Beauty-in-a-box service Glossybox says moves into profit

FRANKFURT, Germany - Glossybox, a beauty products sampling service, said on Saturday it turned profitable last year and is growing solidly again after a previous rapid expansion nearly killed the start-up.

The Berlin-based company, backed by Germany's Rocket Internet and inspired by rival New York-based cosmetics-in-a-box firm Birchbox, said its customer base grew 25 percent in 2014, despite cutting marketing costs by 33 percent.

Glossybox counts 200,000 mostly female customers who pay around 10 euros ($11) a month to have a box of sample cosmetics mailed to them. Working with 600 skincare, perfume and beauty brands, it has delivered 6 million boxes to date.

Birchbox, which reportedly counts 800,000 subscribers, sparked the curated product-in-box craze, inspiring copycats for everything from chocolate to record albums, sex toys, dog treats and even munchies for pot smokers.

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Founded in 2011, Glossybox rapidly entered more than 20 markets including Asia, an over-expansion that led it to cut its workforce to 130 from a peak of 350 in 2013.

It now focuses on 10 markets including Germany, France, Britain and the United States and has begun hiring again after making progress in reducing customer turnover.

"We needed to admit that what we had done would not work, at least at this stage," Founder and Chief Executive Charles von Abercron, 30, said in an interview.

Von Abercron said the company operated profitably in every month last year and turned a "seven-digit" euro profit.

Glossybox has raised 55 million euros from Rocket Internet and regular investment partners AB Kinnevik, Holtzbrinck Ventures and Len Blavatnik's Access Industries. Rocket holds a majority stake in the company.

Beauty products retailing has proved relatively immune to e-commerce as customers prefer to try products before purchasing. Pharmacy retailers such as Boots, DM and Walgreens vie in the sector with cosmetic specialists such as Sephora, Shisedo and Douglass.

Product-discovery sites look to change that by asking users their age, skin type and hair color to create tailored profiles. Glossybox is also expanding into fashion content, supplying customers with beauty tips and trends.

Eventually, Glossybox may look to create an online shop, as Birchbox has done, allowing subscribers to buy full-size versions of samples they like.

"I am not doing a shop today or tomorrow, but maybe in the future," von Abercron said. "Today, what you see, is not what you are going to see in six months."

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