Does the beauty marketplace need another lip balm? How about one more hyaluronic acid serum?
As the beauty industry continues to grow, and product lead times get shorter through more sophisticated manufacturing, brand leaders are faced with a difficult question: How many products should a brand launch each year?
According to market research firm Circana, U.S. prestige beauty sales grew by 14% year-over-year in 2023 while the mass beauty market saw a 6% increase in sales last year. The global beauty and personal care industry is projected to generate revenue of $646.2 billion in 2024, which is up almost a billion dollars from 2018’s $550.38 billion, according to market research firm Statista.
To be competitive in this rapidly growing industry, brand leaders often tell Glossy that there is a looming pressure to constantly create more products in the hopes of going viral, acquiring new customers or gaining more shelf space in stores. But today’s confessions subject offers a different perspective on brand growth.
Today’s subject founded her beauty brand less than 10 years ago and has not accepted any investments. She and her co-founder bootstrapped their launch with $50,000 and have only released a small number of products, which she says has been one key to its early and consistent profitability. Her former experience was in the corporate beauty industry and, more recently, she has also invested in other companies with her brand’s profits.
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While the details of her company have been removed to protect her privacy, she speaks candidly about the importance of setting your own pace, the trap of too many launches and the reasons to prioritize your customer’s needs above the latest trends, ahead.
Many beauty founders today feel they must take on investors to survive, but you’ve led your brand without investment. Do you think this has been an advantage?
“Yes. We’re completely investor free which allows us to own our process, in terms of product launch cycle, and determine when and what to launch. We’re [DTC so] we’re not tied to maintaining specific shelf space [either]. It’s really tough and competitive, and it’s very, very saturated out there, so this was a big point of difference for us and one way we’ve succeeded and become profitable. We launch products we know our customers want — not products retailers or investors see in the market and want us to copy. When I talk to other brand founders, they’re always pressured to grow and launch products that they don’t even believe in.”
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Why do you think that is?
“Investors and a brand’s board of directors hold so much influence — they can dictate your entire product strategy. From my experience, the hold period in the beauty investment space is less than five years, which means that if you take on funding, you have to plan an exit within that time frame. So, I think that kind of trickles down to what the customer sees in the market, right? A bunch of products they don’t need or even want.”
You have experience working in the South Korean market, as well. Do you think K-Beauty created the speedy product cycle?
“I wouldn’t say it started in South Korea, but I would say South Korea is impacting the U.S. market. The business model of how the industry operates in the U.S. industry has changed a lot and now indie brands are going to contract manufacturers [in South Korea] and white-labeling the library of formulas that they showcase. This product development trend is becoming more apparent in the U.S. beauty industry.”
From your experience, what is that cycle like in South Korea?
“Whenever you see a trendy ingredient take off in South Korea, like a cica ingredient or a toner pad, or a product category like a snail product, you would immediately see tons of brands jumping on the trend and commercializing the ingredient or product by launching a new SKU in their lineup within three months of the original product that’s just gone viral.
Take lip oil, for example. When one lip oil went viral, it was easy for every other brand to just jump on it and commercialize it with a library formula from a contract manufacturer. I can actually tell which contract manufacturer it’s coming from for some of these products, but they’re all at varying price points for the same formula within the same retailer, which is actually nuts. This is very common in Korea and becoming common in America now, too. It’s an interesting time to be in this beauty space.”
There are certainly a lot of near-duplicate products hitting the market right now.
“In the past, U.S.-based brands weren’t that quick, but I can feel the speed increasing. It’s why we see so many similar formulas right now in the lip oil, lip balm and skin tint categories. The U.S. is getting very fast to commercialize a trend.”
Where have you seen product and ingredient trends start?
“Product developers all go to supplier trade shows and there are a million different ingredients being showcased. Each supplier is telling you that this is the trendiest item. Brands jumping on these trends are driven by sales targets, often set by investors. If your new customer acquisition growth is capped, which a lot of brands are dealing with right now, the easiest way to grow the revenue is to increase your product portfolio. All the investors in the current VC space know that new customer acquisition is the hardest thing, so the best way to increase your revenue is to upsell your current customer. That’s the entire cycle of how the product development actually happens behind the scenes.”
I have also noticed many brands launch products every month or so, then the products are quickly forgotten if they don’t go viral.
“When you launch so many products, you’re not really solving customer problems — you’re creating more problems for the brand [with waste, marketing spend and eventually having to sunset products]. That’s why the 80/20 rule is so common: 80% of the revenue is being driven by 20% of the products.”
But resisting investment, and this rampant launch cycle, is out of reach for many brands who need capital. Do you have any advice?
“It’s important for businesses to also do due diligence on their investors. If there is an investor that has a pretty good proven track record of a longer hold period, I think that would be the first green flag that I would look for in an investor. But there’s also a lot of debt financing available today, so investors are not the only way if you have a very strong vision, strong operating principle and are truly serving your customers’ needs.”
Let’s talk about relevancy on social media. How do you stay top-of-mind when you don’t have launches to promote?
“That’s the hardest challenge for us; we constantly talk about it. If I had the answer, I would probably have added another zero to our sales goal. Right now, we are focused on showing a hero product’s clear before-and-after in different ways to hook our audience in. TikTok’s [algorithm] has a clear preference towards this content.”
What is your hope for the future?
“Hopefully there are more venture capitalists who are more patient and who do believe in the operating principles of the brand founder and founding team. I often think that investors are not the consumers of the brands they fund and I think that goes back to the current state of funding. There are too few women in the VC space that are actually investing in beauty deals. I hope to see more patient investors and more women in this beauty investment space.”
Editor’s Note: For our Confessions series, we provide anonymity to fashion and beauty industry insiders to allow them to openly share their perspectives and give readers genuine insight. The author of a Confessions story is aware of the identity of the speaker and has validated their title and position.
