THE BUSINESS OF BEAUTY
RISE OF THE EXPERT E-AGGREGATORS
It seems a good chunk of my Fab Five e-aggregators have gotten Liebmann’s memo; one has flirted with pop-ups, one has opened its own permanent retail space and still another has big plans for a shop-in-shop with a major retailer. So let’s dive in and check them out.
Blending Content with Commerce for Major Impact
WONDERLAND FOR SKINCARE JUNKIES
By Dana Wood
hat if you could learn about—and eventually purchase— expertly curated, highly coveted beauty brands without ever having to darken the doorway of a department or specialty store? What if you could plunk down the plastic for the
skincare and makeup all the cool girls are using without battling the aggressive sales bots who attack you the second you step on their turf?
I’ve identified five that I feel are really moving the needle: DermStore, Makeup. com, Net-A-Porter, Peach & Lily, and Violet Grey.
Those are the questions that spring to mind every time I’m in New York and pop into one of my favorite beauty haunts— the Barneys cosmetics department.
From an annual turnover standpoint, these sites run the gamut from under $10 million to north of $100 million. What they have in common is a commitment to education. By emphasizing intel, they gain credibility. That, in turn, drives sales. Toss in stellar customer service and it’s off to the races.
Although I shouldn’t (given the loot I already own), I walk into that department prepared to buy. Yes, I’m mostly in the market for knowledge; it’s in my job description to know about the latest brands and product trends. But I’m hardly averse to spending money. If only the experience were better: more conducive to leisurely browsing, assessing, and finally, buying. Guess where that experience is, in fact, better? On a handful of elite e-aggregators that bundle great content with an edited product assortment. While content-rich aggregation is an increasingly competitive sector,
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“Still, it’s the rare few that can deliver all that,” says Wendy Liebmann, CEO and Chief Shopper of WSL Strategic Retail. To succeed in what she dubs the “Internet 5.0” era, beauty aggregators “have to deliver a fully loaded experience. It’s not enough just to offer item and price. They need to build content into it to create trust; a relationship, an emotional connection. It can’t just be about acquisition.” “It’s also smart to have at least some type of physical presence,” says Liebmann. “Even if that means a pop-up shop or an on-demand service. Because beauty is still inherently tactile, it’s important to create a laying-on-of-hands option, where shoppers have the opportunity to engage with products and people,” she notes. “The transformational nature of what beauty can deliver—the smell of fragrance, the texture of a new skin cream, or a slash of red lipstick—is hugely powerful.”
1. DermStore Founded in 1999 by dermatologist Craig Kraffert, this is a wholly owned subsidiary of Target Corp. as of 2013. At that time, there were two other websites—HairEnvy and Blush—operating under the DermStore Beauty Group umbrella. They’ve since been folded into the DermStore flagship site, which now stocks a staggering 750 brands and 26,000 SKUs, and boasts one million “active customers.” “Target Buys Weirdly Successful Online Cosmetics Empire,” crowed Bloomberg Business News at the time of the acquisition. Describing it as a “proven Amazonbeater,” Bloomberg singled out the site’s special sauce: incredibly polished how-to videos that are created in-house at the company’s El Segundo headquarters. These slick mini films cover basics (i.e., optimal eye gel application) and more advanced topics, such as best practices for using the pricey gadgets like NuFACE, which the site sells. If there’s a weak link in DermStore’s chain, it’s what I call “mission drift.” I’d love to see it spin hair and makeup back out, and focus solely on skin. That’s a big enough category, especially since DermStore is ramping up its professionalstrength treatment lines, which are typically only found in dermatology and plastic surgery practices. Why not just own great skin? It’s a global obsession.
THE CLEVER CORPORATE PLAY
COMMERCE MEETS FASHION CRED
Leave it to mighty L’Oréal S.A. to snap up the domain names for Skincare.com and Makeup.com. The millisecond Al Gore invented the Internet they probably had those two monikers on lock.
Although he’s since flown the coop for the rapidly expanding Cos Bar, buzzy merchant David Olsen was instrumental in laying the groundwork for Net-A-Porter’s sleek, chic push into beauty in 2013.
But what’s really great about Makeup. com is its deft handling of the L’Oréal mothership connection. This is a site that’s solely devoted to the beauty behemoth’s ever-growing bench of cosmetics brands. And in the landing page footer, under a mini-headline that reads “Brands We Heart,” it lists them outright: Maybelline, Dermablend, Essie, Giorgio Armani Beauty, Lancôme, L’Oréal Paris, NYX Cosmetics, Urban Decay, and Yves Saint Laurent.
Fun factoid: Earlier in his career, Olsen served as VP of business development at DermStore, after it acquired a dermatology/medical spa website-creation company he started right after grad school. The guy’s a go-getter.
