how-does-ipsy-make-money

How Does Ipsy Make Money? Ipsy Business Model In A Nutshell

  • Ipsy is a monthly subscription service for cosmetic and beauty products founded in 2011 by Michelle Phan, Marcelo Camberos, and Jennifer Goldfarb. Phan used her large YouTube following to launch and grow the platform.
  • Ipsy makes money by charging customers monthly for beauty subscription boxes. Various subscription plans are available depending on the level of beauty product size and customization.
  • Ipsy also operates an eCommerce store selling branded and in-house beauty products. The company also sells product placement spots to brands eager to receive highly targeted exposure.

Origin Story

Ipsy is a monthly subscription service for cosmetic and beauty products. The company was founded in 2011 by YouTube vlogger Michelle Phan together with Marcelo Camberos and Jennifer Goldfarb. 

Phan started uploading videos to YouTube long before it was possible to make a living on the platform. She began by posting videos about dogs and obscure topics such as how to make face masks from pulverized aspirin. However, Phan noticed that her makeup tutorials attracted the most views. 

When YouTube began allowing its creators to monetize their videos, Phan was accepted into the program. She started posting beauty tutorials more frequently, quitting her weekend job at a sushi restaurant to devote more time to her vlogging.

In a very short time, Phan amassed approximately 1 million YouTube followers. She moved to Los Angeles to build her company with like-minded individuals where she became acquainted with Camberos and Goldfarb. At the time, Phan also noted the surging popularity of the subscription box model with services such as Birchbox.

Ipsy was launched in November 2011 as MyGlam to take advantage of this trend, with each customer sent a so-called “Glam Bag” of beauty product samples every month. After raising seed and subsequent investment funding, MyGlam was renamed Ipsy in September 2012.

During the next few years, Phan managed to grow Ipsy through word-of-mouth advertising and her large YouTube following. Such was the success of the service that it was profitable almost immediately. 

The growth of the company continues to this day. Ipsy now houses more than 10,000 amateur beauty vloggers in a large studio space in San Mateo, California, with each blogger an unofficial Ipsy brand advocate. Ipsy also employs a team of stylists who promote the brands featured in the monthly bag through video. In October 2020, Ipsy announced it would be acquiring rival BoxyCharm to cement its position as one of the leading subscription-based beauty services.

Ipsy revenue generation

Although Ipsy started as a subscription box service, the company now has a diverse revenue generation strategy. An overview of this strategy is provided below.

Subscription boxes

Consumers who wish to receive a regular delivery of beauty samples can choose between three subscriptions:

  1. Glam Bag ($13/month) – the original Glam Bag featuring an assortment of five personalized beauty samples. The consumer can choose one product for their bag each month.
  2. Glam Bag Plus ($28/month) – featuring an assortment of five full-sized beauty products. In this case, the consumer can choose three of the five products each month.
  3. Glam Bag X ($55/quarter) – Glam Bag X is a members-only upgrade that includes seven to eight full-sized products personally curated by beauty celebrities. Glam Bag X is sent in February, May, August, and November and replaces the usual bag in these months.

Shop

Ipsy also operates its own eCommerce store where it purchases products at wholesale and then resells them for a profit.

The company also sells in-house brands such as Complex Culture and Refreshments. Margins on these brands are likely to be higher.

Product placement

With millions of subscribers, Ipsy has access to valuable consumer buying data which allows the company to better predict the products its consumers will enjoy.

As a result, the company works with beauty brands to promote products to highly targeted audiences. Ipsy is compensated by these brands in exchange for access to an effective and organic form of advertising. 

Connected Subscription Box Business Models

dollar-shave-club-business-model
Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscription model to cut off the costs and friction to get new blades and grooming products with a curated package.
dollar-shave-club-business-model
Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscription model to cut off the costs and friction to get new blades and grooming products with a curated package.
how-does-boxycharm-make-money
BoxyCharm recognized that there was a gap in the popular beauty subscription box market. Most companies were shipping boxes with sample-sized products that were not on trend or seasonally appropriate. As a proponent of the subscription box business model, BoxyCharm makes money via subscription revenue.

Read Next: Subscription Box Business Models.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"