Why Changing Consumer Behavior Is About to Cause Massive Upheaval In The Cosmetics Industry
I am the founder of a cosmetics startup called Stowaway. We manufacture and sell direct to our customers “right-sized” cosmetics. Stowaway is half of the size and half of the price of prestige cosmetics. Why? Because 75% of women don’t finish their makeup, not just before it expires, but at all. Cumbersome makeup we can’t finish weighs down our purses and empties our wallets. Our “right-sized” cosmetics are the sizes we should have been using all along. Because when was the last time you finished a lipstick?
So if these were the right sizes, why was no one producing them? Well, 70% of the industry is consolidated into 10 conglomerates that are so entrenched in their wholesale to retail business models they don’t have to bother with changing their 1950s style business practices and product assortments. L’Oreal is trading at a 28 P/E ratio and has a 82B market cap. They can’t maneuver a ship that big in the quarter to quarter short term bus & have little incentive to do so.
But the cosmetics industry is standing on the edge of a market shift and they don’t even realize it.
We are in a time upheaval in the lives of women with radical changes. And with it a massive industry worth 60B plus in the US alone is going to face some uncomfortable truths about their long term business plans and how they need to change.
“A radical upheaval, a national reckoning with massive social and political implications… (is happening) across classes, and races, we are seeing a wholesale revision of what female life might entail. We are living through the invention of independent female adulthood as a norm, not an aberration, and the creation of an entirely new population: adult women who are no longer economically, socially, sexually, or reproductively dependent on or defined by the men they marry.” Rebecca Traister New York Magazine
When people (say for instance male venture capitalists) ask me about Stowaway, I often get questions like “have you done any market validation” because is there actually a market for “smaller makeup” we just aren’t convinced of the TAM (that’s VC speak for total addressable market) at which point I say well it’s not a new market in cosmetics. It is where the ENTIRE cosmetics market is HEADED.
Past obvious but ultimately unhelpful “cosmetics is a huge market,” I think it’s important to recognize a that a series of massive market directional shifts are driving the adoption of different lifestyles. And these lifestyles are making the need for right-sizing a consumer desire which will ultimately become a consumer necessity in very short order.
My favorite thought on this topic as always been the “market wins” theory. When a great team meets a lousy market, market wins. When a lousy team meets a great market, market wins.When a great team meets a great market, something special happens. And something special is happening in cosmetics right now with Stowaway.
So let’s talk a little bit about where the market is headed for this kind because I think it’s interesting for anyone that cares about the lives of women, our independence, what our lives will look like in the future and in the words of Cindy Gallop just how much money there is to be made in taking women seriously.
A more accurate framing of what we are doing at Stowaway is simply that we are ahead of where the wider market of consumer demand is headed because there is no a separate market for “portable cosmetics”, or “half size” or right-size or “smaller makeup” (depending on your prefered naming convention) but rather this is where the winds are blowing for everyone. This will be the ENTIRE industry within a 10–15 years.
The expectations of what the cosmetics industry will have to provide in order to win consumers and growth in the future is shifting. Fast. And the market ALWAYS wins. The fact that we at Stowaway are also a great team with a great product, well, you know how that ends. So let’s look at some facts and helpful data points.
- Women’s Role In The Workplace Has Shifted Dramatically: See Pew study on expectations of workforce changes with tidbits like millennial women aspire to great responsibility (grooming, presentation & being polished is a necessary part of advancement for women) and each new group of young women entering the workforce over the past 30 years has started out at a higher average hourly wage relative to men (yay disposable income we spend to further our goals)
- We’ve Put Enormous Pressure On The American Family and It’s Structures: 50% of working mothers find it more challenging to be in the workplace look for and desire tools to make it easier. Simpler cosmetics is part of that toolkit of the working mom.
- We’ve Seen A Huge Shift In Millennial’s Workforce Expectations and Their Overall Life Experience Expectations: 40% of the workforce is a millennial and they have a lot less loyalty to one workplace, like freelance work (that purse goes with them), and prefer for more experience growth driven opportunities. Various psychological studies are showing that all people — not just millennials — are happier when their money is spent on living, rather than on having. Which means tools to help them experience more and own less are crucial. Further, Mintel’s 2015 American Lifestyles report projects that over the next five years, total spending will grow by nearly 22%, with the so‐called “non‐essential” categories, including vacations and dining out, expected to see the greatest gains. And women wear carry & wear makeup during those experiences (see growth of festivals and those girls sure aren’t going bare faced).
- We Shop In Different Places As Seen Via The Increase in Travel Retailing: Sales at airports alone are expected to grow by 73% from 2013 to 2019, according to consultancy Verdict Retail (The Economist). Perfume and cosmetics represent the biggest product category for travel retail with 28% of the market. Neat data point right?
- Women Are Now HALF Of Business Travelers: Research indicates that women are the fastest growing market of business travellers in the United States, and account for nearly half of all business travellers and business travel is expected to grow by 7% every year for the next three. So that’s neat.
- Overall Market Trend Towards Minimalism: As our world continues to grow in complexity, there is far greater personal demand for many of the benefits that minimalism offers with less stress, less distraction, more freedom, and more time (and you can’t buy time). And in a vertical where 75% of the consumers don’t finish the product the appeal of a better value oriented product that is just as good as the expensive products you don’t finish is clear.
Sometimes you have to get out of your own head and look at the big picture. There are no new markets. There are where the market winds are blowing. And market validation for a change in the cosmetics business is clear given all of the pressures from massive demographic shifts in women’s lives to pressures from adjacent industries and trends in consumption habits that already in motion and in some cases those that have already made this this shift.
We live in a mobile first (which means women in motion) convenience driven (things fit my life not the other way) and the rate of change is accelerating even faster than we can anticipate.
And the cool thing is at Stowaway we see these macro changes impacting the micro validation already. We see it in not just in howwell our products have been received from our current customer response (10s across the board with thank you emails daily from happy customers telling their friends), to the complete adoration in the press of what we are doing and of course winning major industry awards (Beauty Packaging’s Company of the Year is no small thing).
Stowaway has a bit of a nautical flavor so I will say the winds are shifting. Are you smart enough to let them blow into your sails?