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Don’t waste another dime on bloated channel reporting and vanity metrics.
Don’t waste another dime on bloated channel reporting and vanity metrics.
With its first retail deal and more stores, the beauty brand is entering a new era where DTC is only part of the strategy.
Glossier is about to start appearing on more store shelves.
The beauty brand that became synonymous with direct-to-consumer is making moves to expand its presence in brick-and-mortar retail. A pair of announcements issued by the brand on Tuesday make this clear:
Changing of the guard: It’s an about-face in strategy for eight-year-old Glossier, which forged a new path in cosmetics by selling through its own channels, and gained cult status among consumers in the process. On the way to a billion-dollar valuation in 2019, Founder Emily Weiss made a point of foregoing the cosmetics retailers and drug stores where the largest beauty brands compete for space. Weiss had ambitions to grow by creating a deeper tech-enabled experience, but that was abandoned amid layoffs earlier this year. That set the stage for Weiss’ departure in May. New CEO Kyle Leahy, who brings experience from Nike and Cole Haan, immediately voiced that growth through wholesale and other in-person retail would be a priority. Two months later, it's coming to fruition with an agreement in place.
Key quote: “We are incredibly excited to enter our first-ever retailer partnership with Sephora. They are an iconic, international retailer with an extremely loyal community and we know our customers want to find us there,” Leahy said in a news release. “We share the same customer-centric values and are both deeply grounded in the ever-evolving notion of beauty discovery. This marks a new chapter in our omnichannel strategy and we can’t wait for all that’s ahead in 2023.”
Part of the whole: Glossier follows fellow DTC darlings like Allbirds and Casper into the more traditional retail route. With the expansion of its own stores, Glossier is also joining Warby Parker and Everlane in embracing an omnichannel direct model that moves between both digital and in-person retail. Plenty of other newer DTC brands are embracing a strategy of starting direct with digital, then moving into physical retail and big box stores to get bigger, as well. That was on view elsewhere this week as DTC innerwear brand Parade signed its first retail partnership with Urban Outfitters. At the same time, storied brands are prioritizing direct-to-consumer to reach shoppers on a growing number of digital touchpoints. It points toward a model where DTC is less of a movement, and more of an established operational strategy.
Searches answered: While Glossier is looking to find its footing again, the brand still has plenty of the appeal that made it the balm dotcom in the first place. It was legendary for its ability to generate demand, and that carried over to Sephora even before the deal was signed. The retailer said searches looking for information on whether the brand was available at Sephora jumped 200% in the last year, and shared that it is one of the “most searched” brands not currently available at Sephora.
Year of firsts: To be sure, wholesale is just one channel for growth that Glossier is pursuing to add customers. In other firsts, the brand also signed its inaugural celebrity partnership with pop star Olivia Rodrigo, and helped to introduce YouTube's shoppable Shorts with the launch of its No.1 Pencil.
The bottom line: Still, those are moves from the DTC playbook. Wholesale is a bigger step toward traditional retail. As it enters the store, there’s no doubt that Glossier will be more widely available through Sephora. The beauty retailer has over 500 stores in the Americas, and increased its US store count by 260 in 2021 alone. Glossier is also planning to expand its own stores in the coming year with locations in Brooklyn, Philadelphia, Atlanta and its new location in New York’s Soho neighborhood. The test will be whether it can retain its singular status as a business pioneer and it factor with consumers can remain as its products join the brand's distinctive shade of pink in ubiquity.Product innovation, marketing and ecommerce helped boost sales 49% in the holiday quarter.
e.l.f. beauty Poreless Putty Primer. (Courtesy photo)
The clouds are getting darker in today's retail environment, but e.l.f. Beauty is shining. Digital commerce and marketing growth is a primary reason.
The makeup and skincare brand posted the following results for the quarter ended Dec. 31, 2022:
The brand is also outperforming category trends. The cosmetics category grew 8% over 2021, while e.l.f. grew 36%.
“We grew our market share by 150 basis points and increased our rank to the #4 brand as compared to #5 a year ago,” CEO Tarang Amin told analysts. “We continue to be the fastest-growing top five brand by a wide margin.”
