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The Survival Stakes for Small Beauty Brands

As the challenges for small brands grow ever bigger, WWD’s Pete Born discovers a handful of intrepid indies who are staying the course.

Niche is going global.

That was made clear in March at the Cosmoprof fair in Bologna, with an exhibition of indie brands, mostly from Europe and the U.S. Housed in one of the cavernous pavilions, the Extraordinary Gallery comprised 26 small companies all looking to score connections with distributors and retailers, usually from outside their home market.

That display of young upstarts looking for opportunity overseas came on the heels of the Personal Care Product Council annual meeting in Florida, during which some of the industry’s key players discussed ways of unkinking trade- snagging government regulations around the world.

Clearly, it’s a global world and brand building is no longer a backyard affair, as it had been in the freewheeling era that was the Nineties, when the U.S.— with its strong specialty-store competition, the arrival of Sephora, and more than 30 multibrand beauty Web sites hungering for new labels—was the cradle of all things indie. Those were halcyon days, when MAC Cosmetics shocked the market, first with Madonna, then RuPaul. Bobbi Brown, with its fistful of lipsticks, Benefit Cosmetics and the motorcycle-riding Kiehl’s all rose to prominence out of a tribe of beauty hipsters.

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Those days seem distant and these days seem different, with a change in retail realities. There’s a constant profusion of newcomer brands streaming across the Internet. Karen Grant, vice president and global industry analyst of NPD Group, suggests that the Web offers nascent outfits a national voice without the need for building distribution or managing inventory logistics. Also, a brand can try out a key item, rather than having to float an entire line.

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But the digital flow doesn’t seem to translate into significant bricks-and-mortar business, at least not on the scale of the past.

“Especially for indie businesses, it is really difficult to get a foothold in the U.S.,” says Robin Coe-Hutshing, who in her earlier retail career at Fred Segal was the West Coast indie queen, launching virtually every buzz-generating name on the scene. Now she and her business partner, Nicole Ostoya, are busy creating brands. Ostoya was at Cosmoprof tending two booths featuring their brands, like The New Black and Khroma Beauty, in the Extraordinary Gallery.

“There are some unusual opportunities and refreshing opportunities overseas that are kind of retro feeling in a way that doesn’t exist in the U.S.,” Coe-Hutshing says. “There are a number of perfumeries and multi-unit stores that have the ability, and the desire, to do business with niche brands,” she says. She notes that she and Ostoya made a range of contacts at the show and now are in talks with Boots and Harvey Nichols, for instance.

She adds that there’s a kind of “reverse chic” at work, meaning that foreigners see “some magic” in U.S.-made products, just as what comes out of Paris or London “has an exotic appeal to us.”

Although American specialty stores and boutiques still support indie brands, the intensity seems to have lessened. “There’s just not the appetite there used to be for niche brands, unless they have the ability to really support the stores by demonstration, sampling, advertising, marketing and a whole host of other things that cost a whole lot of money. [The indie brands are] just not in a position to gain entry into most of the stores that provide a meaningful amount of revenue,” says Coe-Hutshing.

Much of the previous opportunity was wiped out by the great recession, Coe-Hutshing says, but there are some high-octane retail boutiques and venues popping up that are embracing indie brands, such as Woodley and Bunny in Brooklyn. These, however, tend to be local, since it is difficult to re-create the niche magic in multiple locations. “That’s the problem with niche beauty in general,” she says. “It’s hard to be niche and be big at the same time.”

Speaking from her retail experience, Coe-Hutshing says it would be great to have brick-and-mortar stores and e-commerce platforms to support new brands. But the other side of the argument is that the young brands simply have to wise up. “Some of them are not very savvy about the way they approach marketing and marketing themselves,” Coe-Hutshing maintains. “There always have been a handful of good ones and many, many dreadful ones that need redirection.”

The Extraordinary Gallery was designed by Cosmoprof as an experimental showcase to attract buyers and distributors seeking novelties, and not restricted to any particular retail channel or even bound by the orthodox definition of a beauty product. “[It] is a little bit of a melting pot, a place people can display an idea that can become a cosmetics product, a supplement, a home décor product,” says Laura Zaccagnini, director of international affairs of SoGeCos S.p.A., the organizer of Cosmoprof. Just as the product definition is purposely free-form to create the most fecund atmosphere possible, the idea of retail destination is also kept wide open. “We don’t want to be limited by saying this is a beauty salon product, a spa product or a perfumery product.”

To encourage diversity in the audience, Cosmoprof brought in buyers from Latin American and Japan this year, because Europe “is so saturated with product.” According to Zaccagnini, it worked. “[Exhibitors] didn’t expect so many contacts from so many different parts of the world,” she says. Agreement came on that point from Roger Aoun, international marketing director from the London-based Beauty Lab Co. “What we have done in four days probably would have taken a year to do,” he estimates.

In Paris, Didier Arthaud, founder and chief executive of the naturally based men’s skin and personal-care brand 66 30, agrees with Zaccagnini that the most vexing problem plaguing fledgling brands is a lack of dependable, long-term investment.

He estimates that 95 percent of indie brands disappear. Competition for investment dollars is tough, he says, because it take five to seven years for a young beauty brand to build a bankable reputation. A lot of investors are drawn to Silicon Valley, where “in two to three years they can make much more money.”

But there have been plenty of other inquiries. Arthaud says he attended the Cosmoprof show in Hong Kong last November and “it was amazing.” The intimate niche-oriented format in Bologna also appeals to him. “If you put a niche brand in a supermarket, nobody is going to see it,” he says. In any event, it apparently worked. On a recent Friday evening, Arthaud was having a discussion with a Swedish distributor he met at Cosmoprof. “It’s gone very, very fast,” he says. “We are quite happy, yes.”