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Nailing direct-to-consumer: how big beauty brands can fuel their growth

By Marine Pajot & Christine Nguyen

4 minute read


Take a peek into a millennial’s beauty routine, and you’ll see the pastel colors and sans serif fonts starting to pile up - the D2C brands are starting to take over!

Overall, the beauty industry is ahead of the curve in adopting e-commerce compared to other industries. However, the most innovative and disruptive strategies are coming predominantly from startups. Although the top 20 beauty brands capture 96% of brick-and-mortar sales, they only capture 14% share online. But look at Glossier or Colourpop. Beyond selling online, what they are really doing is creating ongoing 1:1 relationships with their consumers by offering them differentiated experiences. They engage their communities via relevant content and get value out of these relationships in the long run. And that is what being successful in D2C is about.

There are a couple of ways big beauty brands can tap into D2C, but which big bet can properly move the needle for the business and create long-term commercial and consumer impact? 

One way is through acquisitions. When Coty or Shiseido acquire Kylie Cosmetics and Drunk Elephant respectively, they buy direct relationships with a community of younger consumers, certainly with the aim to quickly absorb learnings and capabilities and do it with other brands. But is that really happening? 

Another way is by incubating new brands. When L’Oréal or Unilever invest in incubators like the Founders Factory or The Unilever Foundry, they aim to launch new brands that will become the next Birchbox or Glossier. While being great to foster a culture of entrepreneurship, it dilutes investment and reduces a chance to win and impact.

Have any of those startup-centric strategies worked?

Double digit million dollar revenue brands are amazing for individual entrepreneurs but I doubt it will be enough to attract the attention of billion dollar company CFOs, especially with low to no margins. Successful startups are rare and hard to make work. According to Bain, a new startup has only a 1 in 500 chance of becoming big enough to make a substantial value contribution of €100m or more

In all industries, D2C businesses, even unprofitable ones, are still attractive to investors and big companies because of the most desired commodity of our time: first party data. Some brands, like Nike for example, are even dropping relationships with retailers in order to gain access to first party data, gaining invaluable insights into consumer behavior. However, at Manifesto we believe that, while being a key enabler to delivering personalized experiences to consumers, data is far from being the most important value driver for D2C.

D2C can offer the opportunity to strengthen the core of the business, re-energize existing legacy brands and take back more of the online market share.

By developing a D2C proposition, brands can answer changing needs, stay relevant and attract new consumers. Far from cannibalizing, it can complement the retail offering. As it improves the reputation of the brand, it can revitalize sales in all channels, not just digital. As an example, by offering new online and physical direct-to-consumer experiences, My M&M’s helped to radically transform impulse purchasing into intentional moments of occasion-based gifting by offering personalization of its candies. 

Existing brands also have the power to lower cost per acquisition. Incumbent companies will be able to leverage their overhead costs, reducing the investment that startups, on their end, require to reach scale. Finally, by leveraging their ecosystem of brands, big companies have the opportunity to cross sell driving indirect revenue for the business. What you need to do is to understand the D2C equation, D2C value levers vs D2C investment areas and make it work for your business leveraging your existing assets and capabilities.

So now the question is how are you going to supercharge your brands with D2C propositions?