In July, Glossier announced its first retail partnership with Sephora, marking a critical departure from the brand’s previous direct-to-consumer business model. After years of demonstrating the brand power of a digital-first approach by reaching a $1.8 billion unicorn valuation as of 2021, Glossier’s move raises questions about the future of direct-to-consumer sales and independent brands. who are overwhelmingly dependent on it.
The last decade of growing consumer appetite for discovering new products online and the power to go viral has fueled a new era of beauty brands operating solely through social media. Where product success once depended on the ability to reach store shelves, Facebook and Instagram enabled brands to bypass the bureaucracy of traditional retailers and build profitable businesses, quickly. Social media skincare favorite Farsáli perhaps best exemplifies this trajectory. Launched direct-to-consumer in 2014, the brand’s Intagrammable products and early co-authors from influential content creators saw significant success. So much so that its flagship product sold out within 24 hours of landing on Sephora shelves for the first time three years later.
The newly democratized playing field made way for diverse and first-time founders to step into the beauty. “We decided to start DTC just for Youthforia because it was the easiest way to get started,” says Fiona Co Chan, CEO and founder of Youthforia. “I had no beauty background and we didn’t launch with a wide variety of products.” The launch of DTC keeps new businesses agile and flexible in an industry that typically requires significant capital and powerful connections to succeed.
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In the past two years, store closures and stay-at-home measures have also reinvigorated DTC’s health as department store foot traffic slowed and online shopping increased. But as restrictions are lifted, beauty shoppers are eager to stretch their legs again. “Retailers give brands greater access and opportunity to be discovered and allow consumers to experience products in real life,” says Muffy Clince, director of emerging brands at Ulta Beauty. “Beauty is personal and many of our guests prefer a retail setting when shopping so they can interact with the products in person.” Additionally, increased competition from the DTC-driven brand boom and rising costs to reach digital consumers are now killing the once abundant online opportunity.
“Maybe five years ago, their advertising costs were much lower,” says Camille Bell, CEO and founder of Pound Cake Cosmetics. “One of my mentors who [ran] a big hair care brand told me [she’d] spend $200 or $300 a month on ads and earn $10,000 or $15,000 in sales. Now people spend so much on ads just to compete.”
An ever-changing social media landscape has increased the pressure to adapt, but not all brands have the infrastructure to keep up. “We are seeing more independent and emerging beauty brands adopt physical retail [in the early stages]”, says Clince. “Unfortunately, many independent beauty brands face obstacles when entering retail. This is especially true for BIPOC-owned brands that have historically lacked access to adequate resources and funding.” Retailing requires brands to have ample inventory and financing to design display items, educate sellers, and support potentially hundreds of store locations. “There are a lot of start-up costs to retail,” says Bell. “And you won’t see a return of that for at least the first year or year and a half.”
For example, the barrier-focused skin care line, BYOMA, demonstrates the infrastructure needed for significant retail growth. The fledgling brand launched in the US as a Target exclusive in January. Since then, it has become one of the fastest growing brands on Tik Tok and has been celebrated as Target’s most successful beauty launch of 2022. Run by Future Beauty Labs, the same skincare incubator responsible for Tan-Luxe and Tanologist, BYOMA is now expanding to 715 Ulta stores by October 16.
Despite new setbacks, young brands remain diligent and creative. Luxury candle brand Terminal B is taking a divergent retail strategy by stocking its destination-inspired candles in boutique hotels. This includes an exclusive co-branded candle at Andaz West Hollywood, opening a new door in hospitality aligned with the spirit of the brand. “We want to be very strategic with who we partner with,” says co-founder Chris Breedlove of the one-year mark. “Ideally, travel-related retailers like hotels and airports.”
Founders Fay and Chris Breedlove say that aside from these efforts, they’re still betting on DTC, where they can better control their messaging and brand presentation. Youthforia, on the other hand, has taken its first steps into retail with an initial load that it can carry. The brand recently entered Credo Beauty and sells a limited selection of products on Amazon. As Pound Cake similarly gears up for retail, Bell says she’s focused on continuing to build an audience on newer social platforms like Tik Tok.
Retailers are also responding to a changing market by making new commitments to smaller brands that remain viable on and off shelves. The Ulta Muse, Sephora Accelerate and Credo For Change programs prepare brands to scale, enter retail and, in some cases, directly channel store launches. Pound Cake Cosmetics will be among the inaugural Ulta Muse cohort. In the same vein, Ulta launched its internal Sparked initiative in 2019, which provides premium in-store and online visibility for strong brands doing retail for the first time. “We focus on helping newcomers and standouts thrive,” Clince says. Online retailer Thirteen Lune’s recent partnership with JC Penney seeks to support its roster of primarily POC-owned brands with innovative retail initiatives.
“DTC is slowing down, but I don’t want to say it’s dying,” says Bell. “There is always a starting point and an end for things that are fashionable.” For now, the growing importance of retail looms as the Internet sets new rules for its players. Although smaller brands with fewer resources are the most vulnerable, these circumstances could be what is needed to eliminate predatory brands and encourage undeniably good products that positively impact customers. “We are moving into an era where brands have to work hard to build brand equity and I enjoy that.” Chan says.
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Source: news.google.com