Glossier, the rise of direct-to-consumer, and new-age branding
We’re all familiar with the traditional allures of well-branded products and services; consider the eloquence of Pierce Brosnan choosing between four white Brioni shirts as James Bond in the World is Not Enough or Titleist’s registered trademark as the “#1 ball in golf.” A Brioni suit could hold its own in a challenge of value and quality; however, it could be said that spending $50 on Titleist’s golf balls instead of $12 on Kirkland Signature (Costco’s store brand) golf balls is irrational brand loyalty.
You’ll find Brioni’s suits at your local Neiman Marcus or Saks’ and Costco probably shelves some warehouse-priced Titleist balls right next to their Kirkland ones. What you’ll have a tough time finding at resellers like Costco, Saks’, or even Amazon is the next wave of consumer products: those focused on a direct-to-consumer (DTC) relationship, or products from a recent addition to the club of unicorns (privately held companies valued at or over $1B), Glossier. Glossier joins a string of startups that emulate the theatricality and passion of Silicon Valley tech entrepreneurship by using a direct-to-consumer supply chain, including Away (suitcases), Warby Parker (eyeglasses), Everlane (clothing). Most claim to add value by providing the quality of high-end brands without the markup of their traditional retail-based counterparts. (See Below)
What stands between Away and a more traditional high-end suitcaser like Tumi or Everlane and cashmere-stalwart Loro Piana? A new type of branding fuels these companies’ stray from retailers. A branding that attracts younger consumers with influencer campaigns, attractive social media presences (especially Instagram), and clean, flawless e-commerce websites. They target consumers that are looking beyond traditional brands to serve their needs and trust that newer brands’ quality and DTC pricing warrant their relatively high prices (relative to other lesser-known/cheaper brand names, i.e., American Tourister). These shoppers frequently make purchases based more on recommendations from friends and favored influencers; for some, merely an attractive website with a smooth purchase experience can make the sale.
When Glossier became a unicorn I asked my friends about what drove them to purchase from the company and why they claimed to “love” the brand; I really hoped the answer would be high quality for a low or reasonable price. From their qualitative accounts, Glossier’s quality was not worth writing home about, certainly when pitted against alternatives from a traditional higher-end retailer like Sephora. I think their ability to disrupt the beauty industry and compete with stalwarts like Sephora and Ulta is rooted in their revolutionary branding and marketing process.
Let’s first examine how Sephora resells their wares. Assume the cost of production of a unit of lipstick is $4, and that this Acme brand lipstick is sold on their brand website at a 75% markup for $16. A higher-end retailer like Sephora purchases from the brand at 50% to 65% of retail, or around $5.60 to $8. Add the display unit fixtures ($170 per lipstick, that brands are responsible for), free samples to sales associates ($80), samples for customers ($25 at cost), a dedicated retail person ($48,000 for all products, approximately $600 per product) and before long the brand is shelling out nearly $900 in additional costs for a single lipstick product at a single store, not including the loss of retail value for the testers or associate compliments.
Clearly, Glossier has a massive monetary advantage over the traditional approach; this advantage allows it to invest in its intricate marketing system. The best way to characterize their approach is provided by CEO Emily Weiss when discussing how a hypothetical 22-year old girl in the Chicago suburbs hears about the company for the first time: “I’d much rather have her hear about it from her friend than in a Google remnant ad or something like that,” Weiss says. “If it takes her a little bit longer, I think that’s fine because she’s ultimately going to hear about Milky Jelly cleanser from her friend, buy it, and be using it for years.” Racked did a fascinating piece on Glossier’s marketing strategy, most of which revolves around the fact that the brand should sell itself: “[a] no-marketing marketing, no-commerce commerce approach, the marketing is there, but it doesn’t feel like it.” Glossier began by heavily investing in “reps” (influencers), who advocate for the products and receive up to 30% of the sale, but has been cutting back as growth has skyrocketed and it has established its foothold in the market.
The beauty industry is unique in its aversion to new brands and disruption, and stonewalls those that don’t seek the support of its gatekeepers like Sephora and Ulta — like fashion, there’s not much value left to add — but customer perception is an opportunity that is eternal. Not only does Glossier innovate in its customer perception, but also in its process of reaching consumers — only through someone they follow or know. An interesting result of this is nearly no male awareness of the brand! Before this piece even I was aware of Estée Lauder and Revlon, due to their advertisements (a result of wasted money), but most men needn’t be aware of makeup brands, and Glossier’s system makes sure to serve a direct need instead of telling everyone they exist.
