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As 2023 draws to a close, economic uncertainty and inflationary pressures continue to challenge the retail sector in a variety of ways. But the beauty sector is one of the few industries that remains a beacon of light amid all of the instability. The sector has been fortunate to welcome many new indie brands that have broken into an already crowded space, made possible by a low barrier to entry and fueled by increased consumer demand across multiple demographics.
While the e-commerce landscape, the broader digital ecosystem, and consumer behavior patterns have created new opportunities for brands, they have also led to a multitude of challenges as consumer expectations and the speed of trends that come and go have only increased. We’re seeing more and more interest from consumers in learning everything they can about the products they’re buying, the founders behind the brands, and their missions. This desire for information has raised the bar for companies and puts added pressure on them to ensure they are presenting their brands in the best light and also authentically and transparently.
As a result, founders are missing out on their beauty rest. More than ever, they’re being tasked with staying relevant but true to their brand’s mission, being in tune with and highly engaged with the communities they’ve cultivated, innovating their ingredients and formulations and staying focused on sustainability in their sourcing and production. Add to that the need to build a scalable business model that will allow for sustainable growth to attract the right investors and it’s almost too much for any one founder to tackle. Despite these tall orders, founders are rising to the occasion and amassing strategic support to take on the next challenge.
It was exciting to see that fresh energy reflected in the conversations and dialogue at the BeautyMatter's NEXT Summit last month in Los Angeles. With so many established and well-respected companies standing shoulder to shoulder with up-and-coming brands, the event embraced dynamic, thoughtful, and forward-thinking conversation and allowed for real connections to be forged between brands in attendance. Strolling through the BeautyMatter “SuperMarket” swag area, attendees were gleefully “shopping” for the latest hot products, like K18’s viral molecular hair mask, the holy grail Olaplex bonding oil, BrowFriend’s red-light therapy tool, and a waterless vitamin C–based brightening and firming serum by Matter of Fact, just to name a few. The energy and enthusiasm in the room was palpable. With the overall beauty market (including skincare, fragrance, makeup, and haircare) projected to reach over $450 billion for 2023 (McKinsey), it’s no wonder the Summit was buzzing. Here’s a roundup of the top takeaways and trends from the 2023 BeautyMatter NEXT Summit:
TikTok Is Here to Stay
Social selling on various platforms and the enduring power of TikTok will continue to shape the way brands market products and engage with their highly segmented communities. While millennials seem to favor Instagram, TikTok still rules supreme for Gen Zers. Dune Suncare co-founder and CEO Emily Doyle recognizes that consumers aren’t just scrolling through TikTok anymore to find the latest hot product, they’re actually relying on the platform to get educated. “Today’s consumers are obsessed with a product’s ‘why’ and ‘how’ and want to know how a product will make them look and feel better than the rest of the competition out there. Because of this, consumers are taking a sincere interest in ingredient stories and delving into platforms like TikTok to help educate them and weed through the plethora of options,” Doyle said.
Specifically, within the confines of social engagement and community building, many brands now feel a responsibility to help shape the conversation around beauty and define it and its impact. “The line between healthy self-care and obsessive self-destruction can be razor thin,” said Paul Baek, founder and formulator of Matter of Fact, a skincare brand designed to reduce signs of aging and promote youthful-looking skin. Baek said he believes that a nuanced discussion around the motivation for using beauty products is important. Because of that, he and his team are mindful in their engagement with consumers while also staying the course in his belief that “beauty can be empowering.”
Suncare Protection Isn't Just About SPF
Prevention has always been a major factor in solving skin problems, but now it’s become an absolute beauty buzzword. We’ve seen a major uptick in discussion around suncare and its efficacy and safety, as well as increased activity and innovations in formulation, application, and delivery, whether in stand-alone products or blended with other cosmetics. Dune Suncare, one of the solution-oriented standouts, has created a collection of skin tone–inclusive gel suncare products that tout a myriad of additional skincare benefits. The brand can attest to the boom suncare is experiencing at the moment. “Consumers are starting to understand that sunscreen truly is the number-one beauty product on the market,” said Doyle. “You can spend $150 on a specialty serum from a prestige retailer and it’s 100% less effective at keeping you looking youthful than your $8 sunscreen from a 24-hour drug store.” This approach, mainly through the support of user-generated content (UGC), is also reflected in the growing practice of blending prevention with beauty among both mass and prestige brands as they continue to add suncare capabilities into their lineup of offerings.
