Pretty profits in beauty product samples

Beauty product sales techniques have come a long way from department store salespeople spritzing perfume on passersby.

Those techniques have undergone a revolution, thanks to the increasing use of product samples, which have become a big industry in their own right. American startup Birchbox and a European rival called Glossybox have turned product samples into a profitable segment of the industry, according to a Euromonitor report.

For beauty product manufacturers, providing small samples of their lipsticks and skin products have proven to be a productive technique to convince consumers to open their wallets. Free samples are the fourth-biggest influencer in a purchasing decision, following past experience, friends' and family's recommendations, and price.

But samples have moved far beyond that as Birchbox has proven that consumers will pay a small monthly fee for a box of assorted mini-lip-balms, nail polish bottles and other products.

"Beauty product samples are now a beauty offering of their own, thanks to innovative start-ups, travel restrictions on beauty packaging sizes and consumer desire to continually try new products," Euromonitor analyst Nicole Tyrimou wrote.

Birchbox, started by two women who met at Harvard Business School, has raised almost $72 million in venture funding and books revenue of about $170 million annually, according to Fast Company. While most consumers are familiar with its $10 per month subscription for a different selection of beauty product samples each month, Birchbox has also expanded into bricks-and-mortar stores and e-commerce. About half of its subscription customers end up buying products from its site, Fast Company noted.

"The box is just the beginning," co-founder Hayley Barna told the publication.

But for early sample companies like Birchbox, expanding beyond subscriptions might be a necessity, Euromonitor notes. The field has grown increasingly competitive, with startups such Julep and Ipsy shouldering their way into consumers' beauty bags.

"Subscription sites have had to do more to retain and gain subscribers," Tyrimou wrote. "As a result, most subscription sites now also operate e-commerce, where consumers can buy the full-size products, as well as blogs with reviews (consumers, in many cases, get points for reviewing products which can be used for purchases), articles and how-to-do videos."

Beauty product samples are turning into profitable ventures for manufacturers as well, with new marketing tools such as "advent calendars," which are sold at the holidays and offer a small sample behind each window in the calendar. Companies such as The Body Shop and Benefit offer beauty-sample December countdowns, a development that Euromonitor noted began about three or four years ago. L'Oreal Lancome's advent calendar sold out last year, it noted.

"While a seasonal product, advent calendars do exemplify a burgeoning trend of companies seeking to find a way to capitalize on the massive quantities of samples they have, as well as consumers' desire for trying new products," the report noted.

Other changes are coming to the beauty product market. Technology such as apps that allow consumers to upload pictures of themselves and then "try on" products digitally can sidestep the need to actually try out a sample, Euromonitor said.

It added: "As consumers begin to trust technology to choose the right product for them, the desire to try new products through the form of samples is likely to become subdued."