The strong results proved validating for a brand that prides itself on offering affordable cosmetics, and digital-forward marketing. They were also another sign of the resurgence of beauty as people return to in-person experiences post-pandemic and seek affordable luxuries that can provide joy despite tougher economic conditions.
Here’s a breakdown of the digital drivers of growth for e.l.f., and how it is showing strong results in a tough economic environment:
@meghantrainor A special @elfyeah radiance report: It's an E.L.F.ING GLOW STORM! Please exercise ✨extreme iridescence!✨ (and thank you @weatherchannel for inspiring the glowcast!)🤍 #elfpartner
The brand prides itself on marketing that is both bold and pioneering on emerging channels.
One example came in the form of a holiday kickoff with the singer Meghan Trainor delivering a Weather Channel-informed report on social channels to celebrate the restock of the brand’s Halo Glow Liquid Filter, which was a viral sensation.
“The trifecta of e.l.f., The Weather Channel and Meghan Trainor helped us reach new audiences and entertain our community,” Amin said. “The campaign generated over five billion press impressions, exceeding last year's holiday campaign by a wide margin.”
The combination of innovation on product and virality in marketing helps attract a new audience for the brand.
“They see the viral buzz,” Amin said. “They see other people talking about this prestige quality, these great prices and particularly these days with platforms like TikTok, we get consumers doing their own demonstrations and comparisons.”
When it comes to metrics, Amin said the brand explores, “What percent behind each product are we pulling in new users?”
It's often up more than 50%, and attracts the core consumer in Gen Z as well as millennials and Gen X.
“I think the quality of these products at the prices we have and our ability to engage them really are attracting even more consumers to our franchise,” Amin said.
e.l.f. also deepened its marketing investment. The overall share of marketing is now 16%, as compared to 7% three years ago. It will increase to 17-19% this fiscal year.
“We recently completed our annual Nielsen marketing mix analysis and again saw exceptional ROI results, giving us further confidence that our marketing and digital initiatives are driving brand demand and delivering profitable growth,” Amin said.
Strong ROIs were observed across digital advertising and influencer marketing, while PR was “off the charts,” Amin said. Experimentation also plays a key role in developing these channels.
“The other thing about us is, we're not afraid to test and learn our new platforms. So we were one of the first beauty brands on TikTok. In the early days, it was hard to get attribution on TikTok. We now can see almost immediately when something goes viral on TikTok, the impact it has on our business and our ability to be able to attract that,” Amin said.
When it comes to ecommerce, Q3 digital consumption trends were up over 75% year-over-year, said CFO Mandy Fields. Digital channels drove 17% of total consumption in Q3, up from 14% a year ago. In the quarter that includes the holidays, digital channels were particularly strong through Black Friday and Cyber Monday.
A big point of emphasis for digital growth is the company’s Beauty Squad loyalty program, which provides early access, exclusives, free gifts and bonus points. The program grew enrollment 25% year-over-year to 3.5 million members. The loyalty program helps to boost the value of individual customers.
“Our loyalty members drive almost 70% of our sales on elfcosmetics.com have higher average order values, purchase more frequently, have stronger retention rates and are a rich source of first-party data,” CFO Mandy Fields said.
Plenty of brands and retailers reporting earnings over this week are speaking of a slowdown in demand as a result of inflation and cooling demand in the economy. They also talk of consumers trading down to more affordable and smaller products that challenge margins. Amin batted away that kind of talk.
“No, we've not seen any slowdown in demand,” Amin said.
The response spoke to the unique place that beauty sits in this moment.
“What I'd tell you is, historically, mass color cosmetics, mass skin care has fared really well in…recessionary environments,” he said, referring to the Lipstick Index that posits beauty sales rise during economic downturns as people seek the small joys when they have less to spend on bigger items.
But there’s also a timing factor coming out of the pandemic.
“This is a category that really did suffer during the pandemic when people were restricted from their normal behavior,” Amin said. “So I've long felt there's a lot of pent-up consumer demand for the categories in which we compete, and we very much are seeing that.”