Like untold numbers of entrepreneurs before them, husband-and-wife team Glenn and Shannon Dellimore laid the groundwork for GlamGlow at home, around their coffee table. They struggled to Cobble together $80 to pay for the first batch of samples of the brand’s mud treatment products, and they toiled to get those products into the hands of family, friends and a few influential people to spread the word, all along encountering naysayers who argued mud (mud!) would never catch on.
This story first appeared in the May 9, 2014 issue of WWD. Subscribe Today.
But then something unusual happened: GlamGlow took off—quickly. After just 36 months on shelves, retail sales reached $106 million last year, according to the Dellimores, between just two stockkeeping units—Youthmud Tinglexfoliate Treatment and Supermud Clearing Treatment. Competing with conglomerates that have advertising budgets the size of some states’ GDPs, GlamGlow, now sold in 80 countries, skyrocketed to become among the top skin-care brands at a growing list of retailers that includes Sephora, Harrods and Douglas.
GlamGlow’s success has put the beauty industry on alert—and it’s not the only brand doing so. There’s a new crop of high-energy indies sending shock waves across retailers, large companies and the consuming public. Rather than the me-too model of years past, these budding brands are laser focused on newness and tweaking customary business models, built to leverage technology and social media. They’re led both by founders with experience in the industry or outsiders not accustomed to following the established beauty playbook, and the companies are pumping out products quicker and more in tune with customers’ desires than has traditionally been the case.
“The big boys are definitely hearing and seeing what is going on,” says Glenn Dellimore. “They have told us they look at all of the data that comes in from around the world. I wouldn’t say they are worried, but it has opened their eyes to being more nimble, pushing the boundaries and relooking at the strategy of what they provide to consumers. I don’t think it will change overnight.”
What is happening basically overnight is an onslaught of new entrants into the beauty world. Since its debut in January 2011, Elements Showcase, a platform for emerging fragrance brands cofounded by Frederick Bouchardy of Joya, has gone from 35 exhibitors to between 75 and 150 exhibitors.
“There has been a huge increase in brands being developed and launched in the last two years. Everybody feels safer about the economy,” says David Pirrotta, founder of a namesake brand-management firm that has counted RGB, Rodin, Blind Barber and Sachajuan as clients. “In my office, we get three to eight brands a month sending us product for us to take them on board and help them on sales.”
The infusion of newness isn’t limited to a particular category. At Barneys New York, which last year launched the color cosmetics lines Surratt and Make, Jennifer Sunwoo, executive vice president and general merchandise manager for women’s, says, “In color in particular, we haven’t seen much newness or emerging brands in the past few years. It has been exciting that all of a sudden, we did find new color lines. I’m not sure why we haven’t seen it in the past few years. Perhaps because the focus has been more on skin care, and the makeup trends have been more about looking fresh and a cleaner aesthetic in terms of face, so there wasn’t a lot of emphasis on color, but, if you look to many of the designer runway shows for fall, there was loads of color in terms of shadows, etc., so there is a resurgence in an emphasis on color.”
In skin care, antiaging has been the traditional powerhouse, but Karen Grant, vice president and global beauty industry analyst at NPD, has noticed the market becoming quite receptive to products beyond wrinkle and line solutions. She credits the device brand Clarisonic for paving the way. “Where a product like GlamGlow before might have been fringe or niche, consumers today are looking for other benefits. With the greater importance of cleansing now, the consumer is looking at the fact that caring for her skin is as important as serums. She was just focused on correction, correction, correction; now she is looking for correction, but care first,” says Grant.
In contrast to skin care, fragrance sales have been universally soft, an issue leading retailers to search for distinct brands and sparking a resurgence in niche and artisanal brands. On that quest, Sephora chief merchant Margarita Arriagada found herself in the Nolita outpost of Atelier Cologne. “Sephora is so forward in skin care and makeup, and they came to the conclusion that in fragrance they were very much following the big department stores. They wanted to try to do in perfume what they had very successfully done in skin care and makeup,” says Sylvie Ganter, the founder and creator of Atelier Cologne who was formerly at Fresh, Hermès Parfums and Selective Beauty. “They approached us and felt we could be an anchor brand.”
