will pay £20 per month and receive four 'discovery' boxes per year. This service is more akin to the curated beauty boxes referred to above – the difference is that the monthly subscription fee is redeemable against future beauty purchases and can be saved up. To look at it another way – customers will effectively be committing to an annual £240 beauty spend at Liberty, with the quarterly boxes an added bonus. 

This gives consumers an added incentive to commit to making all their beauty purchases from Liberty. This has the potential to be a game-changer in the competitive beauty retail market, where the biggest retail brands already compete for customer loyalty with incentive points, samples and goodie bags. We would expect leading competitors to develop their own rival concepts in due course and to see continued disruption and creative sales models in the fast-paced sector.

Legal risks

Beauty brands and retailers considering alternative sales models should consider whether any additional consumer protection regulation may apply.  Regarding subscription models in particular, there is increased scrutiny over the auto-renewal of contracts and consumers' rights of cancellation. The Competition and Markets Authority (CMA) undertook enforcement action against two leading suppliers of computer anti-virus software, following which the CMA recently published Compliance Principles for the sector.  These include obligations to give customers the opportunity to change their mind after the contract has auto-renewed, and to offer pro-rated refunds. Whilst these particular obligations are sector-specific, the government is also considering reform of subscription regulations more generally. Any businesses offering subscription sales should therefore be mindful of these principles and consumer fair-dealing.

- Written by Lisa Sabbage (Business Insight Manager) and Eloise Harding (Managing Associate)

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