How the Internet Disrupted the Beauty Industry

Could you paint a bit of a picture of what the beauty industry was like ten years ago and the key structural changes that you've seen over that decade.

There's been a major upheaval in the last decade. Ten years ago, the department stores were still holding court, and Sephora had started to make inroads. Nevertheless, Sephora weren't able to get any other big legacy brands to sell to them. So they took the indie route. Today, they are the powerhouse, in terms of the makeup category and taking on new and independent beauty brands, from the incubator stage through unicorn type exit. However, ten years ago, the bulk of the business was still controlled by department stores. Media advertising was very traditional; everybody was still using print. Conde Nast and Hearst were the two prominent publishers in the magazines, as well as TV advertising for fragrance.

Then, over the last ten years, there has been the onslaught of Instagram, Pinterest, and other social media, as well as influencers who started out with a thousand followers and ended up some of them have one million, two million, even 100 million. Reviews by these influencers became a very crucial ingredient, in terms of how the consumer was choosing for a product but also using influencers’ YouTube channels to learn more about beauty. Therefore, traditional media and traditional department store distribution were both flipped on their heads over the last ten years.

So, the internet revolutionized the CPG story, where big brands, with big advertising budgets distributed by one channel to everybody and then reinforce that through more R&D, thus monetizing more products. The internet leveled the playing field enabled smaller companies to target specific audiences via Instagram and different channels online.

Sure. If we look at the distribution channel with department stores, the brands controlled their image in the department stores because everyone had or were building their mausoleums and controlling beauty advisors. So if you went into a department store to shop at the Dior counter, Chanel counter, or Lauder counter, you were talking directly to a beauty advisor that had been hired and trained by the store. So they were dedicated. The message was being pushed to the consumer. It wasn't like a conversation; it was like, this is what you need, this is what you're going to buy, this is how you're going to buy it, and you're going to buy what I tell you to buy.

That's not the way it is today, at all. Via Instagram and YouTube, the consumer will follow several different influencers and make up her own mind. Thus, you've got to push with the younger consumers saying, I don't need to look perfect, I want to look like me, I want to be accepted for who I am, I don't want to look like the latest celebrity, I want to be authentic and natural, and I want people to accept me for what I look like, no matter what. It’s a big change.