Who needs brick-and-mortar?
This story first appeared in the October 31, 2014 issue of WWD. Subscribe Today.
A new breed of beauty brands like Jay Manuel Beauty, Glossier, Beautycounter and Tula have scrapped the old adage of “Try before you buy,” and are in favor of taking their products directly to the consumer via TV or the Internet to ignite impulse sales.
These upstart brands are creating beauty’s new reality, one where fashion seems to be ahead of the game with e-commerce players like Warby Parker, BaubleBar, Bonobos and Negative Underwear, among others.
“[Consumers are] buying [online] with the incentive that you’re first to have it,” said Karen Grant, vice president and global beauty industry analyst at The NPD Group Inc. “You’re getting these special deals or you’re getting the sneak peak. There’s a lot of buzz and fun for that impulse purchase, too.”
NPD reported that in 2013 the prestige market was up 5 percent, but the direct-to-consumer category was up 19 percent and it was growing about equally between makeup and skin care. Fragrance on the other hand, isn’t so appealing to purchase online.
Grant added, “The makeup category has been huge. The presence of brands like Sephora and MAC [online] has really helped to create a lot of excitement because it’s so visually easy to see color [on screen].”
While the likes of Sephora and Amazon may dominate beauty e-commerce, these new direct-to-consumer brands believe they have a competitive advantage with their authentic voice. Plus, smaller brands find it’s hard to differentiate themselves in a department or specialty store with the absence of multimillion-dollar advertising campaigns.
“There’s a cost obviously associated with launching digitally,” said Grant. “But in-store you have to have inventory and personnel. In a store you have to ask, How can I get the space to make sure someone sees me there?”
Celebrity makeup artist Jay Manuel is unveiling his 174-stockkeeping unit color cosmetics collection, Jay Manuel Beauty, in March via HSN, jaymanuelbeauty.com and an app called Jay Manuel Beauty. The core of the line, which is manufactured, owned and distributed by Iman’s beauty company, Impala, Inc., took inspiration from Instagram claiming to give consumers a filtered finished canvas.
“My 14-year-old daughter doesn’t even have acne and she uses a filter,” said Iman. “It doesn’t matter what age you are [everyone uses a filter]. It’s part of the language we’re living today. It’s a new way of talking about foundation and delivery.”
The Jay Manuel Beauty app, which was created in partnership with technology engineer company Plum Perfect, lets the consumer upload a photo of him or herself. Said to know the difference between day, incandescent and fluorescent light, the app analyzes a user’s skin tone and chooses a color that will best match. Also, if the consumer has a brand of foundation that she already uses, the app can cross-reference the shade so it picks something similar from Manuel’s product range. Beyond that, it asks consumers if they are classic, iconic or avant-garde and coordinates shades from the rest of the collection based on their eye color, hair color and skin tone.
“Retailers have told me that customers come in with their technology already knowing so much,” said Desiree Reid, senior vice president of brand development at Impala Inc. “If there’s an iPad or something on that counter, then they will use that and trust it more than the beauty adviser.”
“When women take a picture, they want to control not only the mood of the photo and how they look, but everyone wants that air of perfection,” noted Manuel.
For example, Manuel created a powder-to-cream foundation with ingredients like crushed gemstones to refract light so that the consumer receives the delivery system of a powder and the performance of a liquid. Also, the mascara has a telescopic brush so that users have the option of lengthening or thickening.
While executives wouldn’t talk financials, industry sources expect the line, priced from $13 for a blush brush to $35 for a powder-to-cream foundation, to generate $8 million at retail during its first year.
But Manuel isn’t the only beauty brand keeping its distribution direct-to-consumer.
Tula, a skin-care brand conceived by gastroenterologist Dr. Roshini Raj using patented probiotic technology, was unveiled on QVC.com exclusively in July with no TV presence.
“Skin care, too, has been really big in the online space and on TV because of the demos,” said Grant. “Skin care has benefitted from all the education [from multibrand and individual brand Web sites.]”
For Tula, the most important factor is education, but it isn’t ruling out brick and mortar.
“If you look at Bonobos, they started as an online-only brand and they recently did a strategic deal with Nordstrom, [while adding freestanding stores],” said Dan Reich, cofounder of Tula. “At some point, as a brand grows, it’s inevitable to have very broad distribution.”