And on the “About” page, it clearly states: “Makeup.com is a proud member of the L’Oréal family, and our articles feature beauty products from the L’Oréal portfolio.” Many moons ago—we’re talking early aughts—the Estée Lauder Cos. pursued a similar corporate brand-bundling, e-aggregation strategy with the acquisition of a terrifically ambitious little online beauty magazine called Gloss.com. Unfortunately Lauder was ahead of its time with that venture. L’Oréal, however, has found plenty of digital wind to lift its sails. And with its smart commitment to transparency and a fleet of beloved brands for editors to build content around, it’s got a little gem on its hands in Makeup.com.
Kicking off with just a handful of brands, Net-A’s beauty offerings were showcased in features in The Edit, its stunning digital magazine, and with the addition of a glossy print vehicle—Porter—in 2014, there are now even more opportunities for the merchandising team to inform/ sell in a way that never feels forced. If you’re reading a piece on, say, DIY acid peels, and there’s a sidebar with three handpicked peels to click on and buy, why not go for it? By typically not taking a brand lock, stock, and barrel, and instead cherrypicking the SKUs it wants, the site has been able to comfortably expand its offerings without turning into an editorial version of Sephora. One gets the sense that it’s considered a real coup to be welcomed into the Net-A-Porter fold. Hence the splashy party Aerin Lauder threw for herself in the Hamptons last summer to herald her beauty brand’s arrival on the site.
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THE BUSINESS OF BEAUTY
RISE OF THE EXPERT E-AGGREGATORS
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4. Peach & Lily K-BEAUTY CATEGORY KILLER If imitation is the sincerest form of flattery, Peach & Lily founder Alicia Yoon must be turning cartwheels on an hourly basis.
If only she had the time for such frivolity; between weeks-long product scouting trips to Korea, plotting the roll-out of the Peach & Lily shop-in-shop with Macy’s and developing her first batch of branded skincare, Yoon barely has time to breathe let alone stress about the mini wave of U.S.-based K-Beauty sites she’s inspired. Despite her push into other arenas, Yoon prioritizes the flagship site. She estimates that only 5 percent of the products she’s considering make the cut, after a rigorous vetting process that includes everything from ingredient quality and identity to back-office ops. “The brand should have its own point of view,” Yoon says, “and in-house R&D capabilities so they can continue making great and innovative products. My concern is that usually these brands have to compete on pricing, and then it’s a slippery slope—quality can be compromised to keep costs low.” For her first Macy’s shop-in-shop, Yoon opted for the Flushing, Queens location, which has a predominantly Asian clientele. Stocking it with products curated from the website, she quickly discovered a breakout star: Shangpree S-Energy Long-Lasting Concentrated Serum. “It does so much better in-store than online because you can, touch, feel, and smell it,” she notes. “I love this product so much, but it’s harder to explain how delightful—and efficacious— it is through virtual means only. It’s been exciting to see how it’s taken off when people can ‘meet’ it in real life.” Suffice it to say Yoon’s business future includes a mix of digital and brick-andmortar. “Call me old-fashioned,” she says, “but I’m a firm believer that there’s nothing that can replace a real, in-theflesh relationship.”
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5. Violet Grey CINEMATIC QUEEN OF CONTENT While acquisition rumors swirl, one thing’s for damn sure about Violet Grey: This three-year-old, content-steeped commerce site is prepping for major growth. Why else would it install industry vet Maureen Case as president? After all, the former head of Bobbi Brown and Jo Malone is well versed in taking a promising entity and igniting it with rocket fuel. Founded by Cassandra Grey, the wife of Paramount chief Brad Grey, the LA-based site draws heavily on its proximity to the red carpet machinery of Hollywood. (Note the tagline: “The Industry’s Beauty Edit.”) That translates to a lot of product recommendations from in-the-trenches hair and makeup gurus, and incredible photography informed by Grey’s glamorous inspirations. The lush shoots, like a recent cover story starring Kim Kardashian channeling Elizabeth Taylor by way of Cleopatra, have a spare-no-cost vibe. Pat McGrath did the paint and powder honors for the Kardashian extravaganza, and the results were pretty breathtaking. Let’s hope that beauty product sales— as well as a new retail outpost on Melrose Avenue—are helping to pay the bills around the joint.
To make the product-selection cut every SKU must pass something called “The Violet Code.” According to the site, that’s “a process and set of standards by which Violet Grey’s committee of beauty industry experts and influencers separate hero products from the tens of thousands of options available on the market. The result is a curation that is truly the best in beauty from those who know best.” That’s a tad earnest and manifesto-y for what is essentially a stash of pricey lip gloss and mascara. But if the worst one can say about a path-breaking, forwardthinking beauty venture is that it’s trying too hard, it’s doing just fine.
DANA WOOD Beauty Journalist
A beauty journalist for 20+ years, Dana Wood has served as beauty director for BRIDES, Cookie and W magazines, has written for numerous national publications, and is an author and a blogger. She also spent several years in the Luxury Products Division of L’Oréal, as AVP Strategic Development.