How BeachMint is overcoming growing pains

Rapid growth has CEO Josh Berman rethinking its strategy and building a new team

Updated to include input from BeachMint investor Peter Sonsini and to include growth numbers and traffic figures from comScore.

These days, you can subscribe to get anything in a box on a monthly basis—shoes, clothes, food, dog toys, craft kits, condoms, tampons, etc. Subscription commerce is stepping in to fill the void left by the rapid inflation and equally rapid deflation of the daily deals industry. Where consumers once wanted daily discounts, they now want cool stuff—every month. And right now, the subscription commerce industry is dominated by three major players: JustFab, ShoeDazzle, and BeachMint.

Growing pains

Launched in October 2010, BeachMint got into the game a little later than ShoeDazzle and JustFab. And the company has experienced some very public growing pains. In the last year, BeachMint has lost its CMO John Volturo (who had been with the company since launch), CTO Carl Trudel, and CFO Jordan Posell. In exchange, it got new COO Greg Steiner, who packs some heavy industry punch.

When a company plays a game of musical executives, that can only mean one of two things: it’s either in its death throes (think Zynga), or it’s scrapping the first plan and trying something else with a new team (think Yahoo). Co-founder and CEO Josh Berman says it’s the latter.

“I think we’ve had very low turnover with key people: [co-founder] Diego and myself. We brought in more people with the right experience in the right categories. We’ve kept the same engineers—these guys are crazy good. We kept the same guys in Ops. I can’t be more pleased with our team,” said Berman, who hinted at a new marketing hire that the company hasn’t yet announced.

Berman argues that the departure of a number of top executives doesn’t signal that BeachMint is floundering. Rather, BeachMint finding the right people to put into the right roles.

(Great timing for us! Berman will be one of the keynotes at our Splash LA event on the evening of May 30 at the famed and swanky Hollywood Roosevelt hotel. As always, our Splash keynotes share their lessons learned from the challenges they face building their startups. Register to get your Spring Sale tickets!)

"There are challenges in every startup, and turnover happens. There have been some changes in management at Beachmint, but I wouldn't categorize it as anything extraordinary for a dynamic, fast growth startup," said BeachMint investor Peter Sonsini of NEA. "Anticipating your hiring needs is always tricky. The company has really found a good fit with their focus on technology and their brand-based model in women's fashion. Ecommerce is obviously a huge category and they are sufficiently differentiated from the other companies in the space."

"BeachMint is still a startup that has had incredible growth and we expect there to be some changeover with that level of growth," said Samit Varma of Anthem Venture Partners. "We brought in Greg Steiner as COO, and placed an emphasis on strengthening the organization, getting the right people into the right positions."

BeachMint has had an interesting story in its two-and-a-half years. The company launched in late 2010 with a familiar L.A. subscription commerce model: pair up a celebrity with your product and get customers to sign up to buy a new product every month. ShoeDazzle got Kim Kardashian. JustFab got Kimora Lee. BeachMint got Kate Bosworth—and then added Mary-Kate and Ashley Olsen, Jessica Simpson, Justin Timberlake, Brooke Burke-Charvet, and Rachel Bilson. 

While ShoeDazzle and JustFab were drilling down on shoes, BeachMint was throwing its arms open and dabbling in a little bit of everything: jewelry (JewelMint), shoes (ShoeMint), beauty products (BeautyMint), lingerie (IntiMint), home design (HomeMint), and apparel (StyleMint). The company also took a decidedly higher end approach. While ShoeDazzle and JustFab were offering a new pair of shoes for $40 a month, BeachMint’s styles were twice that. Today, shoes on BeachMint start at $79.99.

The company raised $73.5 million across four rounds in just 18 months to fuel its rapid growth. In the seven months between its June 2011 round and its January 2012 round, the company said that both subscribers and revenue tripled.

Executive turnover

And then rumors began bubbling of problems on the home front. Just five months after raising $35 million and launching two new categories, CMO John Volturo left in June 2012. Trudel and Posell followed in January 2013. There was also lower level turnover. Today, BeachMint has 110 employees, down from 150 last summer.

