Meera Innes spills the beans on the beauty industry’s struggle to reinvent itself for the digital age in this deep-dive analysis of an archaic and arrogant approach to the internet.
When I say “beautech”, you say… stumped? Granted, I may have just made up the term. I think I’ve more commonly heard beauty in tech referred to as “beautytech”, which, quite frankly, is as clunky and unintuitive as the industry itself – an industry which is increasingly populated by frustrated innovators running on the spot to drag beauty into the digital age.
In case you’re not familiar with where the beauty industry is at when it comes to tech, the answer is… well, behind. Embarrassingly so. You probably know this from trying to buy, well, any cosmetics online. Whereas we might justifiably expect game-changing innovations from what is one of the most lucrative consumer industries, beauty is known for an archaic aversion to digital in favour of stubbornly clinging on to convention and dated visions of retail.
To date, the industry’s digital innovation strategy has amounted to: “LALALALA I’M NOT NOT LISTENING.” And they say Hollywood has problems.
I recently had a colourful lunch with a PR who became near-apoplectic while describing a recent – and it has to be said, entirely typical – exchange with a brand: “We get them coverage on Vogue.com – Vogue! – but we can’t convert the press into sales because the product isn’t available online. [Brands] still want their customers in stores, not online. Why do we bother? What is the fucking point?”
Friction-free, instant conversion is just one aspect of going digital that beauty is failing to master, or even warm to. Why are they missing such an obvious trick?
We can assume a degree of arrogance from an industry that hasn’t suffered during even the harshest economic periods: beauty is one of the few industries that continued to expand through the recession, with figures showing an 11 per cent spending rise per capita since 2007, to value the industry today at a whopping $300 billion – and that’s set to grow annually at 4.5 per cent.
Predictably, the US leads the charge for sales, but growth in Asia is fast outpacing America and Europe. Overall growth is hardly surprising, given the “lipstick effect” – in other words, in times of economic downturn people are more likely to spend on affordable indulgences with luxury cache, such as cosmetics.
In times of economic downturn people are more likely to spend on affordable indulgences with luxury cache, such as cosmetics.
The issue of “luxury” here is crucial in the sense that the appeal of beauty products isn’t just a representation of monetary value. It’s about how it makes you feel. Beauty holds so much more appeal than owning a pocket-sized piece of a designer brand. A shade of lipstick can have a transformative effect; the right skincare can make you look and feel more youthful; a good hairstyle can add polish on an otherwise lousy day.
It’s an intangible confidence boost that only beauty products can offer. This powerful connection between the consumer and the product is why the beauty industry always wins. And the people in charge know it.
So why innovate when there’s never likely to be a decline in demand? It’s a fair point. It doesn’t help that beauty is dominated by enormous parent companies (who, between them, basically own every brand you might have heard of) run by suits stuck in the Stone Age. In Brand Finance’s 2013 Cosmetics Brands league table, the top 20 read like a prize pupils roster of brands owned by L’Oreal, Lauder, LVMH, Johnson & Johnson, P&G and Coty; only 3 were independent.
These overbearing parent companies have tied their products up with so much red tape that it stifles innovation and progress for the entire industry. Did you ever have that friend who could never come out and play because their parents were so strict? It’s kind of like that, when you try to work with beauty brands. I mean, for God’s sake, guys. All I want to do is buy a fucking lipstick on the internet.
The best online retail experiences are limited to independent or mass brands who are actually allowed to peddle their wares with the cool retailers; the prestige, a.k.a. fancy-pants, brands – Chanel, Bobbi Brown et. al. – can be found on their own e-stores or those of the same department stores at which they’re stocked offline. Typically, if a big brand does get over itself enough to entertain a third party retailer, the partnership is mandatorily subject to exclusivity clauses that put the kibosh on glorious possibilities – as was recently the case with Net-a-Porter’s highly-anticipated foray into beauty.
The biggest obstacle to taking beauty online is the physical interaction with products that, to date, has been an essential part of the consumer experience. We could argue that other industries have circumvented the very same issue – primarily fashion, which is commonly regarded as being interchangeable with beauty. (It’s not. Don’t get me started.)
Still, it’s a conundrum: how has fashion transitioned so successfully to digital where beauty has yet to make it? In my mind it’s an easy question to answer, insofar as it concerns e-commerce: returns policy. In beauty, unless you have a pretty good reason (say, your face blows up) the policy is a pretty flat “you break it, you buy it”. Ergo, the risk is simply too high for consumers to buy online when they can just go into their local store. And getting made up by the MAC girl is a fun way to spend a Saturday afternoon.
Signs of life
At the In-Cosmetics 2013 show, tech refused to stay under the carpet. It was noted that brands are failing to implement basic tweaks to their websites that could encourage impulse buying. “For example, click and collect, same day delivery, easier returns, convenient location and not being locally available are all compelling reasons to purchase products online.” The review forecast a greater use of mobile technology to facilitate online retail.
Though this analysis referred more specifically to e-commerce, the need for brands to prioritise their digital presence is especially pertinent given the reported spending rise among tech-savvy younger demographics, with ‘tween’ consumers spending more than ever on prestige brands. Apps are still gimmicky at best, and fall into the trap of using pseudo-clever technology that tries give consumers what they didn’t know they wanted (“Match your make-up to your outfit!” – ugh, L’Oreal. Really?), instead of catering to existing need.
The earnestly-named Pretty In My Pocket, self-branded as a “mobile beauty shopping tool” has come closest to the mark by marrying retail and social: users can scan barcodes for product reviews as well as access discounts, tips and tutorials. While being a bit twee, its functionality addresses a demand, which is a step forward. Achieving this via a grown-up, non-gag-inducing medium is the dream.
