Honest opinion: is it even worth launching a new cosmetic brand?

EclecticEclectic Member
edited June 25 in Off Topic
As chemists I know this question won't have a direct impact on you, but I consider the cosmetic chemist community to be "insiders" so I assume you've seen a lot of cosmetic startups crash and burn.

From the surface, this is what I see and why I feel like starting a cosmetic brand is not a smart business move now vs say a decade or two ago:

  • The market is completely flooded with brands of all kinds. Unless you have something ground breaking to offer like Olaplex, it will be difficult if not impossible to gain enough market share to survive.

  • It's virtually impossible to protect your market share if you manage to secure any because cosmetic products are easy to duplicate. As cosmetic chemists, you're trained to do exactly that. For safety, a product's formula is required to be placed on the bottle (ingredients lists are easy to extrapolate into an actual formula).

  • Unless you decide to market your products as Only For Professional Use, the only distinguishing features a product really has is marketing and scent. Also, the ingredients are readily available to anyone who can buy them online. So what are you selling in the end? Convenience so someone doesn't have to mix it up themselves in their own kitchen?

  • In a flooded, super competitive market, it requires exorbitant amounts of money to advertise a startup brand enough to grab new customers' attention. For a new small to midsize brand, I saw a quote of $100k to $500k being required for a competitive launch. Social media use to be an affordable super effective way for small brands to gain traction, but once big brands caught on, that has become less of a truth since they drove up the cost of advertising.

Given all this, my assumption is that a small start up with a single cosmetic product, a relatively simple ingredients deck and only $10,000 in start up money should really give up the pipe dream of having a successful product, and instead maybe invest that money in an index fund.

Do you agree? I appreciate any thoughts on the above assumption.

Comments

  • PerryPerry Administrator, Professional Chemist
    This is an excellent question.  It's one that everyone who has dreams of starting their own line should ask themselves.

    My resounding answer to whether you should launch a product line is YES* (with caveats).

    If you really have a passion about helping people solve beauty problems, expressing your own creativity, learning how to market & sell products, and running a business, starting a cosmetic line is a great business. It can be highly profitable, they are products that get used up so there is a lot of repeat buying, and people are always looking for something new.  There are a lot of pluses.

    To your specific points...

    1. Yes, it's flooded but brands like Drunk Elephant & Kylie Cosmetics prove it can be done.  And they demonstrate you don't need any special technology to launch a successful line. In fact, the vast majority of brands do not have any special technology that couldn't easily be duplicated by a big company (Olaplex included). To gain market share and survive you have to find your audience & sell them products that they want.  

    2. Yes, duplicating someone else's product is simple. That's why your products & how well they perform is less important than your brand and your brand story. I could easily make a product that performs exactly as good as this $235 La Mer eye cream and sell it for $10 or $20 or $50. But La Mer isn't worried about people who could exactly copy their formulas. That's because consumers buy cosmetics primarily due to the brand & brand identity. Consumers become part of the La Mer tribe. Once they identify as a member of the La Mer tribe, they are not going to readily switch to something else. If product performance was most important the only shampoo anyone would buy is Suave or VO5. People buy products for the brand and a sense of identity, not for the formulas.

    3. You're selling the brand & the brand story. Yes, you're selling convenience and you're selling functional products, but mostly you're selling an experience, and hope and aspiration. You're selling a vision that people have of themselves and your product with its fragrance and color and packaging and story and price, all contribute to a consumer's sense of what they can be. You're not selling products, you're selling dreams. And this is something that can't easily be duplicated.

    4. You should not spend a lot of money to launch a brand. Unless you are a giant corporation or have money to burn, you would be out of your mind to launch with a 100K - 500K budget. $10,000 is plenty of money to start a cosmetic line. Especially in the Internet age. You just have to know how to start.  

    Here's a plan I would follow if I were launching a product line. 

