In 2010, two business school graduates launched Birchbox; a monthly subscription service to a box filled with sample-sized beauty products from over 309 brands.
Birchbox has solved one of the most significant barriers to in-store and online sales in the beauty and cosmetics industries – the fact that many consumers prefer not to purchase beauty products without having sampled them first and yet some products (think shaving, dental, bathing and haircare products) simply cannot be tested in store. Birchbox acts as a channel between brands and consumers by delivering samples to the privacy of the consumer's home, and charging for the luxury.
This subscription model is also enlightened from a business perspective. The Birchbox e-commerce portal reports that 50% of subscribers buy full-sized products after receiving their samples. By inviting customers to purchase those full-sized products directly from the Birchbox website in return for member "'points"' to spend in the online store, Birchbox is able to pull in affiliate fees in addition to subscription fees.
Seems simple enough, but be under no illusions – subscription models require a keen eye from a legal perspective. Amongst other requirements, and specifically in relation to subscription contracts concluded by electronic means (including over the internet), The Consumer Contracts Regulations 2013 require that the trader provide information detailing the total costs per billing period or (where such contracts are charged at a fixed rate) the total monthly costs in a clear and prominent manner directly before the customer places the order. The consequence of failing to provide this pre-contract information is that the customer may not be obligated to pay such charges or costs.
- the fact that the subscription has an initial and recurring payment feature which will be automatically renewed;
- how, when, and through which payment method the trader will charge the customer for the subscription service;
- if and when the subscription service will expire; and
- how to opt-out, cancel or modify the subscription service, and eligibility conditions for a pro-rated refund in those circumstances.