Ganter reasons the retail interest is the result of consumer disillusionment with mainstream perfume brands obsessed with launches and celebrity spokespeople. “We are not trying to build a hit perfume. We are trying to build a brand that has strong values and a strong point of view about fragrance,” stresses Ganter. Continuing on about Arriagada’s visit, she says, “It was her experience in the store as a customer that made her feel she wanted a piece of that in her store. We rarely talk about ingredients. We show customers and tell them stories. You can discover what you really like and want to smell like without feeling pressured.”
Making it at retail today, however, is harder than simply being an alternative to what’s already out there or dressing up packaging. Compared to 15 to 20 years ago, when color cosmetics brands like Too Faced, Urban Decay, Bobbi Brown and Stila came on the scene, Troy Surratt, the makeup artist who launched his brand last year, says, “The environment is far more competitive. There were indie brands years ago that were speaking to niche markets and marketing concepts in ways that were never marketed before. Many of the niche consumers have already been spoken to, so figuring out how to do it differently, and where are the holes in the market and speaking to those holes is what I try to do.” The hole that Surratt contends his brand is filling is for luxury cosmetics for a fashion-forward woman who wears Balmain or Rick Owens. “The heritage brands can look very fancy and mumsy. I wanted to create a brand that looked cooler, more modern and more forward,” he says.
Such sharp points of differentiation are unambiguous prerequisites for getting into stores today. “Retailers are so demanding about what they accept and don’t, unless you come to the table with something that is very different from what they have and creates a white space,” says Rob Robillard, chief executive officer of Sensible Organics, the company behind the brand Nourish Organic, and previously the ceo of Living Proof and the general manager of Kiehl’s. “They are now like, ‘Tell me why this idea is so breakthrough that I can’t say no.’”
Carisa Janes, ceo and founder of Hourglass Cosmetics, agrees that it is her brand’s unrelenting commitment to innovation that has driven its 60 to 70 percent annual average growth for the last six years. “Everything we do needs to be from the future,” she says.
Honing in on points of differentiation has also created brands with much more narrow assortments than previously. GlamGlow is one example, the sheet mask specialist Karuna is another. Karuna founder Linda Wang explains, “I really wanted the brand to be very focused. I knew once I brought the brand into the marketplace, I didn’t want to compete with all the other brands that have multiple steps.”
In the services arena, which has seen a spate of concepts pop up covering hair, makeup and nails, Drybar has stood out for its blowout expertise—a positioning it is careful not to dilute. “It is so important that we stay focused on doing one thing and doing it well. That is a huge differentiator for us,” says founder Alli Webb.
Sephora was influential in tightening Bite Beauty’s focus. Susanne Langmuir, its ceo and founder, recounted that the lip-care brand originally approached the retailer with a concept called Bite Me that would deliver products for the full face made from food-grade ingredients. Collaborating with Sephora, Langmuir turned Bite Me into Bite Beauty and zeroed in on lips. “The more we became obsessive about the ingredients and techniques for making lipsticks, the better the lipsticks became,” she says. “We made a conscious decision to focus on that one idea and do it well. If you have one memorable idea, that’s half the battle because there are so many great lines. Ideas are worthless without a point of view,” she concludes, noting the brand now has 72 sku’s, just in lips.
If having a clear point of view is half the battle, the other half is having enough money to convey it. After funding dried up during the recession, nascent brands are once again attracting investors, particularly if there is a digital component involved. Julep, the monthly subscription brand that started with nail lacquer and has expanded into skin care and color, has raised a total of $56 million in venture funding; Living Proof has piled up some $53 million in funding and inked a deal valued at $75 million with Valeant Pharmaceuticals; Madison Reed has scored $16 million; Dollar Shave Club has racked up around $23 million, and Dollar Shave Club competitor Harry’s has been enriched with a whopping $123 million.
