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Birchbox Sells Majority Stake After QVC Deal Falls Through

Nine months after reportedly putting itself up for sale, Birchbox appears to have found a buyer for a majority stake in its business. Viking Global Investors, a hedge fund and prior investor in Birchbox, has invested an additional $15 million into the subscription box retailer, according to a report from Recode.

Birchbox has raised nearly $90 million in total funding since its launch in September 2010. The retailer had a valuation as high as $485 million after its $60 million Series B funding in April 2014.

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The Recode report indicated that Birchbox engaged in “serious” sale talks with QVC but that the deal fell through. Co-Founder and CEO Katia Beauchamp would no longer have run Birchbox under such a deal.

The QVC fallout was the latest chapter in Birchbox’s attempt to combine with a larger retailer that could give it a course correction. In August 2017, Birchbox reportedly held acquisition talks with Walmart and other retailers, but the talks fizzled out.

Subscription Box Model Not To Blame For Birchbox Struggles

Although there have been questions about the sustainability of the subscription box model that Birchbox helped usher into retail, the retailer’s decline doesn’t appear to be indicative of the category’s performance across the board. For one, fashion subscription retailer Stitch Fix saw Q1 revenue of $296 million and net income of $13.5 million, with users increasing 30% to 2.4 million in its first earnings report after going public in November 2017.

Ipsy, Dollar Shave Club, Le Tote and Loot Crate all have succeeded with the model and continued to add subscribers, with Ipsy cutting directly into Birchbox’s beauty share. Although Ipsy launched in September 2012, two years after Birchbox, it has a 68%-to-32% lead in head-to-head market share as of 2017, according to data from Second Measure.

While Birchbox was profitable in 2017, the company has dealt with internal financial issues in recent years stemming from debt owed to investors. The retailer conducted two rounds of layoffs in 2016 and needed a $15 million Viking Global-backed lifeline round when it couldn’t bring in capital from new investors.

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