Memebox's retail store.
Courtesy of Memebox

The four-year-old company raised $66 million to keep expanding its cosmetics business.

By Kia Kokalitcheva
August 10, 2016

With Dollar Shave Club’s recent $1 billion sale to Unilever and Wal-Mart’s $3 billion acquisition of Amazon competitor Jet.com, e-commerce is looking both well and dangerous.

But Memebox—pronounced “me-me box” not “meme box,” according to its website—an online seller of Korean beauty products, is hoping for the former and taking its chances with the recent close of $65.95 million in new funding.

Much of Memebox’s confidence comes from its approach to choosing and developing products to sell. “We have tens of millions of data points about what customers want,” Memebox USA president Arnold Hur tells Fortune.

Using data it collects from customer sales and feedback, Memebox says it can keep its finger on the pulse of customers and keep its catalog filled with the latest trends.

Sheet masks, for example, is one such trend onto which Memebox has latched. The thin fabric face masks soaked with lotions and serums first began to get some attention in Asia two years ago, but they really exploded in popularity all over the world in the past year, according to Hur. Along with stocking a wide variety of these masks, Memebox also produces its own as part of its in-house brands.

Of course, not every product in Memebox’s catalog has been a hit, Hur admits, though he says that a majority of products have sold through.

“The rate of mistakes can be lowered if you have data and technology helping you get there,” Hur explains.

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Creating its own brands and products is another way the company hopes to differentiate its products as it rides the current trend of Korean cosmetics. In the past year, it has released its first four lines of products and with plans for two more by the end of the year.

To keep its customers coming back for more, Memebox believes in a having a fast product development cycle. Many of the company’s products have been developed in no more than six months, and some in as little as two to four months. In contrast, beauty companies typically take 12 to 18 months, according to Memebox.

One of its in-house brands is Pony Effect, a collaboration with Korean beauty blogger Park Hye Min, also known as Pony Makeup, who has 1.58 million subscribers on YouTube and 2.4 million followers on Instagram. The line of products sold 20,000 units within the first four to five minutes it was available for sale on Memebox, says Hur.

Recently, a number of so-called YouTube makeup gurus have teamed up with cosmetics companies to design and market their own branded products. These deals let the social media stars cash in on their popularity by getting a cut of the sales, while the makeup companies use their fame to sell products, knowing that fans will flock to purchase them.

Memebox leans heavily on social media and digital marketing to establish its brand and attract customers. Today, the company’s videos have garnered more than 70 million views, and more than three-quarters of its sales are done on mobile devices, both through its app and via its website.

Founded in Korea in 2012, Memebox got its start by selling subscriptions to boxes of Korean cosmetics, similarly to Birchbox and Ipsy. However, it quickly did away with the business and switched to being an online reseller of beauty products.

“We grew so quickly that we couldn’t necessarily get the free products we needed,” says Hur of the box model, which requires that these subscription companies obtain free products from beauty companies for the promise of giving them exposure to their customers.

In hindsight, the box model has led to varying success for other companies. While Ipsy (co-founded by YouTube star Michelle Phan) raised $100 million last fall and said it was profitable, Birchbox recently raised $15 million from existing investors to help tide it over as it recovers from layoffs and reported scaling back of its plans to open new stores.

Today, Memebox still sells themed boxes of products, but they only represent about 1% or 2% of the company’s sales, according to Hur. It currently projects $150 million in annual run rate, which is calculated by taking a company’s sales during a particular month or quarter and extrapolating for a full year.

Memebox’s latest funding round was led by Formation Group along with Goodwater Capital and Pejman Mar Ventures. To date, the company has raised $95 million in funding and participated in the startup accelerator program Y Combinator in 2014.

But Memebox doesn’t want to remain an online-only company. It recently opened its first retail store in Korea, where it makes almost $1,100 in sales per square foot, according to Hur. It plans to expand further into retail stores, though Hur declined to share more details. It also plans to continue expanding in China, one of its three markets, and to grow its San Francisco-based team from 60 to 120 by the end of next year.

However, don’t expect to see the company expand into product lines for men anytime soon. Hur quips, “One challenge at a time.”

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