“It’s frothy just shy of a bubble,” says Victoria Tsai, founder and ceo of the skin-care line Tatcha. She has sought to avoid venture fever with the understanding that loads of money brings pressure to expand swiftly to set a course toward a lucrative exit. Robillard highlights the positives of having significant financing up front. Noting his company has raised about $8 million, Robillard suggests the money pouring into beauty brands has made it possible for them to accumulate the inventory necessary for chain-wide rollouts. “That allows you to execute well and you can come out of the gate in a way that makes you look like a bigger company and deliver to the consumer what she expects from a top-notch brand,” he says.
Consumers have higher and higher expectations—and up-and-coming beauty brands are communicating with them directly to satisfy those expectations. Technology has enabled companies to directly solicit and respond to consumer demands, and social-media outlets have enabled them to reach broad audiences without splashy, expensive ad campaigns. “The Internet makes it an even playing field now. If you have a great site and you create a great conversation, you can come across just as impactful and just as powerful as a big brand,” says Grant. “We have seen greater acceleration [of brands] from word of mouth and buzz. While TV and print can help you drive awareness and the buy, today, that word-of-mouth buzz is really what is going on.”
Dollar Shave Club has been especially adept at spreading word of mouth via social media. Its online video “Our Blades Are F*ing Great” has been viewed more than 14 million times on YouTube and helped catapult the company’s membership to more than 500,000. “I don’t want to say we would have not been successful in a prior year, but the conversation that we started with that video was carried across the world, and we have had a cultural impact that wouldn’t have been possible five years ago,” says the brand’s cofounder and ceo (and star of said video) Michael Dubin.
For its part, Julep has maximized the feedback loop. In an initiative it has dubbed Idea Lab, Julep e-mails its fans to chime in on products in the works. “When we are faced with x or y decisions, instead of deciding that ourselves, we look for opportunities to let consumers in,” says ceo and founder Jane Park. For example, to develop its new Plié Wand polish brush that assists users in doing their own nails, the brand posted a message on Facebook telling people of its meeting at the firm IDEO to discuss the wand and inviting those who were interested to attend and give their input. Julep sold more than 2,000 of the wand before it even existed. Throughout the process, the brand vetted 230 prototypes. “I am excited about always pushing the boundary between the company and the consumer. How great is it that we can operate in a community together where those lines are blurred?” says Park.
The Internet is also upending conventional distribution channels, with existing e-commerce outlets and newer direct-to-consumer models both proving viable. E-commerce sites—Net-a-porter, for instance—can generate exposure and sales for smaller brands without the expense of supporting brick-and-mortar stores, buoying the proliferation of those brands. “I advised that Sachajuan go onto sites like Net-a-porter, B-glowing and really great individual e-commerce sites that have higher volume,” says Pirrotta. “We already had a 40 percent increase this year without having Sephora involved.” With e-commerce outlets, Kate Scherer, cofounder and creative director of Product 360°, says, “You cast a wider net. It is more cost effective for a small brand to be able to participate in their marketing programs.”
Some founders, including those of eSalon, Madison Reed, Restorsea and Dollar Shave Club, have fervently embraced direct-to-consumer formats. With a nonbeauty background, Amy Errett, ceo and founder of digital hair-color company Madison Reed, didn’t have preconceived notions that hair color couldn’t build an online following. “People thought you can’t buy a pair of shoes without trying them on. Well, then a company like Zappos comes along. People thought you can’t buy a pair of glasses without trying them on. Then came Warby Parker. All those notions have been put aside,” says Errett. “It is superearly days, but the beginning suggests this can work.”
Restorsea founder and ceo Patricia Pao has chosen a direct-to-consumer brick-and-mortar hybrid with Bergdorf Goodman as the skin-care brand’s sole physical retail door. Pao lauds Bergdorf Goodman for giving the brand credibility, but admits it loses tens of thousands of dollars there yearly. “You not only pay the retailer 40 percent, but you pay for the sales person, you pay for the commissions, you pay for every sample, every tester, every piece of Kleenex, every Q-tip. No one makes money in retail,” says Pao. “The first business plan was actually written doing brick-and-mortar. It was rewritten when we realized quickly that we were selling 12 to 15 times more on our Web site than we were at Bergdorf, and it was profitable.”