Beauty for All
The beauty sector has seen a steady climb in male consumers over the last few years and that trend will likely continue its upward swing, with the global male grooming market expected to reach $100 billion by 2030 (Custom Market Insights). Some theorize that this uptick can be attributed to the rise in highly targeted social selling that is able to reach a much bigger population of male consumers. Social marketing and selling, along with the more intimate experiences of browsing and buying beauty products online (versus physical retail locations) have presented many appealing opportunities for male consumers to enter the market and invest in self-care routines for the first time. “Men are much more curious today about their skincare and health options than they were 10 years ago, mainly through the sheer number of brands they’re pummeled with via ads on social media,” said Doyle. And for Baek, a male founder of a skincare brand, his personal journey of skincare struggles prior to starting Matter of Fact in 2018 resonated with both female and male audiences that share the same concerns. One of Baek’s goals is to make his consumers feel less overwhelmed and more educated and empowered in their purchasing decisions.
The voice of consumers and the decisions they make about where and how they decide to part with their dollars speaks louder than ever. In responding to a more diverse audience, brands are increasingly considering a broader range of skin colors, hair types, ethnicities, and gender identities. For Dune, having a go-to-market strategy at inception that created inclusive products that could be used and loved by all has been key to the brand’s success. Doyle said the company found ways to innovate and reach broad audiences early on through clean, universally appealing packaging, a unisex signature fragrance, and a smart, playful tone that worked seamlessly across marketing, branding, and retail platforms.
While you can’t be all things to all people, it’s become almost essential that companies have an inclusive message in their brand representation. In addition, accessibility and affordability, without sacrificing quality and sustainability, are also top of mind for many indie brands as they strategize in this highly competitive landscape. These are welcome trends, and many of the viral products we have seen share these attributes. The brands that are able to capitalize on that are gaining an edge on their competitors.
The Original Influencers
One of the key concerns founders share once their brand enters a retail partnership is how to achieve high sell-through and remain on the shelf. It can be complicated given the limited resources emerging brands may have. Beauty advisors and the role they play in shaping a brand’s performance at the retail level continue to be an important part of the business strategy mix. When Matter of Fact launched on Sephora online as well as in 270 store locations, one of the strategies Baek employed was working closely with the team that would be training the beauty advisors. “They are the original influencers,” said Baek. “I cannot be more grateful for their role in leading customers to our line.” Other industry experts also advised that creating short training videos on a consistent basis for the field team is critical, but these retail-focused tools are only effective when paired with segmented consumer marketing strategies in an omnichannel world.
Capital Raise and Debt Financing
The sheer amount of capital required for a beauty brand to effectively market and compete in such a saturated and fast-paced sector has reached new heights. At the same time, it’s also become incredibly important to maintain sufficient inventory for all sales channels to ensure that one isn’t completely depleted from rapid sales of a trending item. Effective engagement, segmented marketing strategies, and inventory planning are mission critical for emerging brands in achieving conversion and ensuring repeat purchases. Having a healthy and innovative pipeline is also advantageous. All of these growth strategies require capital. Whether bootstrapped or funded by investors, many emerging companies are focusing on capitalization planning.
In today’s restrictive banking environment, which has been exacerbated by investors who are more disciplined (and skittish) than previous years, it’s become even more challenging to raise capital. Rather than displaying impressive top-line growth, investors are now looking for businesses that exhibit the ability to grow sustainably and maintain healthy margins and profitability (or at least can demonstrate a clear path to profitability). They’re also looking for a growth trajectory that’s rooted in fundamental product efficacy and brand appeal rather than one that’s based solely on the hot trends and happenstance that may not pass the test of time. While many founders at the BeautyMatter NEXT Summit expressed interest in learning about how to better position their brands and prepare for a desirable liquidity event, asset-based lending and purchase order financing were also hot topics among these business owners and entrepreneurs. The right debt financing can fund inventory purchases once a company lands on a highly coveted retail shelf. And while there are many alternative lenders out there, not all money is the same. Finding the right financing partner with deep experience and knowledge in the fast-growing and ever-changing beauty landscape is an important step in a brand’s journey to scale successfully and, even one day, achieve a noteworthy exit.