Glamsquad to Glossier … new business models are rapidly disrupting the world of beauty

May 25, 2017

The world of beauty is being transformed rapidly. New consumers, and new aspirations of existing consumers through their experiences in other sectors, have fuelled the opportunities to embrace the potential of digital platforms, new business models, and a radical rethink of products, devices and services.

Look at the cult success of Dollar Shave Club with 3 million subscribers. Millennial consumers have different priorities and new heroes. Look at the demand for Urban Decay amongst fast-grown-up teens. Brands are no longer built through advertising, but through the peer to peer influence of Instagrammers and vloggers. Look at Michelle Phan’s weekly Youtube audience, and her Ipsy brand. Trust and influence is not about advertising dollars and retail counters anymore, but is built socially and rapidly.

Investment analysts recently reviewed the beauty sector, clustering it into the following categories, and highlighting the starts-ups, fast growth brands, and new retail platforms that are attracting most interest, and shaping the industry:

  • Beauty e-commerce platforms – Brazil-based BelezaNaWeb ($40.7M in disclosed funding) and other startups provide e-commerce platforms focused solely on beauty and cosmetics, selling selections of products from different brands.
  • Booking platforms – Startups such as SF-based StyleSeat, which raised $40.67M from Lightspeed Venture Partners and others, provide Yelp-type platforms to browse and instantly book beauty appointments.
  • Brick-and-mortar salons – These startups have launched new brick-and-mortar salon chains. Drybar, which offers a limited menu of hair blowout options in its 70+ locations, leads in funding with over $97M raised.
  • Fragrance – Phlur ($4.5M) and other startups have launched new fragrance brands.
  • Hair care – These startups have launched hair care brands, including direct-to-consumer hair coloring startups Madison Reed ($45M) and eSalon ($22.3M), and customized shampoo/conditioner startup Function of Beauty ($9.6M).
  • Men’s shaving & grooming – This segment boasts the largest acquisition to date in the sector: Dollar Shave Club, which was acquired by Unilever in 2016 for $1B. Among private shaving startups today, razor brand Harry’s leads in funding with $287.1M. Walker & Co., which sells direct-to-consumer razors geared toward people of color, has raised $33.3M.
  • Multi-category cosmetics – This segment contains startups creating new makeup & cosmetic brands, and offering a range of products including foundation, mascara, lipstick, and more. Notable in the segment, Glossier ($35.4M) pairs its cosmetics brand with an online media platform.
  • On-demand beauty – Startups such as GlamSquad ($25.5M) send stylists directly to people’s homes or offices for makeovers, hair styling, manicures, etc.
  • Salon & stylist aids – These startups, such as Paris-based FlexyBeauty, provide software for salon management or to help individual stylists learn and promote themselves.
  • Skin care – Many startups are using all-natural or plant-based ingredients in new skin care products. For example, SF-based Yes To($17.5M) offers lines based on tomatoes, carrots, and other plants, while TULA, which recently raised $8.46M from L Catterton, has launched a line of probiotic skin care products.
  • Subscription boxes – Led in funding by Ipsy ($103.4M) and Birchbox ($86.9M), these startups focus on subscription boxes with curated selections of numerous brands’ products. Scentbird offers sample-sized perfumes. We Are Onyx focuses on women of color.

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In every industry, new start-ups and established brands are turning to new business models in order to engage new consumers, to find new revenue streams, and to reinvent themselves in a way that is disruptive and distinctive, profitable and practical.

There are an infinite range of business models to explore. Often it is practical to understand what works (often with the same consumers!) in other sectors, and then consider how they can be adopted and adapted for your own sector. Whilst new business models have become common in areas such as banking, entertainment and retail, they are new to beauty. Therefore there are huge opportunities to do it first, to do it better, in a way that “changes the game” to your advantage!

In my business school executive program on new business models we explore in detail what makes the different business models work, and how to apply them appropriately. Typically they embrace a combination of physical and digital business models, transactional and enduring revenue streams, partnering and licensing, personalisation and influencing, relationship and community building. In food and drink think about Beer52 and Graze, Ava Wines and Nespresso. In media and entertainment think about Skype and Instagram, Netflix and Spotify. In hotels and travel think about Airbnb and BeMyGuest, Surfair and Emirates. In retail and luxury think about Inditex and Farfetch, Burberry and 1Atelier. In cars and taxis think about Tesla and Nutonomy, Uber and Zipcars. And on, and on.

Of course, a business model is not the total solution. It starts with understanding who is the target consumer, new and or existing, and then what drives and inspires them, typically with some form of design thinking to find relevant insights. From this we develop appropriate and creative value propositions, from which the business model can then be shaped as the method of delivery.

 

One comment on “Glamsquad to Glossier … new business models are rapidly disrupting the world of beauty”

  • Daniel Han says:

    Hi.
    I love your writing.
    Is it possible for you to send a picture of the 4 flow chart for uber, nespresso, airbnb and Tesla? Or is it possible to post a more clear picture of it? The picture is very blurry and I really want to read what you have written on the chart.

    I look forward to hearing from you.

    Thank you

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