Birchbox Could Propel Wal-Mart’s Beauty Game With Data

Wal-Mart’s hunt for market share is extending to beauty, and if the retail giant were to buy beauty box company Birchbox, it would gain not just a trove of consumer data, but potentially gain access to hip indie brands.

​

One source noted it was the increasingly acquisitive Wal-Mart Stores Inc. that approached Birchbox about a potential takeover, while multiple sources confirmed that talks between the two companies have taken place.

​

The business — believed to have roughly $200 million in sales and to have recently reached profitability — is said to have hired Centerview as its investment bank to manage the talks.

​

“We can see with the new beauty innovation that they really do feel that beauty is an opportunity to invest in,” said Wendy Liebmann, chief executive officer of WSL Strategic Retail, referring to Wal-Mart’s recent efforts to upgrade its beauty offerings. A deal for Birchbox could be a way for Wal-Mart to “build that 360-degree relationship, whether [beauty consumers are] physically in the store or not,” she noted.

 

If Wal-Mart were to take over Birchbox, experts agree the move would bring not just data on consumers’ habits — but a way to reach beauty shoppers who are making less frequent visits to stores. It could also bring a sampling arm to Wal-Mart. Birchbox would gain logistics support and a means to cash out some of the investors who pumped more than $80 million into the business since its 2010 launch.

​

Industry sources noted it is unlikely Birchbox would be acquired for the lofty $485 million valuation it received in back in 2014.

Birchbox has the potential to bring some brands to the Wal-Mart family, but it also has a significant amount of brand overlap with Wal-Mart’s Jet.com. On the data side, Birchbox’s insights could provide a lens into emerging brands and trends, according to Liebmann.

​

“[Wal-Mart] certainly has a lot of data from their vendors, but will this give them a different view. The other piece of this is data about new and emerging things,” Liebmann said. “What we’re seeing in beauty, where the big brands have been challenged, is, ‘How does a retailer see where things are emerging and how do they quickly respond to that?’ In a high-trend category like beauty, having data that helps you understand that is really important.”

​

Retail analyst Jane Hali, ceo of Jane Hali & Associates, noted: “Wal-Mart certainly isn’t the Wal-Mart we all used to know, just based on their digital acquisitions. They purchased Jet, they purchased ModCloth, they purchased Moosejaw to get into the outdoor business, they purchased Shoebuy to compete with Amazon’s [footwear business].…They are targeting Millennials through all of this, and Birchbox would be another acquisition that would make sense.”

​

And one financial source noted: “Everything Wal-Mart does right now is a race against Amazon. The only other good buyer for [Birchbox] would be Amazon.”

​

News of the Birchbox talks broke as Wal-Mart unveiled a heightened focus on beauty — from upgraded beauty departments, to new brands, to its in-house beauty debut, a better-for-you skin-care-and-makeup range called Found. A big part of the push is the look of the departments — at a test store in Secaucus, N.J., they had white, illuminated, fixtures, complete with iPads to highlight relevant beauty trends. Wal-Mart is also dedicated more shelf space to growing brands like E.l.f., which is getting 20 percent more shelf space.

​

Original Post Here