Earlier this month, GlossyBox was acquired by The Hut Group, a UK-based e-commerce platform player that already operates several subscription box brands. And Birchbox — arguably the company that launched the entire subscription box business model — is reportedly in talks with Wal-Mart and other companies. This surge of deal-making is not coincidental; this slice of the subscription box industry is set for expansion, and retail giants are jumping in, either with their own versions or with the purchase of existing companies. And that’s a reasonable big-box strategy, considering that beauty box subscribers do go on to seek out and buy the products they try in their boxes:

(Source: Statista)

Research firm Statista, a source I use in this column as an aggregator of survey data from other sources, conducted some research of its own in May 2017. The project polled 1,006 respondents in the United States age 18 and older who reported an interest in beauty and/or cosmetics. The results, as you’ll see below, show a vast untapped market of potential customers, and big players now want in on that.

GROWTH OPPORTUNITY

There are many beauty box providers, some with relatively wide name recognition, some with less. Current subscribers were asked if they had heard of a range of brands:

(Source: Statista) 

Every subscriber polled had heard of at least one of these brands.

This data also reveals the top players in the field, and it is notable that Target, Wal-Mart, and Sephora — big retail brick-and-mortar chains — come in fourth, fifth, and sixth. Clearly, the potential upside in the beauty-box industry has attracted big players. Take a look at that potential market with this graphic:

(Source: Statista) 

More than half of women interested in beauty and cosmetics surveyed said it was very or fairly likely that they would subscribe to a beauty box in the next 12 months.

The potential for growth remains huge. Look at this graph of interest in subscribing:

(Source: Statista)

We see that 11% of women polled are already subscribers. Those are still potential customers considering that women often subscribe to multiple beauty boxes. Another 11% used to subscribe — and are also potential customers, if they can be convinced to try again. A full 40% have never tried, but are curious. Only 39% of those surveyed have no interest. Bottom line: the potential customer base is huge.

Take the 11% of current subscribers and the 11% of former subscribers and call them experienced consumers. Take the 40% who are interested but have not yet taken the plunge and call them untapped consumers. Consider these consumers to be the current target audience for beauty box services:

(Source: Statista)

What do you call a market in which 65% of the target audience wants to buy in but has no pre-existing loyalty or commitment? The room for growth here is just astounding.

Now take that same question, on subscription status and interest, and look at the demographics by age:

(Source: Statista)

In looking at demographics in general, I’ve discussed at length the upside and importance of the Millennial consumer for subscription services. That remains true here, but remarkably, the potential in Gen X and Boomer/Senior markets is also quite strong. Only 35% of women age 30 to 59 are not interested in beauty boxes, and although 60% of women 60 and up are not interested, fully 40% are! That’s a wide open market with a lot of room for growth.

THE ALLURE OF BEAUTY BOXES

In looking at why beauty boxes appeal to consumers, the research shows that two significant imperatives stand out. When asked “Which reasons would make you subscribe to a/another beauty box?” — a question only posed to consumers who had subscribed in the past, who subscribe now, and who said they were interested — discovering new products and receiving high-value products for a good price were foremost:

(Source: Statista)

The lesson here for marketers is clear: novelty and value trump convenience.

The same trends are on display in results to a follow-up question: “Which features are most important to you when deciding on a beauty box?”

(Source: Statista)

Again, value and variety top the list, with personalization in a strong third place.

The research also looked at consumer satisfaction. Of consumers who currently subscribe to one or more beauty boxes, 65% are very happy and 32% are fairly happy. But that’s among current subscribers, and as we saw above, only 11% of respondents fell into that category. The results for those who had canceled their subscription might have been revealing. However, the research did ask former subscribers why they had canceled:

0)](Source: Statista)

Bottom line: Not enough value, not enough of the right kind of variety.

Another measure of satisfaction is whether you think that beauty box subscriptions make good gifts, because after all, we give the gifts we would like to get. And on this measure, customer satisfaction is high:

1)](Source: Statista)

That’s 60% who think beauty boxes make good gifts.

THE IDEAL BEAUTY BOX

The Statista research also polled subscribers on what they like and do not like in their boxes. They looked at the number of items, size of items, the frequency of delivery, and price per box. Here are the results:

About three-quarters of females likely to subscribe are looking for four to seven items per box:

2)](Source: Statista)

And 45% prefer four to five items.

A plurality of 48% want an equal mix of sample size and full-size product:

3)](Source: Statista)

Half of likely customers want a box a month; another quarter prefer twice a month:

4)](Source: Statista)

The results on preferred cost show a marked preference for value:

5)](Source: Statista)

FOR FURTHER STUDY

It may well pay dividends to look at a deeper slice of the research. For example, we know that consumers look for variety (especially for new products) and for value (especially bargains on products they know have a high cost). But would a deeper dive show that all consumers desire value and variety equally? Or are some subscribers seeking one and some, the other? Similarly, it is possible to look for age differences? How about race, or geographic region?

It might turn out that consumers who really want bargains also want larger baskets with more items. Or maybe older subscribers look for the ability to customize their boxes. Or maybe customers in the Northwest just love little boxes of samples, delivered often.

If I can convince the good folks at Statista to slice and dice their data — within the best practices allowed for smaller sample sizes — I may return to this topic in a future column.

Insider Take

The beauty box business was the first subscription box model to break out as a popular hit, and it paved the way for the wide range of boxes that followed. Given the beauty box’s history as a groundbreaker, it is all the more remarkable to see that the business continues to demonstrate a huge potential for future growth, particularly in regard to the large untapped market of unserved but interested customers who are still out there.