    Best plan
    A.  Identify a consumer who you want to sell products to - (preferably a consumer with money to spend)
    B.  Figure out what beauty problems they have 
    C. Create products that solve those beauty problems
    D. Build a "tribe" of loyal followers and sell them those products

    Alternative (harder) plan
    A. Create a product that solves some problem better than something else on the market
    B. Identify consumer who already buy the existing product & sell them your better product.

    With the Internet and search engines and social media, it's still rather cheap and easy to build an audience. Once you have a following, you can create products that they want and build yourself a nice business. I have an email list of over 50,000 people on Chemists Corner. To build that I have spent exactly $0 in advertising. You don't need to spend a lot in advertising to build a customer base.

    Now, you might be thinking if it is so easy why don't I have a product line.

    Well, that's because I have a hard time telling a marketing story that would set my product apart. I would have a hard time trying to convince someone to buy my excellent product when I know that they can spend a lot less money and get their problem solved by someone else's excellent product. In truth, I'm not a great salesperson. I believe scientists in general have this problem.

    But as long as you don't mind buying into a story, there is still lots of opportunities to launch a beauty product line.   

  • EclecticEclectic Member
    Thank you Perry, very well thought out and balanced response.


  • BelassiBelassi Member, PCF student
    Alternative Alternative plan (Mine):
    Create loads and loads of products and market them. Most will fail for one reason or another. Stop creating that type and try something different. Repeat as necessary.
    Cosmetic Brand Creation. Concept to name to IMPI search to logo and brand registration. In-house graphic design inc. Pantone specs. Cosmetic label and box design & graphics.
  • PerryPerry Administrator, Professional Chemist
    @Belassi - indeed, that plan makes sense for everyone. 

  • BelassiBelassi Member, PCF student
    I would estimate my success rate at product creation to be not much better than one in ten.
    Cosmetic Brand Creation. Concept to name to IMPI search to logo and brand registration. In-house graphic design inc. Pantone specs. Cosmetic label and box design & graphics.
  • EclecticEclectic Member
    Belassi thanks for stating your success / failure rate. Sobering.
  • BelassiBelassi Member, PCF student
    It's not a problem creating perfectly usable products. The problem comes with marketing them long term. For instance, launching a shampoo. You spend a lot of money giving out samples, doing advertising. But then after three months sales disappear. 
    Cosmetic Brand Creation. Concept to name to IMPI search to logo and brand registration. In-house graphic design inc. Pantone specs. Cosmetic label and box design & graphics.
  • lushdermalushderma Member
    @Perry provides a great answer. In essence, identify your market and their problems and provide them with a solution. A colleague of mine was involved in the launch of Carbon Theory - an acne focused line whose core product is a soap bar with activated charcoal and tea tree oil. Hardly rocket science. The guy made test batches in his kitchen before finding a contract manufacturer who could make it in volume. He then pitched it to the Boots pharmacy chain who liked it (and its low price - circa £6) and put it in its Beauty Finds category in around 180 stores. About 1 in 20 products will flourish after being tested like this. Carbon Theory did and they are now one of the best selling products in this acne category. They are also rolling out to the US via Ulta. Didn't require masses of capital or fancy ingredients. Just a well thought out and targeted product and some luck (as with all things!) with initial distribution. 
  • @Perry this is a great idea for an online workshop!
  • PattsiPattsi Member
    edited July 6
    Perry and lushderma ' answers covered all .
    but this problem happen with all sorts of merchandise.
    as for an only $10,000 in start up i'd say it is possible but u can't expect a benefit of 1M in a short period right? , some brand takes long time to catch on in the market , some brand blooms quick. it's a matter of time and place etc.
    in US the market is completely flooded indeed. but u may consider other market that 's still growing outside US say China ,India , Russia there might be some room for u if u understand their cultures and your product can solve their beauty problems. there r  people who have $$$ everywhere if u can find them.

