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Good morning! It's Thursday, February 22nd. Today’s post breaks down the success of IPSY, a subscription-based makeup distributor that’s generating over $1B in revenue!

THE FEATURE

IPSY— $1B in ARR from Personalized Beauty Boxes!

The beauty industry is growing fast, generating $530B in 2020, and expected to generate $646B this year. 

Leading this growth charge are companies like IPSY, which are expanding the market through their personalized beauty boxes.

In 2020, IPSY generated $1B through its 4.3M subscriber base!

So, What's the Business?

At the core of IPSY's business is its advanced user personalization that uses proprietary machine learning technology. 

When users make an account with IPSY, they take the Beauty Quiz that covers skin tone, eye and hair color, favorite styles, and brands. The result: 150 data points that IPSY's algorithm uses to curate makeup boxes tailored to each user's tastes. 

This personalization is deepened via IPSY's incentivized product review page. Every month, subscribers are encouraged to rate and review the products they receive. In return for their reviews, users get in-store points for exclusive makeup products. 

Incentivizing product reviews serves two purposes:

1. IPSY sees which products resonate best with consumers and can deepen inventory. 

2. Personal product preferences are tracked and taken into account for the curation of future monthly makeup boxes. 

The real magic behind IPSY's subscription service is that it introduces consumers to products they never knew they needed or wanted, thereby expanding demand for makeup products. 

IPSY makes its subscription model more attractive via its exclusive IPSY Shop, where subscribers can purchase select products for 30%-80% off retail prices. 

There are three subscription tiers: 

• Glam Bag: $13/month for five deluxe beauty samples 

• BoxyCharm: $28/month for five full-size beauty products 

• Icon Box: $58/quarter for eight full-size products

Traction

IPSY grew revenue from $150M in 2015 to $500M in 2019. Off the back of stellar growth, IPSY secured a ~$135M funding round to fuel expansion in 2020. 

With massive revenue growth and new funding, IPSY acquired competitor BoxyCharm for $500M in 2020. By bringing the two competitors together, IPSY nearly doubled its revenue, surpassing the $1B ARR mark. 

IPSY hasn't released more recent revenue figures. But, considering the expansion of the makeup industry, we can only assume that the leader of subscription beauty products has only grown since 2020. 

How They Win: Leveraging Social Media Stardom

Before Michelle Phan founded IPSY in 2011, she was just a YouTube content creator— albeit a very successful one. She began posting makeup tutorials on YouTube in 2007, and by 2015, she had accumulated 7.5M subscribers and over 1B views!

When she used YouTube to announce her subscription-based "Glam Bags" in 2011, she gained 500K subscribers and routinely sold out each month. 

The idea behind IPSY came to her when she was 19 years old and on a trip to Thailand. While there, she saw hordes of young girls scrambling to kiosks to pay for makeup samples since beauty products are nonrefundable in Thailand. 

Recognizing the demand for beauty products that matched skin tones and types, she built IPSY to make it easy and affordable to test out new products. 

Phan wasn't an influencer who stumbled upon some lucrative deal to become the face of someone else's makeup brand. Instead, she grew her social media presence with the intention of building her own future brand off of it. She explained this strategy at the Forbes' Under 30 Summit: 

"I thought, if [YouTube] is going to be the global television of the future, I need to build my brand here… Influence is the new power--if you have influence, you can create a brand."

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