Macy’s moves while Birchbox stumbles

A tale of two startups

Hi there,

Today, Macy’s announced its acquisition of Story, a concept store in Manhattan. While Story has a single, fixed location, every 6-8 weeks it shuts down and re-opens with a completely new theme, interior design, and product mix.

Story sells products, but also charges brands $600k – $1M to sponsor the theme of each “edition” (though Story maintains final design control).

Story’s successful exit follows yesterday’s news of Birchbox’s failure. Major debt forced the beauty subscription box startup to sell to hedge fund Viking Global, leaving its prior investors “expected to walk away with nothing” after pumping in $71M.

What’s the connection? Both startups aimed to provide curation — but only Story actually delivered.

Helpful or invasive?

Birchbox offered subscription boxes of personally tailored, sample-sized beauty products. At least initially, brands provided these samples to Birchbox for free in hopes that users would trade up to full-sized products later on.

However, Birchbox faced frequent criticism that the personal info users submitted seemed to have no impact on the samples they received. Last year, it even launched a second, higher-priced subscription option that promised this time, for $4 more, it would truly be personalized —  not the best way to earn customer trust.

And under big-money VC pressure, Birchbox tried to expand too quickly. Amidst profitability struggles, it laid off several rounds of employees. It took away that human touch in personalized product selection without the tech to fully replace it.

For example, it appears to use startup RangeMe — the same platform used by Safeway, Target, and other more traditional retailers — to source its products.

And in Birchbox’s case, a bad experience is worse than no experience. Getting a box on your doorstop each month raises expectations; opening it to find yourself burdened with irrelevant products crushes them.

What did Story do right?

Story, on the other hand, curates experiences.

It chooses the product assortment that visitors see, but people make final buying decisions on their own.

Story also focuses on B2B revenue through its paid sponsorships —  a more stable business model. And since Story designs such memorable in-store experiences, its clients can feel they’ve gained long-term brand capital even among shoppers who don’t buy products.

What’s next for Macy’s?

The Story acquisition represents a rare deal for Macy’s, whose last acquisition was of cosmetics chain BlueMercury in 2015.

Since Macy’s owns so much real estate — its properties are worth twice as much as its business, by some reports — it could potentially work with Story to turn some of its stores into experience centers to better attract foot traffic.

Following this deal, I’d also keep my eye on Appear Here, another B2B startup helping brands launch experiential pop-ups.

Sexy new consumer products, like Birchbox, often grab all the headlines. But this week’s news shows that slow growth, a human touch, and a B2B focus can win out.

Stay hungry,

Zoe
@Zoe_Leavitt

P.S. I’ll be speaking at Techonomy NYC next week, alongside the president of Microsoft, the CEO of Postmates, and some other terrific speakers. Let me know if you’ll be attending!