There was a reason for Volturo’s departure—he went off to become the founder and CEO of Scriball. There were rumors that Volturo might be looking to sell his stock, but the company says nothing of the sort has happened.

Nevertheless, some have begun to question whether the company simply grew too large, too fast. Launching into six shopping categories at the same time is no joke. It takes some serious focus and man-power to find out exactly who the customers are and what they want out of each category.

And indeed—BeachMint’s subscriber base is diverse. Each category draws a different crowd, according to Berman. At JewelMint, where the monthly subscription fee is $29.99, users tend to be younger and more social savvy.

“They tend to shop at Macy’s or Forever 21, and they make a lot of Facebook purchases,” said Berman. “On the shoe and fashion side, they’re Nordstrom shoppers. They know that Steve Madden shoes aren’t disposable shoes.”

With such a diverse range of customers, would it be better for Beachmint to shave off some of its categories and focus on one or two things at a time? Berman said that the company has no plans to drop any of its categories.

“When we launched we didn’t know which verticals would catch on,” said Berman. “After we launched six categories, we learned where our expertise was. We’re definitely focused on circling down on categories that work. We’re not prepared to drop any. We’re taking the approach of—let’s find the right partners for the right verticals.”

Berman said the company is currently in discussions with a number of possible partners.

Expanding into six verticals in parallel might make the BeachMint team crazy, or it might make them crazy like a fox. Traffic figures from comScore reveal that BeachMint's three most popular sites, StyleMint, ShoeMint, and JewelMint, drew a combined total of 749,000 unique visitors in March. BeachMint declined to give the traffic figures for the remaining three properties, but it's probably safe to assume that BeachMint's properties draw over one million unique visits per month. 

(Note: in a previous version of this article, I included traffic figures from Compete that only reflected traffic to BeachMint.com, not BeachMint's other sites.)

By comparison, JustFab saw 4.2 million uniques in March, and ShoeDazzle drew 928,000 (ShoeDazzle has had its own problems over the last year). True: six product categories are probably more expensive to manage than one or two, but it stands to reason that if BeachMint can build up a good sized following across all of its properties, then the foundation for solid growth has already been laid, and as it finds the right partners for each vertical, those numbers will only increase.

Indeed, the company has seen some strong growth in the last year. Sales increased 250% in 2012, and BeachMint saw a 150+% increase in new memberships in the first quarter of 2013. 

Getting back on the right track

In addition to finding the right partners, BeachMint also boosted its prospects when it brought Greg Steiner on board as COO last summer. Steiner hails from eHarmony, where he spent 12 years in the role of COO, starting from the company’s launch. That level of experience and expertise packs some serious weight.

“Greg is an amazing operator and executive. He brings to Diego and me a third partner that is extremely knowledgeable with marketing, subscription, finance, operations and strategy,” said Berman.

BeachMint's growth strategy going forward is to focus on its women's fashion verticals--namely StyleMint, JewelMint, ShoeMint, and IntiMint. JewelMint--BeachMint's first product category--is getting a lot of attention. Last month, JewelMint unveiled its designer collaboration program Studio Series, which launched with a collection designed exclusively for JewelMint by CFDA award winning jewelry designer Philip Crangi of Giles & Brother. Over half the collection sold out in the first week. 

Additionally, the company plans to hone in on its Facebook followers, as the lifetime value of customers who use BeachMint's fCommerce app is 79% higher than those who don't. The Facebook app utilizes a number of gamification and engagement techniques, which--when combined with other social media efforts--has resulted in a higher rate of sales conversion.

All of this spells good things for L.A.'s tech scene, where BeachMint, ShoeDazzle, and JustFab are e-commerce leaders. 

Berman believes the company has a bright future in Los Angeles.

“If you’re in fashion and you’re working in content, there’s no better place,” said Berman. “There are a lot of great story tellers here. You want great writers and storytellers when you do a lot of marketing and photography—L.A. is poised above every other city to do it well and cost effectively.”

Image source: cloudfront.net