Crowdsourced product development is catching on for indie beauty brands

Beauty brands have realized that by working with customers in the early stages of development, they can foster emotional attachments that equal long-term loyalty, as the concepts of ownership in beauty continue to shift.

“We started our own democracy to give beauty consumers a voice like they’ve never had before,” wrote co-founder Brandy Hoffman in a Forbes story in March, adding, “As our industry evolves, brands must move to transparency. We believe in the fundamental importance to be open and decided to build that into our company.”

Crowd-led innovations are not a new concept — we’re in the post-Kickstarter era of consumer involvement — but the beauty industry has more to gain by leaning into them. Thanks to social media, customers have a more active role in directing beauty trends than ever before, and designing democratized business practices give new brands an edge over older competition.

Crowdsourcing is working for beauty brands in the traditional, capital-raising sense, too. In early July, indie brand Sweat Cosmetics received over $260,000 from an equity crowdfunding campaign, bringing in over 500 investors into its business.

The brand, which creates sweat-resistant makeup for active women, had previously raised funding through a friends-and-family round and an Indiegogo campaign that fell short of its $30,000 goal in 2015. The brand already distributes in Anthropologie and Revolve, but it needed to raise more money in order to invest in marketing and manufacturing. But venture capitalists felt the brand was still too much in its infancy to be a worthwhile investment, co-founders Courtney Louks and Leslie Osborne said. That’s when equity crowdfunding was seen as a viable option to raise awareness by offering customers the chance to be both emotionally and literally invested in the company.

“We thought we can use this not only for crowdfunding [money] but also as marketing, and on top of that, we loved the idea of incorporating people into this,” co-founder Courtney Louks said.

The concept of ownership is rapidly evolving for millennials and Gen Xers, who are more familiar with sharing-models like rideshares and co-working spaces, and now even companies. Sweat Cosmetics valued itself at $6 million during its funding campaign and ultimately gave out approximately 4 percent in equity, co-founder Leslie Osborne said. Additionally, because equity crowdfunding means that people who contributed to the campaign were investors rather than contributors, it added an extra incentive for people to help the brand. Following the close of the campaign, Louks said she has received roughly a dozen emails with people offering to help the brand in any way they could.

“We have a great group of people and it proved people believe in the product and we can now ask for their opinions and advice,” Louks said.

For Volition, its business model has proven successful. Sales are growing 70 percent month over month, according to an October 2017 story from Forbes, and it now has nine of its products sold at Sephora. Indie beauty brands have realized that allowing consumers to make suggestions and provide input over the operations and development of brands can serve as a new marketing strategy that builds early customer loyalty that legacy brands cannot offer.

“Only when you challenge the process status quo does innovation reveal itself,” Volition’s Hoffman wrote.