The issue of converting online activity to sales has been addressed with phenomenal success by US company Birchbox, for whom, I must disclose, I have worked in the past, who found the missing link within brands’ own marketing budgets. Y’see, most brands have an inventory of sample-sized products that, traditionally, have been distributed via retailers – it doesn’t take a genius to see that this isn’t a strategy designed to track ROI or drive customer acquisition; at best, it’s a customer retention exercise.
It beats me why brands think it’s such a great idea to invest so much in giving people stuff they already use and which will probably just languish in their shopping bags. Birchbox applied “try before you buy” by convincing brands to instead allocate samples to a subscription-based marketing and e-commerce initiative that benefits both the brand and the consumer, while doubling as a tidy revenue model in its own right.
Birchbox paired this initial brainwave with slick editorial to make it a leading beauty source in the US and cleverly branded the whole thing in a way that doesn’t limit it to one vertical – in fact, not even to beauty – establishing itself as a lifestyle brand. The company swept up the US market and spawned dozens of clones – notably, Rocket Internet’s Glossybox.
Enter the villain, cue dramatic score, etc. Glossybox, if you’re not familiar with the infamous Samwer brothers’ beauty mug-trap, is the epitome of their incubator Rocket Internet’s MO: get in, clean up, get out. It’ll come as a surprise to no one that once the Samwers seized this model, they ruined it for pretty much everyone else. I’ve watched through my fingers as Rocket, like a toddler with a coin purse, is gleefully shaking the market until all the money falls out.
Sure, Glossybox has iterated the model successfully – that’s what Rocket does. That said, there’s (also typically) no longevity in its proposition – they might capitalize in the short term but sooner rather than later the market will wane; both brands and consumers will run out of resources, patience and interest as a result of over-saturation and over-exposure, even before the model has really had a chance to take off. Pity for some, bravo for Rocket Internet?
If the Samwers manage not to kill everyone’s fun in this particular industry, there’s still a lot of potential for beauty to be redefined via digital. In fact, beauty is increasingly reliant on the self-sufficient online community, an entity unto itself. Bloggers, vloggers and their avid audiences have collectively established a new brand-consumer zeitgeist by themselves,setting market parameters that were previously defined by leading brands. Angel Investor Nils Johnson, entrepreneur Vu Nguyen and Google technology manager Sameer Iyengar recognized this decentralised beauty network as a potential goldmine and launched Beautylish, a lovely community platform popular with users – but with no discernible revenue model.
I’ve been watching them for a few years now and, apart from a tentative step into social e-commerce, I’m still no clearer on how they plan to make any money. If they could partner with all the brands that get so much user-generated press on their platform, they could really be on to a game-changer – but, again, this idea is barely worth the cognitive overheads involved. Perhaps this was the initial plan in a long game – as far as I know, they initially launched their product to scale their user base before attempting to monetise.
I can only imagine that now, they’re attempting to turn a previously cost-free product that works so well into a paid service of some kind, a turn of events which nobody likes, in any vertical. That said, it’s just raised $6.5m of an $8.64m round and the community has gleefully embraced the platform, so there might be some life in it yet.\
She said what now?
With the proliferation of try-hards trying to make it big in beauty, it’s refreshing to see a company that actually seems to have its finger on the pulse and evolve with the market, as opposed to just seizing on a niche and trying to pummel it into submission. It also takes a confident venture to pivot boldly in the face of demand, but She Said Beauty has done it and might just be pulling it off.
She Said Beauty, yet another beauty startup by yet another male entrepreneur, Ben Aronsten, is far from the most original kid on the block but what it’s copied, it’s done well. It first launched in 2011 straddling editorial and e-commerce, and seemingly phased out the latter service to transition into a ‘social network for beauty’.
It was a platform that the UK community badly wanted. Sadly, the UK community is still badly wanting. Not being as slick or as savvy as their US counterparts, members of She Said Beauty seem to have missed the point: whereas Beautylish is full of glossy, user-generated content displaying talent and artistry, She Said Beauty is a mish-mash of grainy selfies interspersed with photos of members’ kids and, er, their dogs.
Perhaps this is why a journalist friend recently ranted about a leading UK beauty blogger reaching a million subscribers: “It really is the end of times… It says more about pedestrian and middle England dullards teaching people how to put on their make-up and garnering more interest than clever, sparky, well-written and beautiful blogs.” She then conceded: “It says more about lowest common denominator than beauty or online, I think.” This is less a problem of the model and more an issue with the regional market, so I’m rooting for She Said Beauty to give the industry something fresh.
The remarkable thing about beauty is that the consumer is increasingly calling the shots. Prestige brands have adapted their marketing strategies to pander to the democracy. But that’s not yet reflected in their attitude to technology, because the industry largely still favours conventional marketing and bricks-and-mortar retail to taking their business online. It’s surely only a matter of time before the industry is forced to yield.
I recall one mortifying occasion when the chief executive of an innovative beauty start-up convinced a big name skincare brand to part with a thousand products for a marketing exercise. It was a coup for progress, and a leap of faith for the brand – which he promptly bitch-slapped by marking up the products to a 100 per cent margin. The brand was justifiably livid, withdrew from the partnership and have since signed a 12-month exclusivity deal with Glossybox.
So there’s some way to go before everyone involved gets it. What’s next for the industry? Success, whatever form it takes, needs to be forged through genuine collaboration between tech and beauty. One way or another, a game-changer is due and the first players are set to make a fortune. Bets are off as ti whether this will be at the industry’s expense, or in its favour.