Beauty Incumbents Go Direct-To-Consumer

5 Min Read |

A significant trend is emerging in the beauty industry, and transforming the way that large scale corporates reach their audience. Brands which interact with and sell directly to consumers have been around for years — think Avon and Mary Kay. And now larger incumbents are picking up on the potential for big sales by focusing on mergers and acquisitions of smaller direct-to-consumer brands, as well as launching their own new peer-to-peer brands.

One such launch comes in the form of Glossier’s rep program. The business draws on earlier models of peer-to-peer selling, but takes it further by integrating each of the 500 or so individual reps into the Glossier team via a personal landing page on the brand’s website, which includes their product picks and a video introduction.  By doing this, Glossier is moving with the times, harnessing the power of the Internet — and especially social media — to connect with customers and boost sales. Older brands like Avon are in decline; and their lack of focus on social media platforms undoubtedly contributes to their decreasing customer loyalty.

Social Media & Social Change

Social media is unique in the way it allows big brands to connect with consumers on an immediate and emotional level. Brands can talk to customers as if they were good friends — picking up on their pain-points, empathising with their challenges, and offering attractively packaged solutions to their beauty needs. And on-the-ground reps are a perfect addition to a brand’s social media offering because they’re real people with an authentic message which customers can relate to. Instagram is an effective platform for connecting with a huge audience via eye-catching visuals and compassionate text captions. It allows brands to build an active and supportive online community with ease.

The end of 2017 was marked by a spike in M&A activity within the beauty industry. Big name corporations veered towards natural beauty products and inclusive brands, driven by their ambitions to create beauty lines which are accessible to a diverse demographic of consumers with increasing awareness of social and environmental issues. For example, Unilever now owns Hourglass Cosmetics, a line of luxury makeup and skincare products which are vegan and cruelty-free. And in the autumn of 2017, Unilever also acquired Carver Korea, and Sundial — both brands which focus on creating and promoting beauty products for people of colour, and ethnicities which have historically been neglected by the mainstream beauty industry. In addition, Unilever has bought the Quala personal care brands, a successful Colombian cosmetics initiative. 

“The active management of the portfolio through bolt-on acquisitions such as this one, and the sustained investment in our existing brands, will help us deliver continued growth ahead of our markets.” – Paul Polman, Unilever CEO

P&G snapped up the New Zealand based brand Snowberry which concentrates on functional, natural, safe and nourishing skincare products for the health-conscious consumer. Coty has taken majority possession of Younique Cosmetics, a brand with a personal touch; it shares products and beauty wisdom via its Younique Presenters, who speak of their enthusiasm in helping customers find their ideal makeup and skincare products. And in January 2018 L’Occitane took on the natural beauty line Limelight by Alcone — an organic skincare company which was founded in 1952, and is still marketed as ‘family-owned’.

Challenger Launches & The Risk Of Acquisitions

But acquisitions are not the only way in which established players are shifting towards a direct-to-consumer approach. As well as taking existing brands under its wing, Unilever has also launched new brands with a view to competing with the start-ups which hope to sweep up the market. These newly launched Unilever brands include:

  • Sensei – a personalised skincare subscription service

  • ApotheCARE Essentials – with a line of hair and body cosmetics created using natural ingredients and modern science, based on the brand’s personal 3-step approach to crafting the perfect products

  • Love Beauty and Planet – which went through a large-scale launch and focuses on natural ingredients, sustainability, and a personal touch; the brand’s website includes ‘Source Stories’ which paint an enticing picture of where the ingredients and fragrances come from 

However, there is of course a downside to the process of mergers and acquisitions. Critics suggest there may be risks to the reputation of well established companies; by acquiring smaller competitors they open themselves up to also acquiring questionable reputations which those smaller brands have picked up along the way. And in a culture of social media promotion, bad reputations travel and escalate quickly — consumers can instantly and loudly share their complaints on a global stage.

This problem was highlighted in 2016 when Julep was fined $3 million for mis-selling using the ‘negative option’ marketing method. And again by Tarte Cosmetics, which was sold to Japanese company, Kose — it became the centre of a very visible and damaging backlash from social media influencers in response to the animal testing practices used by Kose. Honest Beauty has also come up against legal challenges due to reportedly faulty products and misleading marketing tactics.

Nonetheless, the risks do not seem to outweigh the rewards for beauty incumbents acquiring and merging with smaller brands which are popular and active on social media platforms such as Instagram. And they continue to draw inspiration from the marketing and social activity of these brands when they launch their own challenger lines. We can expect to see a continued push to increase direct-to-consumer product sales and interactive corporate relationships, and we speculate that new approaches to connecting with diverse and ethically minded audiences will continue to arise from the social media revolution.