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Could Birchbox Be The Next E-Commerce Buy For Walmart?

Could Birchbox Be The Next E-Commerce Buy For Walmart?

Birchbox is apparently putting itself on the market, having held acquisition talks with several retailers, according to a report from Recode. One of these retailers is rumored to be Walmart, which has been on quite the buying spree ever since scooping up Jet.com in August 2016.

Neither retailer has commented on the reports or speculation, and Birchbox hasn’t named any of its other potential suitors. But a Walmart-Birchbox partnership seems much more realistic now than it did over a year ago, with e-Commerce-first brands such as Bonobos, Moosejaw, ModCloth and ShoeBuy (since renamed Shoes.com) now all under the giant Walmart umbrella.

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Like these other acquisitions, this one probably would have as much to do with the brainpower and reputation of the beauty brand as its more tangible assets. After all, Birchbox was one of the first major subscription box services to really take hold in the U.S. and usher the category into the public consciousness. Walmart presently offers its own $5 seasonal subscription box, but the service has remained largely under the radar.

But Birchbox — along with many of its fellow subscription brands — recently has fielded questions about its sustainability due to high customer acquisition costs. Birchbox received a $15 million “lifeline” funding round from its current investors in 2016 when it was unable to find any new investors. Walmart would surely have the resources to keep the brand afloat, scale it up and even introduce it within its own stores.

Approximately 35% of Birchbox’s revenue comes from full-priced sales on its web site and in its two brick-and-mortar stores, so the financial backing of Walmart would likely allow the retailer to source more product to these alternative channels. The subscription cosmetics retailer also prides itself on being a brand for casual beauty shoppers, so the added exposure to Walmart’s large customer base could give the brand a chance to reach more of its target audience.

Despite these potential benefits, Birchbox Co-Founder and CEO Katia Beauchamp and her executive team reportedly believe the company’s move toward profitability, coupled with an expected debt restructuring, gives the brand a better chance at remaining independent and potentially raising more capital, according to the report.

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