But the direct-to-consumer road can be bumpy. With a philanthropic mission to back the We See Beauty Foundation, the makeup brand Make, which is exclusively available at retail in Barneys, attempted to sell only online in order to give a loftier percentage—a third of the sale price—to its cause, rather than 10 percent at retail. Ariana Mouyiaris, creative director of Make, laments the e-commerce model couldn’t raise enough awareness for the brand. She speculates that the model is better for replenishment than introducing customers to a new brand. “The digital world is a great opportunity, but for beauty and color in particular, that alone isn’t really enough,” says Mouyiaris.
Charles Perer, a partner at boutique private equity firm Intermix Capital Partners, says that the digital model might be “a more capital-efficient way to do business than traditional retail, but the ultimate goal is to have enough brand leverage to get into retail.”
New direct-sales brands, like Beautycounter, Willa and Katherine Cosmetics, aided by technology, are also proliferating. Door-to-door has become Facebook-to-Facebook selling (or Twitter-to-Twitter or Instagram-to-Instagram and so on). Beautycounter founder and ceo Gregg Renfrew opted for the direct-sales route because she believed the brand’s story of creating safe products would be best told person to person. “That is not happening at the point of sale in a department store when people are selling you on inspiration, aspiration and sex appeal,” says Renfrew. “It is a difficult business to be in. The rules of the game have changed. It is less about instinct and more about number crunching—margin and sell-through and chargebacks. It is very formulaic and not friendly to younger, newer, smaller companies. It wasn’t even in the conversation for us.”
Annie Finch, ceo and founder of luxury direct-sales beauty brand Katherine Cosmetics, says the direct-sales model is “very scalable. It’s very profitable, and it is very trendy. It also fits the consumer and how the consumer is shopping. Everyone spent years saying no one is going to department stores and malls. They are still going, but it is not new and fresh and exciting.”
To be fair, department stores and specialty retailers are trying to up their games. Exclusives, in particular, have gained importance, a strategy that is benefitting some fledgling companies. “We are seeing that the brands that are in limited distribution are some of the fastest growing in the marketplace—double-digit growth—and we are seeing that across all three categories, in makeup, skin care and fragrance. That speaks to upstart brands that are only in one retailer,” says Grant.
Upstart brands are setting themselves apart by being responsive to shifting customer tastes and rapidly releasing products to respond to demand for given products or trends. “You need to respond in six months or a year versus a year or two before,” says Celeste Hilling, the ceo of Skin Authority. “Especially with small companies like ours, if you sit on opportunities, someone else will fill that gap.”
Julep, too, considers speed to market a key competitive advantage. “Last year, we came out with 10 times the number of sku’s than many beauty companies come out with, over 300,” says Park. “We are on the sixth iteration of our nail polish; it would be hard for traditional companies to iterate and iterate like that. Every time we go to manufacture, we ask: Is there a way to improve upon this formula?” She posits, “Gone are the days where you came up with an idea, market-research tested it, took two years to launch it then pushed it in traditional media.”
Similar to Julep, Langmuir says Bite Beauty’s ability to react quickly gives it an edge. Talking about the trajectory of a violet shade it launched recently, she recalls, “I had a conversation with one of the beauty merchants at Sephora at three in the afternoon and, by the next day, I had some lipsticks that I’d made in the lab in her hands in San Francisco. The reception was really good, and we completely switched a color story. Pretty much any retailer plans six month to a year in advance, and it is really hard to be authentic in a color story that is focused on trend and how people are thinking and feeling that [far] ahead of time,” says Langmuir. “That [long lead time] pretty much doesn’t exist any more. Now with Twitter, if there is something that happens on the runway, two weeks later people want to try that.”
The implications of the rise of the new indies for larger brands is far-reaching: a faster product development cycle, recalibration of distribution strategies and the imperative to stay one step ahead of technology. To change established rules, the big players may have to behave more like indies or, as likely, acquire them. “I think some of these brands eventually will get huge investors and be picked up by more of the major beauty companies,” says Sunwoo. Langmuir agrees. “The reality,” she says, “is that good ideas are generally acquired by bigger fish.”