Growth hack via the underserved — male cosmetics: D2C (Direct 2 Consumer) transformation for an Original Equipment Manufacturer (OEM)

tl;dr — Executive Summary

Beauty Care (BC), a family-owned cosmetics manufacturer, adeptly transitioned from its traditional role as an Original Equipment Manufacturer (OEM) to a successful player in the direct-to-consumer male cosmetics market. This transformation was not a mere leap of faith but a calculated move, underpinned by rigorous market analysis and strategic experimentation to identify and exploit a gap in the market.

A shameless plug — this is a disruptive company owned by one of our alumni, check out our course — bit.ly/3rg4IAr

Challenge: The OEM Dilemma

• Driven by the brand owners: BC initially grappled with the limitations of being an OEM, struggling with marginal profits and a demanding client-driven market. BC is under huge pressure to constantly advance its technology and other competencies just to keep afloat, which basically means the need for continuous financial investment to be added.
• Cost to establish own brand: Suggested by many so called “marketing gurus” and consultants, BC contemplated the idea of launching its own brand as a strategy to avoid the competition. However, this strategy brought its own set of challenges, most notably the massive financial investment required to build the new brand awareness and reputation.

Opportunities in Spotting the Blue Ocean: An Unconventional Market Segment

In-depth Market Research: BC’s decision to target the male cosmetics market was based on comprehensive research, identifying it as an underserved yet burgeoning sector projected to reach $166 billion in 2022.

• Rediscovery of Focused Target Audience: The company found a niche in catering to younger adults, particularly tech professionals, who showed a 40% interest in gender-neutral and personalised beauty products. But more interestingly, the “user group” of such products, are ofter NOT the ones who made the purchase decision.
• Change of Channels: Now knowing who actually “buy” the product, BC decided to leverage corporations as their sales channel, envisioning the products as employee benefits package.

Transformation Insights: The D2C Approach

• Innovative Sales Strategy: BC opted for a unique initla sales channel, integrating their products into corporate employee benefits, starting with a partnership with a major tech company, let’s call it ‘Techy Corp’ for anonymity — with an astonishing initial order of over 100,000 packages.
• D2C: Instead of following up with the “users”, BC followed up with the hidden “buyer” group — the corporates’ employment welfare department and/or the “WAGs” behind the scene for continous D2C sales.
• Orders from Techy skyrocketed BC’s business, led them to approach Techy’s competitors with similar offers.

Transformation Non-Stop: Riding the COVID Wave

While COVID-19 disrupted may industries negatively, personal hygiene has become one of the most beneficial ones due to the pandemic. With a large customers base for their skin care products, BC advanced rapidly in introducing a range of unique products — a hand cream with a small amount of antibacterial features, functioned as a sanitiser.

This made BC’s products mandatory on every desk in may of their corporate clients. Subsequently penetrated into the families and friends of corporate employees.

Impact and Results

• Shift from OEM to Collaborative Branding: BC’s transition was marked by a calculated risk-taking approach, focusing on a specific market segment and redefining their business model.
• New Business Model: The initial success with Techy paved the way for a very different business model from what BC originally planned: new customer segmentation, new markets; new channels; new offerings, new USPs. BC reinvent themselves, not only to survive and but thrive in a highly competitive industry.

Key Takeaways

• Identifying Market Opportunities: BC’s journey illustrates the importance of thorough market research and identifying gaps in competitive markets.
• Customer-Centric Innovation: Their transformation was driven by a deep understanding of value proposition, customer needs, leading to tailored product solutions.
• Strategic Experimentation: BC’s case is a prime example of how rigorous analysis and strategic experimentation can lead to groundbreaking success in niche markets.

The Role of CBIT

The Centre for Business and Industry Transformation (CBIT) played a critical role in fostering such innovative business transformations. Through its Venture Builder program, CBIT helped BC in understanding value propostion at co-creation context, and in the exchange context. CBIT further helped identifying unique market opportunities and guiding them towards pioneering business models as a sparring partner to build-measure-learn the new model together.

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