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How Miss A Can Keep Its $1 Pricing Amid Inflation

August 4, 2022
August 4, 2022
Miss A

In a time when even Dollar Tree is doing away with $1 prices and raising prices on most products to $1.25, bargain beauty retailer Miss A is doubling down on its commitment to deliver high-quality products at $1 pricing. The affordable Dallas-based ​​cosmetics and jewelry store saw demand soar during the pandemic, with total sales growing 15 percent from 2020 to 2021.

When logistics costs skyrocketed in late 2021 and early 2022, several beauty brands responded by increasing prices across the board to maintain ordinary profit margins. Knowing this increase was likely temporary and would reset to normal levels eventually, the team at Miss A made the deliberate decision to stick with its $1 pricing, even though its margins have already been affected by over 15 percent.

BeautyMatter caught up with Miss A founder and Chief Marketing Officer Jean Baik to discuss how the brand is able to keep retail prices low as operational costs increase, their brick-and-mortar growth strategy, and the power of bootstrapping their business—in good times and bad.

Founded in 2013 by husband-and-wife team Jean and Kenneth Baik, Miss A has stayed true to its vision of becoming a dollar beauty destination since its launch. The couple has owned and bootstrapped the company from day one, and have never taken on any outside investment. With Kenneth’s background in manufacturing and imports and Jean’s passion for beauty and accessories, they started Miss A with around $100,000 of their own capital.

Originally, Miss A was just another beauty and fashion e-tailer, sourcing and buying products from brands like L.A. Colors, e.l.f., and other affordable brands you can find at your local beauty supply store. The site also sells budget-friendly jewelry and home goods. Affordable beauty brands became extremely popular in the early 2010s as the beauty community began to take root on sites like YouTube and Instagram.

All individual products on Miss A retailed for $1, aside from their charity lines, which retail for $1.33 and $1.88 and whose proceeds go to charity organizations around the world. $1 was a steal even back in 2013 when the brand first launched. Baik said their low-cost strategy initially backfired on the brand before its reputation was solidified.

“At the beginning [customers] were very skeptical when they first heard about [Miss A],” she said. “They were like, ‘No, this must be a scam website. You probably pay for it, and you never get anything shipped [to you].’ Now that we have a presence on social media and so many people they know have talked about Miss A and they've seen the products on TikTok, we don't get that question at all. But that's how unbelievable Miss A is. So for us, keeping our prices as low as possible has always been important.”

A few years into the business, the founders created their own line of products from Miss A under the AOA (Art of All) Studio umbrella, all priced at $1 to compete with the other budget brands available on the e-commerce site. This proved to be a wise decision, as the founders would eventually have to phase out budget brands, including e.l.f. Cosmetics, after the brand announced in March 2011 that it would be increasing the price of products across its dollar line, which was a staple for affordable beauty lovers. Today, the AOA brand makes up more than 90% of the brand’s total sales.

“It's not easy to source these products to be able to sell for $1,” says Baik. “There's a very, very limited amount of SKUs that I can even purchase now to sell for [that price].”

“In hindsight, it's such a blessing that we came out with our own AOA studio line back then. If I didn't have my own brand of products, I would have nothing to sell with all the inflation going on. Or, be like everybody else and just raise our prices, and that's what we don't want to do.”

So, how is Miss A able to sell its products at such bargain prices?

Baik says Miss A’s unique pricing strategy is made possible by minimizing packaging costs, negotiating with their manufacturing partners, and reducing their product markup to a rate that’s less than industry standard but still provides them with a profit.

“There's a really big bubble and markup in the beauty industry,” she says. “Even if I'm not doing anything special and I'm buying the same product as everybody else, I'm selling it for $1 whereas they're selling it for $10.”

Sticking to its dollar-pricing strategy has forced Miss A to take quite a hit on its margins following the events of the last few years. From pre-pandemic to now, Miss A experienced a 26% decrease in product gross margins. Baik says the import tariffs on cosmetics that started during the Trump administration and all the inflated costs have contributed to this significant change. This excludes the increase in the cost of labor, which Baik says cut into their margins even more.

Because the brand has been bootstrapped from the beginning with no outside investment, Baik is cautious when it comes to expenses. The brand prioritizes slow, intentional growth over instant results.

“We have never spent a single dollar on Google Ads or traditional ads until last year,” she says. Since then, the brand has halted its Google Ads spend. Instead, Miss A utilizes influencer marketing and social media to fuel organic growth. TikTok has been a major driver of growth since 2020, with the #shopmissa hashtag racking up over 84 million views. The brand’s own TikTok account has grown over 500% since the end of 2020.

“There's a really big bubble and markup in the beauty industry. Even if I'm not doing anything special and I'm buying the same product as everybody else, I'm selling it for $1 whereas they're selling it for $10.”
By Jean Baik, Founder + Chief Operating Officer, Miss A

Even with the hit they’ve taken to their product gross margin and conservative attitude regarding spend, Miss A is projecting a 100% increase in sales growth from 2021 to 2022 as a result of recent brick-and-mortar expansion.

The budget beauty retailer has 15 stores across Texas, Oklahoma, and New Mexico, with 10 more planned to open in the fall. Following that, Miss A plans to open another 10 stores every six months.

Although the brick-and-mortar growth may seem accelerated now, it’s actually been over five years in the making. Miss A opened its first store in 2016, and tested out the market and its own internal processes for two years before opening another. The slow-and-steady strategy paid off: Baik says Miss A retail stores have a 90% conversion rate, which has given them the confidence to expand at such a rapid pace.

The pandemic initially halted their plans for retail expansion, but with the recent news of DTC darling Glossier entering Sephora in 2023, the timing is ripe for a return to retail. Distribution is changing at a rapid pace, and Miss A is perfectly poised to be the next big affordable beauty destination. Beauty lovers may experiment with a trendy product at Sephora or Ulta, but when it’s time to purchase, Miss A offers the lowest price among retailers, which is enticing for both the casual consumer who’s not entirely sold on the trend and the beauty-obsessed consumer who wants to try them all.

“We’re very fast on trends,” says Baik. “That's the beauty of Miss A. Our customers love makeup, they want to try it, but they don't want to go to buy a $30 blush every time something goes viral. If you go to Miss A, you can buy it for $1. If you really love it, you can go ahead and splurge on that high-end item that you’ve been eyeing. That's our concept.”

In the nearly 10 years since Baik and her husband founded Miss A, they have been entirely 100% self-funded. Today, the brand’s current valuation stands at around $250 million, with Baik projecting $1 billion within five years with the expansion of brick-and-mortar locations as well as e-commerce growth.

When asked if she’ll ever take on outside funding, Baik suggests they may consider raising outside funding in three years, depending on revenue and growth plans. Unlike many DTC brands that started around the same time as Miss A, Baik doesn’t believe that more funding is always in a brand’s best interests.

“You don’t need that much money to be a successful brand,” she says. “I feel like that really takes away from a brand’s initial purpose and vision—it's a distraction more than a help. For us, we wanted to make sure that we were profitable for an extended period of time. I think that’s what a successful business model is.”

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