LONDON — Beauty buyers’ club Beauty Pie has closed a second round of investment totaling $100 million that was co-led by Index Ventures and the U.S. private equity firm Insight Partners.
Having proven that its model works — the business operates with a direct-to-consumer, membership model that allows it to offer subscribers accessible prices for luxury skin care and cosmetics — Beauty Pie is now looking to scale its reach and experiment with physical retail, new membership models and product categories.
“We are different from a lot of the [direct-to-consumer] start-ups that just kind of blow cash. We’ve broken even already. So having proven that our model is one that can make a profit, while still bringing this incredible value to customers, now it’s just about expanding that out,” asserted Marcia Kilgore, founder of Beauty Pie.
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The company has been seeing steady sales growth throughout the last year, so much so that it sometimes had to turn its marketing off because inventory was running out too fast. Now, with new investment in hand, the company will be able to expand into new warehouses and buy more inventory.
“As we get larger, we just get better. Because of economies of scale and what they can do for your product pricing and the value that they can bring to the customer, the more members that we get, the greater the value proposition becomes for everyone,” said Kilgore, adding the new funding was a “vote of confidence” from investors but also a way to achieve the scale the company is striving for faster.
“While we weren’t necessarily thinking, ‘Oh, we should go raise money right now,’ because we still had quite a lot of our Series A money left in the bank, we realized that being able to take in a big new investment would help us step on the gas. If we want to expand, that inventory has to be sitting in the warehouses,” she said.
The Series B round brings Beauty Pie’s total funding to date to $170 million.
“Beauty Pie delivers huge value to its customers, demonstrated by exceptional member loyalty over many years. It’s a model that marries industry disruption with customer obsession — a winning combination,” said Danny Rimer, partner at Index Ventures.
Kilgore’s ultimate ambition is to grow Beauty Pie into a Costco of sorts for luxury beauty — offering convenience and anything women’s hearts desire when it comes to the world of beauty, from razors to silk hair ties, top-quality supplements and luxurious hyaluronic acid serums offered at drugstore price points.
The company made its first foray into supplements last year and has seen success so far. The category is set to launch in the U.S. around November, alongside two new supplements and gummies, which Kilgore describes as “an enormous area for growth.”
Loungewear, convenience-based accessories like razors or nail files, and plastic-free toothbrushes are in the works.
“All those kinds of accessories and luxury items that you normally maybe wouldn’t be able to afford have been incredibly good for us and repeat. So we’re looking at those accessory convenience items, anything else that is a luxury pampering product,” said Kilgore.
Looking at physical retail is also part of the company’s growth formula, following a single yet highly successful pop-up experience at Harvey Nichols held shortly before the outbreak of the COVID-19 pandemic.
“It was just four days and we were mobbed. It was really fun because we got to meet the people that we talk to on social media all day. They all came to test and touch and smell and meet everybody. It was like a big community adventure. As an experiment, it just showed that, of course, there is still a place for retail. And it has to be I think about entertainment and education,” said Kilgore, who is keeping an open mind as to what the right retail format for Beauty Pie will look like.
“It could be a pop-up or it could be a flagship. It’s just another method of teaching people what your brand is about and acquiring new members. We do really love the idea of something like the Museum of Ice Cream. How can Beauty Pie be like the Museum of Ice Cream, so that people can come in and really experience how cosmetics are manufactured? I would love to experiment with things like that because for women, the idea of being a kid in a candy shop is actually more about going and smearing body butter all over themselves.”
The company is beginning to offer new yearly membership models to allow customers to shop more and ship less, free from the spending caps of its initial monthly membership model.
“When we first launched, we had no idea how much stuff people will buy every month and had a limited amount of inventory. We just had to make sure that people wouldn’t come in for one month and then quit, so it was really important for us to limit how much people could buy every month. But we realized after a while, with different tests, that people who weren’t constricted by these limits were buying a lot more and in many cases shipping a little less often. So now that we can buy a lot more inventory we can allow people to shop for whatever they want, which is more in keeping with how people are used to shopping at retail,” explained Kilgore.
The membership costs $59 a year with members then receiving a $3,600 spending allowance upfront. It’s already available in the U.S. and will be rolled out globally later in the year.
“It’s also easier to understand how the membership works. I think there’s precedent in terms of pay X per year and watch whatever or buy whatever. Costco has that kind of membership club, or with Netflix you know that you pay X per month and you can watch whatever,” said Kilgore.
“After the whole COVID-19 experience, you kind of have to be more responsible and think about your impact on the world — and your budget, too. People really appreciate being able to get it at that insider price that makes it a little bit of a splurge but it’s really a steal.”