The great Birchbox scandal!


Paul Carr
February 13th, 2014

In yesterday’s post I explained how I’m keen to give Pando readers (and, occasionally detractors) more of an insight into how we do things here. Today, by a nice coincidence of timing, I’m able to give an actual example of why I think it’s important.

Yesterday Sarah and I were on a flight to New York for tonight’s PandoMonthly and so out of phone contact (but not email) with the rest of the team. At one point during that window Adam also stepped away, briefly, from his editor desk to work on a feature of his own.

Of course that was the moment things went horribly wrong. A post about Birchbox was published on the site before it had passed through our normal editorial process (it had been copy edited, but not looked at by a senior editor). Both Sarah and I read the post after it had been posted and agreed that it was nowhere near ready to be published. All of the evidence cited was anecdotal, which is fine as a jumping off point, but it needed hard data before we were comfortable with readers seeing it and deciding whether or not Birchbox is in trouble.

So what to do? There were no actual errors in the post (in which case our policy would be to leave it up, but add a correction), it just wasn’t finished.

Both of us felt it should be pulled. But don’t take my word for it — here’s the entire email “discussion” around taking the story down. I’ve only redacted the name of the reporter — to be absolutely clear, this wasn’t their mistake, it was entirely our failing as editors.

birchbox

Deleting a post isn’t something we do often (I’m actually not sure if we’ve ever done it before) but, honestly, this didn’t seem like a massive ethical dilemma. We shouldn’t have anything on the site that even hints at problems at a company until we’ve reported it out. The Birchbox story is back in our editorial queue and is being edited properly as we speak. Assuming the reporting stands up, it’ll be on the site soon. If it doesn’t it probably won’t.

Enter the conspiracy theorists.

It started with a comment on my post about openness.

Screen Shot 2014-02-13 at 1.24.42 PM

Honestly this was the first time I’d heard that we shared investors with Birchbox. I genuinely have no idea who Birchbox’s backers are. It wasn’t until after I’d responded to the comment that I actually checked. Lerer is an investor in both companies, apparently — but First Round isn’t. The commenter had also missed another “conflict” — apparently Accel is an investor in both companies too. (Yes, that’s the same Accel who are investors in Beachmint who, just a few months ago, we were accused of being brutally unfair to in our reporting of their struggles).

This is the problem I wrote about in my original post. The meme that Pando is the only blog to have Silicon Valley investors, leading to weird bullshit conspiracy theories every time we make even a trivial decision. THEY CHOSE STARBUCKS OVER PEETS! LET’S LOOK AT THEIR INVESTORS!

But that’s ok. As I say, I’m happy to have those conversations, even with loons.

This particular loon clearly wasn’t happy with my response and so he did what all loons do in his position. He emailed Sam Biddle at Valleywag.

Sure enough, a few hours later, despite a clear and categorical denial from Sarah that we had any conversation with investors before pulling the story, this (grammatically ugly) headline appeared on Valleywag…

Pando Spikes a Post Critical of a Company It Shares Investors With

The crookedest little bloghouse in Silicon Valley just hit a new low, it appears: A negative story about Birchbox, a beauty-product site with which Pando shares investors, was deleted shortly after being published. Unfortunately for Pando and the backers it loves so dearly, this is the internet, and nothing ever disappears.

The post continued:

At any other website this kind of criticism is about as scalding as a half-empty Ensure shake, but Pando is different—it’s lost almost all of its original staff, its business office has all but emptied out, and advertisers have been missing since the end of last year. What the site has left is its chummy relationship with investors, a cadre of elite Silicon Valley business players who still believe in editor-in-chief Sarah Lacy. Two of these investors—Accel and Lerer Ventures—have enjoyed glowing Pando coverage for Birchbox, which they both hold a stake in. Accel is also, coincidentally, sponsoring a Pando event in New York today.

Those allegations about Pando’s “troubles” telegraph Biddle’s real reasons for writing his post. Late last year I wrote a lengthy piece about his attempts to start a grotesque, hypocritical class war in San Francisco. Clearly he’s still smarting hard at being forced to do actual reporting instead of just throwing rocks at buses.

For the record — and I can’t believe I actually have to spell out the universal truth that Valleywag is lying — Pando’s traffic is at record levels, we sold almost as many ads and sponsorship slots just last month than in the entire previous year and while, duh, some early employees have moved on after two years at the company, our staffing level is at an all time high, as is the number of people working in our SF office (which makes the unavailability of a single editor to work on the Birchbox story slightly more embarrassing).

