Interview Transcript

Why is beauty, as a category, so innovative?

Because girls love makeup, and they always want something new. That sounds like a really simple answer. But beauty products are also accessible and affordable. It's like a small treat; you can treat yourself. Even in times of recession, you can treat yourself with a $15 to $20 lipstick versus you maybe can't buy that $200 pair of shoes that you covet. Beauty is a confidence builder. Women love to play with makeup. It's creative and artistic. Many women believe that they look better with makeup on than with makeup off. Looking good makes you feel much more confident. That's what makes beauty go around and so innovative. Always having some new product form or something new to try is very important to bring the customer to the beauty counter to actually touch, play, and try, especially in makeup, where they do want to touch, play, and try makeup. It's hard to buy online because of the shades, you don't know what the coverage is or what that shade is going to look like on your skin. So, in makeup, it's really important to drive traffic to the stores, and innovation drives traffic.

So it's demand-driven, but also you've got the supply side where the gross margins of the products are very high and therefore fairly cheap to make. So you can meet the demand, in terms of new products and testing new products.

Yes. Gross margins in beauty are fairly consistent from brand to brand. The gross margins are not higher on a prestige product, because a prestige product is using super high-quality ingredients. Also, many companies are adding skincare-like ingredients to their makeup because that's what the customer is demanding. Also, you now hear a lot of buzz about clean beauty. Nobody knows what that is. Sephora has their interpretation. Macy's now has their interpretation. Ulta also has their interpretation. None of them match. There's no regulation around what is clean and what isn't clean. It’s not regulated, so it’s ingredient’s stories or chemophobia; I don't know what to call it because there are many ingredients that people talk about being bad when there's no scientific evidence behind it. Nevertheless, it does drive up the cost of formulating new products, without some of these things that the fear mongers are saying are bad for you, even when there's no ban on that particular ingredient.

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