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The Decade Beauty Retail Stepped Out From Behind the Counter

December 19, 2019, 7:00 PM UTC

The big players in the beauty product world may start looking pale unless they pay attention to the new crop of indie beauty brands that are breaking out with the help of digital media.

Take, for example, Kristen Noel Crawley, who launched her direct-to-consumer brand, KNC Beauty, on Instagram in 2016 with one product: a lip mask.

“I had a nice size following and I knew my followers would like to purchase something that was accessible and affordable,” said the Los Angeles-based Crawley, who has 417,000 followers on Instagram.

KNC’s product line remains tightly focused, with just three products, a lip mask, a lip balm, and an eye mask. Those three, said Crawley, add up to “seven figures a year” thanks to sales at more than 1,500 brick-and-mortar stores, including Nordstrom, Neiman Marcus, and Urban Outfitters.

But Crawley remains loyal to the platform that launched her. “Instagram is a huge tool I use,” Crawley said. “Every time I have a product launch, I am posting it on my Instagram, in my stories, doing the swipe-up links and sending it to all my friends and getting them to post about it. It’s building hype and driving sales to my site.”

Welcome to the new beauty landscape, where cutting-edge brands gain traction on social platforms like Instagram (itself just 10 years old), and consumers discover new brands through influencers. Experts say the rise of social media and digital culture have played critical roles in transforming beauty shopping over the last decade.

“Digital influences beauty more than any other channel,” said Erin Schmidt, beauty industry analyst at Coresight Research, a global advisory and research firm specializing in retail and technology. “Today’s consumer goes to YouTube and TikTok for beauty videos and tutorials. They go to Pinterest, Instagram, and Facebook for inspiration and recommendations.”

Other digitally-savvy brands that have gone big include Beautycounter, founded by entrepreneur Gregg Renfrew; Glossier, the brand that founder Emily Weiss launched out of her blog “Into The Gloss” and that surpassed $100 million in annual revenue in 2018; Kylie Cosmetics by Kylie Jenner, which Coty became majority owner of last month  in a $600 million deal; KKW Beauty, which Kim Kardashian West started in 2017; and Drunk Elephant, launched in 2012 by Tiffany Masterson and acquired by Shiseido in October for $845 million.

“If you think of these well-known direct-to-consumer beauty brands, many came out with one product,” said Julie Van Ullen, managing director, U.S. Rakuten Marketing. “Traditionally you had big, well-known brands coming out with a full suite of products targeted to department stores.”

The global cosmetics market was valued at $532.43 billion in 2017, and is expected to reach a market value of $805.61 billion by 2023, based on a report by Orbis Research.

“Department stores, specialty stores, and direct-to-consumer are all growing in beauty and personal care, but they all serve different purposes,” Van Ullen said. “There’s just a sheer amount of new brands growing dramatically. It’s a lot to do with the lower cost and barrier to entry [via digital platforms].”

Making their beauty mark

Brands like Glossier have disrupted the traditional beauty market by focusing on direct-to-consumer, says Kayla Marci, market analyst for the London-based firm Edited.

“These brands have rebooted millennial’s interest in skincare by embracing flaws in advertising and showcasing more than one ideal in beauty,” Marci said.

At the same time, specialty stores like Sephora, Ulta, and Bluemercury, acquired by Macy’s for $210 million in 2015, have made shopping for beauty fun and personalized, challenging department stores to up their game.

Experts say Sephora, considered a digital pioneer, continues to raise the bar with innovative services like Color IQ technology, which can suggest shades of foundation, concealer, or lipstick all from a customer’s photo.

“Sephora has really redefined beauty selling,” said Sucharita Kodali, a retail analyst at Forrester. “You could walk around and try things on without a lady spritzing you. It’s an attractive shopping environment because their square footage is smaller, the stores look fuller so they can make great sales per square foot.”

In the ten-year period from 2008 to 2018, specialty store beauty sales have risen 15% to 21%, while department store sales have fallen from 22% to 16.5%, according to Euromonitor International.

“Department stores have not been successful in targeting the younger consumer,” said Hana Ben-Shabat, founder of research firm Gen Z Planet. “The younger consumers are really more interested in the Glossiers and Sephoras of the world. They’re looking for the ability to explore, to educate, to learn, and to experience something different every time they shop.”

The emerging beauty brands are raising the bar for the entire industry, said Ben-Shabat: “You do see in some department stores, they’re trying to do something different. Bloomingdale’s has had some different experiences, same with Saks, but they are not implementing these experiences across the board.” 

Others maintain that department stores offer valuable shelf space that young brands aspire to, pointing to Glossier recently partnering with Nordstrom to promote its fragrance.

“The value that department stores bring, brought, and will always bring is curation,” Van Ullen said.

More on the changes in retail:

—The legacy brands that couldn’t keep up  
—E-commerce moves at the speed of I want it now  
—Consumer demands drove apparel industry change 
—Why the future is now in consumer electronics 
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