    Eclectic said:

     Unless you have something ground breaking to offer like Olaplex
    @Perry 
    may i have your opinion on olapex?
    i am not a chemist but to my little to nothing knowledge in chemistry , olaplex doesn't seem to do anything or little they did to bleached damaged hair. their no.1 and no.2 that sell to professionals only the effect only last a day or 2 in my observation. and their no.345.. are just a set of conditioners and treatment products.
    or i missed something and olaplex have that magic (including otherplex too)
    thank you
  • PerryPerry Administrator, Professional Chemist
    @Pattsi - Olaplex - They claim to have a molecule that can better reform broken disulfide bonds in the hair. I'm not impressed & don't think consumers get much additional benefit by using it over standard treatments. 

    They do have an impressive marketing machine though. They have done an excellent job of convincing people that their product & technology is special. And that is more important than whether the technology is actually special. I don't think it is, but I'm not their target market. 

  • EclecticEclectic Member
    edited July 8
    lushderma said:
    @Perry provides a great answer. In essence, identify your market and their problems and provide them with a solution. A colleague of mine was involved in the launch of Carbon Theory - an acne focused line whose core product is a soap bar with activated charcoal and tea tree oil. Hardly rocket science. The guy made test batches in his kitchen before finding a contract manufacturer who could make it in volume. He then pitched it to the Boots pharmacy chain who liked it (and its low price - circa £6) and put it in its Beauty Finds category in around 180 stores. About 1 in 20 products will flourish after being tested like this. Carbon Theory did and they are now one of the best selling products in this acne category. They are also rolling out to the US via Ulta. Didn't require masses of capital or fancy ingredients. Just a well thought out and targeted product and some luck (as with all things!) with initial distribution. 
    @lushderma - I know this topic is over two weeks old now, but I've been meaning to come back and post a follow up question to your story:

    How was this person able to bring this product to the market without it being classed as a "drug" by the FDA? Or was it? If so, the cost of passing all the testing and regulation to sell a drug would be well outside the $10k budget mentioned in the original post. What was the budget to originally launch this product?
  • ZinkZink Member
    The market is completely flooded with brands, it's extremely hard to stand out, even if you're venture backed most still fail. 

    There's huge survivorship bias, Perry mentions "Drunk Elephant", a brand being sued by L'Oreal for patent infringement that also got $8.3 million in VC funding.

    Amazon is flooded with no-name brands that game the system to get top spots, even huge brands like L'Oreal struggle to rank for keywords.

    Facebook marketing costs on average >$10 pr sale or so in skincare.

    So to succeed (big time) you either need:

    a) Millions in VC capital to start a relatively general brand such as drunk elephant. To get said funding you'll likely need some very solid industry experience/track record/connections. Recommend it if you can hack it, you need to have strong reasons why people should invest in your brand in a sea of thousands.

    b) Find a hyper targeted niche audience that's not price sensitive  (I saw a brand succeed selling concealer sticks to women over 60), you need to "overprice" your product to be able to pay for marketing. This is probably what I'd recommend and you can alternatively focus on creating viral products, making a viral "brand" is a lot more work - think making the new Snickers instead of starting the new Mars company.

    c) Bring a genuinely new technology to the market (e.g. if you made a cream that stimulated melanin production - better hurry though, plus you easily run into problems with the FDA). Don't recommend unless you're a hardcore scientist and can raise money, and even then, it's very high risk.

    d) Do something grey area, e.g. skin bleaching or some such product - do not recommend.

    e) Find a way to sell products for super cheap and partake in the price race to the bottom that is amazon - also don't recommend.
  • PerryPerry Administrator, Professional Chemist
    @Zink - you make some great points.

    I'd suggest that you do not need as much money however if you work on email marketing. You can build a relationship with people via email marketing in a way that SEO and even social media don't. You just need to rank for a lot of long tail keywords and that means creating a website with lots of content and a free something to give away to get email addresses. Then you need to have a good story to tell through email which might eventually lead to a sale.  For someone starting out with limited funds, this is the strategy I'd suggest.

  • ZinkZink Member
    edited July 9
    Perry said:
    @Zink - you make some great points.

