Jul 30, 2018 - Economy

The big picture: Millennial-targeted startups face wild boom-bust cycles

A Blue Apron box on a doorstep

Photo: Scott Eisen/Getty Images

E-commerce startups, especially those in the fashion and lifestyle spaces, are testing novel methods to keep young shoppers coming back in a saturated market.

Why it matters: Millennial spending habits on retail are impulsive as they spend more freely than other generations. New startups are popping up on their Instagram feeds to advertise free trials or referral codes to get them in the door — but retaining those free-flowing dollars can be more difficult.

By the numbers:

  • An average company has a 32% chance of retaining a customer who made one purchase for a second purchase, but once a customer makes two purchases, there's a 53% chance they will make a third, per a report from RJ Metrics.
  • 90% of female social media users interact with beauty brands, and 83% of interactions are related to clothing, according to Adweek.
  • The two top factors when buying clothing and accessories re low price and high product quality, according to a 2017 Statista survey.

The winners:

  • Birchbox, a monthly subscription service for beauty products, went through several restructuring methods this past year in a successful attempt to show profitability, per Retail Dive.
  • Letgo, the secondhand goods marketplace valued at over $1 billion, announced the launch of image recognition technologies to give users video listings and automatic pricing suggestions, TechCrunch reports.
  • Glossier's CEO Emily Weiss raised $86 million in venture capital for the beauty brand. The company's clean product branding has attracted a mass of young cultish fans, Recode reports.
  • ClassPass, a subscription service for fitness classes, has raised $85 million in venture capital to fund the New York City-based startup’s plans to open in 10 more U.S. cities by end of year as well as enter new markets overseas, primarily in Southeast Asia.

The losers:

  • Mobile shopping app Grabble folded in July after it deemed its progress in "creating a technology platform for native mobile commerce" as a failure to deliver, trade publication Drapers reports.
  • Blue Apron stock has taken a hit since it went public last year. Blue Apron CEO Brad Dickerson told Axios' Dan Primack that the company pretended to be a technology business when it wasn't. "It’s something we’ve seen lots of other consumer companies do," Primack reported on his Pro Rata podcast.
  • MoviePass ran out of cash just last week, freezing subscriber usage at the theaters. "Surge fees" consistently keep going up and the company’s owner, Helios and Matheson Analytics, filed for a $5 million loan to keep the company afloat, per Business Insider.

The bottom line: As Kirsten Green, the founder of Forerunner Ventures, wrote for Axios Expert Voices, "These trends most often direct transactions straight to brands and specialty retailers, and will only continue in popularity."

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