If you want to find a site that is missing its entire starting line up and can’t seem to hold on to a star writer for more than ten minutes, maybe take a look at… well… Gawker.

[Update: Apparently Nick Denton’s patience with Biddle’s constant bungling of stories is running out. Shortly after this post was published, a reader noticed that Biddle has been demoted from sole editor of Valleywag to “co-editor,” with Nitasha Tiku promoted to the same.]

So, that’s the truth behind the big Birchbox scandal. The post is back in the editorial queue and we’ll publish it on the main site (or not) when we’re happy it meets our standards for reporting. In the meantime, though, and in the interests of openness and giving insight into our process, here’s the entire draft, as it appeared on the site yesterday. Again, the only thing I’ve redacted is the name of the reporter. This was a failure of editing, pure and simple. And the responsibility for taking down the post lies entirely with the guy who pressed the unpublish button: me.

It’s important to reiterate that nothing that follows should be considered to be Pando’s editorial view. It’s an under-reported draft, published here just so you can see what all the fuss is about. With that caveat…

Is Birchbox starting to hit some scaling woes?

Subscription commerce is hard.

ShoeDazzle pivoted from it. GuyHaus failed with it. BeachMint overdid it. It seemed like the era of subscription e-commerce was seeing its final days. But through the tough times, a few companies squeezed past big obstacles and started to succeed.

Birchbox is one of them. The company sends monthly samples of beauty, lifestyle, and grooming products to users. It didn’t fall into the subscription pithole of paying loads to acquire customers, only to have them quit the service after a month or two.

It just kept growing, going from an estimated 100,000 subscribers in February 2012, to 200,000 in October 2012, to a reported 400,000 by August 2013. I’ve reached out to Birchbox for more current numbers or growth stats and will update this story when I hear back.

As Erin Griffith covered, Birchbox’s value came from being a marketing company that was disguised as a subscription e-commerce startup. It sourced all its box items free from beauty providers, who appreciated the customer leads and the chance to get more people to test and adopt their products after trying a sample. That also allowed Birchbox to have higher profit margins than other subscription companies who supply their own products or have to pay other companies for the products in their boxes.

But Birchbox has stayed largely mum with the press in recent months. Various Birchbox customers have told me anecdotes about their boxes that suggest the company is facing scaling challenges.

I’ve had a range of conversations with people who loved Birchbox but eventually stopped subscribing. One told me, “You can only use so many moisturizers.” Others said they received certain products repeatedly in follow up boxes. That would certainly be a detriment to Birchbox’s ability to provide bigger sales leads to the beauty companies themselves.

One particular subscription fan, who uses fashion subscription service Stitchfix religously and is one of its longest running customers, told me she tried Birchbox for awhile. The variety in each box didn’t keep her interest. She’s switched to Michelle Phan’s Ipsy instead because it sends her more makeup and “stuff that isn’t just anti-aging wrinkle cream.”

Another person trying out Birchbox and Ipsy echoed the sentiment, telling me she is considering canceling her Birchbox and prefers Ipsy because, “The products feel a little less samply and it comes together in a cute little makeup bag whereas Birchbox just comes in a box.”

Birchbox is probably taking on more customers as fast as it may be losing some. But it’s not ideal for a subscription e-commerce company when users start jumping ship for the competitor.

It’s worth noting that this is by no means a proven trend. I’m not a Birchbox user myself, the company’s data isn’t public, and this is entirely anecdotal. I’ve spoken with five or six current or former Birchbox users across a range of geographies.

Regardless of whether their complaints represent a larger trend, their stories are worth exploring because they hold a wider lesson for the larger subscription e-commerce industry. It’s difficult to maintain variety and retain customer interest. If you can’t do the first one, the second may decline.

Birchbox likely knows this, and it’s entirely possible the company has plans to create its own products to fight that issue. CEO Katia Beauchamp told Pando in February that the company was experimenting with sourcing its own supply.

Birchbox investor Ben Lerer has been pushing her to expand such test runs at least since then. That’s when they debated the issue at a Pando CEO Supper Club. Lerer told Beauchamp, “You are also an entrepreneur who raised money and hit your five-year goal in seven months, and you’re sort of a wuss, and you can lean in a little bit here and take some risks.”

At the time, Pando reporter Erin Griffith rightly asked the question:

Beauty brands that were willing to provide 10,000 samples aren’t necessarily interested in providing 100,000 samples. That means Birchbox has to segment its boxes, which involves a lot of coordination. The company sends between 20 and 50 different versions of the box each month.

If the anecdotes I’ve been hearing are any indication, Birchbox is struggling with that scaling woe.

[illustration by Brad Jonas for Pando]