Raj elaborated, “Rather than get lost in the shuffle of a brick-and-mortar setting, we want to develop the story. Once that story has been established, then we may go into stores.”
According to Claudia Lucas, director of beauty merchandising at QVC, the shopping network is pleased with the results of Tula so far. She added that the shopping network generates 43 percent of its U.S. revenues from its digital channels and often more information is available digitally than in an in-store environment.
“Beauty tools and devices typically do well online because shoppers look for more information about how these products work and their benefits before purchasing,” said Lucas.
Although executives wouldn’t talk numbers, industry sources estimated that Tula, which is priced from $25 to $49, could do $2 million in first-year sales on QVC.com and Tulaforlife.com.
Beautycounter, a skin-care, hair and body line said to contain non-toxic ingredients, launched its first foray into color cosmetics in mid-October and allows consumers to shop on its Web site or with consultants.
“Consumers are increasingly more comfortable shopping online,” said Gregg Renfrew, founder and chief executive officer of Beautycounter, who added that lip gloss and lipstick are an easier sell online versus something like a tinted moisturizer. “If you look at how people shop a clothing look on a model, it’s just applying those same tactics to beauty.” But when it comes to international expansion, sales can be tough when consumers are paying $30 for a foundation and $40 for shipping.
Although Beautycounter would never distribute its products in traditional department stores, it would consider pop-up and stand-alone boutiques. But it would never be its lead strategy.
“Department stores today have very high selling requirements and have lower margins,” said Renfrew, who added replenishment is always strong online.
According to the company, Beautycounter’s quarterly year-over-year growth is 300 percent for the second quarter of 2014 versus the second quarter of 2013.
“To reach a younger audience, [brands] need to be able to sell their products through [direct-to-consumer and social media] channels,” said Marco Habert, managing director at Deutsche Bank. “None of the big guys seem to be particularly good at it. A lot of the ones that score high [in social media] tend to be the independent brands. A brand like NYX scored very high and was very well promoted by people like the beauty bloggers. One of the drivers as to why L’Oréal acquired it is to use that skill set across their portfolio.”
While this approach is the antithesis of the industry’s current love affair with exploration and in-store experience, more brands, even those that have items in physical doors, are jumping on the digital and airtime bandwagon.
Today, Joya launched its latest scent, Foxglove, exclusively on Net-a-porter, therefore consumers couldn’t smell it before it was purchased. The launch strategy, while definitely innovative, was a risky one at best.
“We are confident sales will be very strong,” declared David Olsen, vice president of beauty at Net-a-porter. “We try to break from traditional retail. It won’t be the last time we do something like this. Then, we can parlay that success and do similar things.”
But Grant explained that fragrance isn’t so strong when it comes to direct-to-consumer sales.
“Fragrance is something you have to experience and smell,” she said.
Emily Weiss, founder and ceo of beauty blog Into the Gloss, has expanded with Glossier, her own line. Glossier, which is sold exclusively on Glossier.com and priced from $12 to $26, launched on Instagram in early October with a priming moisturizer, an all-over balm, facial mist and foundation.
“We can go direct-to-consumer because we’re not offering this crazy sku choice,” said Weiss. “You don’t need more noise [in the industry], you need more context.”
Meeting a beauty adviser for the first time can lack a connection, but with Glossier, Weiss is hoping the content-driven brand will act as a reliable friend.
“[Launching online] allows you to reach consumers you might not reach when you’re in store,” noted Grant. “So you can do an e-mail blast and it can go out to five million people at one time. It’s been hugely successful and can reach multiple demographics and ages.”
Henry Davis, chief operating officer of Glossier, believes there will always be customers who want to touch and feel products and have an experience you can’t do online, because it is an industry where texture comes into play.
“Those off-line experiences will change as a result to digital,” said Davis. “Retail needs to find a new relevance in this more engaged environment.”
The fact that Glossier is aligned with Into the Gloss further boosts the brand.
“Companies are finding they can grow much faster without traditional media and marketing spend by focusing on the beauty bloggers,” said Habert. “The how-to-videos on how to apply different cosmetic looks and products are also an important part of that.”
So is laziness a benefactor of buying beauty online or is brand engagement via conversation an exciting element for consumers?
“There’s a shift,” said Iman. “[Consumers] know so much or they think they know so much. Women are always online and they have all become experts.”