    I'd suggest that you do not need as much money however if you work on email marketing. You can build a relationship with people via email marketing in a way that SEO and even social media don't. You just need to rank for a lot of long tail keywords and that means creating a website with lots of content and a free something to give away to get email addresses. Then you need to have a good story to tell through email which might eventually lead to a sale.  For someone starting out with limited funds, this is the strategy I'd suggest.


    Thanks Perry,

    Albeit email marketing to works great, the problem is scaling to get the emails in the first place. 

    You could try to rank for long tail stuff if you go for option b and have a niche product, SEO is however its own can of worms you need to hire an expert on it to have a chance to rank for anything. Creating the content alone does nothing.

    For someone just starting out I'd recommend focusing on one or a few stand-out products, then reaching out to relevant small to mid size influencers and press channels for reviews - hopefully your product is different enough to elicit interest. I'd also start selling on Amazon with a strategy in place to get customers over to your site, first and foremost pricing your product lower on it, as Amazon marketing is 10x cheaper than Facebook and Google (this is also why most Amazon pseudo brands aren't able to break out from Amazon).

    Lastly I'd reach out to small shops or salons that are a match for your product, many are happy to buy a few units to try them out. Sales is a form of marketing too and relatively cheap.

    You can forget about facebook and google ads until you can afford hiring someone who can run them and have a real marketing budget to work with.
  • BelassiBelassi Member, PCF student
    edited July 9
    Make a truly great product and tell its story. You cannot compete on price so do not try. Yesterday in my new house I had a fumigation company come. The guy says, "British, eh? Not many of you here. Say ... you wouldn't be the British guy who makes the great coffee shampoo?"
    It turned out, he is one of our customers. I gave him a free bottle and he discounted my bill!
    Cosmetic Brand Creation. Concept to name to IMPI search to logo and brand registration. In-house graphic design inc. Pantone specs. Cosmetic label and box design & graphics.
  • MarkBroussardMarkBroussard Member, Professional Chemist
    Your best approach with a new line is to target a niche market with a superior product with some unique ingredients or ingredient combinations that fulfills a need and the potential consumers are easily targeted through various channels ... Baby & Mommie Care Products, Acne, Eczema, Rosacea, Hair Growth Products, etc. ... or appeal to a specific niche of consumers.

    Develop yet another moisturizer and you have a difficult time differentiating and standing apart from the competition.
    Chemist/Microbiologist formulating in the Organic & Naturals arena under ECOCert/Natural Products Assn/Whole Foods/National Organic Program guidelines focused skincare & haircare products. 

    See website for details www.desertinbloomcosmeticslab.com
  • Eclectic said:
    lushderma said:
    @Perry provides a great answer. In essence, identify your market and their problems and provide them with a solution. A colleague of mine was involved in the launch of Carbon Theory - an acne focused line whose core product is a soap bar with activated charcoal and tea tree oil. Hardly rocket science. The guy made test batches in his kitchen before finding a contract manufacturer who could make it in volume. He then pitched it to the Boots pharmacy chain who liked it (and its low price - circa £6) and put it in its Beauty Finds category in around 180 stores. About 1 in 20 products will flourish after being tested like this. Carbon Theory did and they are now one of the best selling products in this acne category. They are also rolling out to the US via Ulta. Didn't require masses of capital or fancy ingredients. Just a well thought out and targeted product and some luck (as with all things!) with initial distribution. 
    @lushderma - I know this topic is over two weeks old now, but I've been meaning to come back and post a follow up question to your story:

    How was this person able to bring this product to the market without it being classed as a "drug" by the FDA? Or was it? If so, the cost of passing all the testing and regulation to sell a drug would be well outside the $10k budget mentioned in the original post. What was the budget to originally launch this product?
    Hi @Eclectic. The product was launched in the UK and quickly attracted some venture type funding. I don't know what the initial launch budget was but I imagine it was relatively modest. The US launch came about a year later and I expect the FDA costs etc you mention were met by the aforementioned funding. So the initial UK launch could have been done within the $10k budget but then things scaled rapidly from there. 
  • ZinkZink Member
    Acne is too broad, you'd have to make a product that appeals to women of a certain age group with fungal acne specifically. 
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