Can Traditional Beauty Companies Compete With Disruptors Dominating Instagram?

New brands see explosive growth by being on social platforms natively

Illustration of people hitting "like" buttons on smartphones
Print accounts for less than 2 percent of the average American’s daily time spent with media, digital for nearly half. Illustration: istockphoto

In the past few years, mobile has risen to become the most dominant form of media consumption. With this change in consumer behavior, platforms like Google, Facebook and Instagram have grown into virtual monopolies. This shift has not only affected consumers, it has also changed retail and the way smart marketers approach commerce. Nowhere is this more apparent than in the beauty category.

Long dominated by well-established legacy brands, a new phenomenon has risen—direct-to-consumer indie beauty brands. And their secret weapon is mastering all things digital.

Let’s examine why these new beauty disruptors are growing so quickly when traditional beauty companies are all seeing soft to negative year-over-year organic sales growth.

It’s clear that Instagram has replaced the magazine rack as the dominant platform for discovering, engaging with and buying beauty products.

The power of the platform

It’s clear that Instagram has replaced the magazine rack as the dominant platform for discovering, engaging with and buying beauty products.

For example, Kylie Cosmetics has done $420 million in retail sales in just 18 months, and its most dominant vehicle of communication is Instagram. For perspective, according to WWD, the Estée Lauder Cos. Inc.-owned Tom Ford Beauty is said to have reached revenue of $500 million after a decade. Bobbi Brown took 25 years to reach the billion-dollar mark, and L’Oréal’s Lancôme hit the milestone in 2015 after 80 years in business. Kylie Cosmetics is on track to see a 25 percent increase in sales this year alone, and the brand is expected to become beauty’s next billion-dollar company by 2022.

Geoff Schiller

If you think that Kylie’s success as a DTC Instagram brand is an anomaly driven by the power of the Kardashian clan and their starpower, think again. Anastasia Beverly Hills has 13 million Instagram followers, it does not advertise at all in print, and it saw online sales grow by 150 percent in 2016. ColourPop, Karity, Tarte, Too-Faced and Becca all focus their efforts on social marketing versus print.

In other words, there is a direct correlation with the mega success of upstarts not advertising in magazines (and maintaining a laser-focus on their robust digital presence) to the stagnation/negative growth of traditional beauty companies that are continuing to bet on print.

How traditional beauty companies can win

It starts with embracing the future, not the past. Print accounts for less than 2 percent of the average American’s daily time spent with media, whereas digital accounts for nearly 50 percent, according to eMarketer. And a recent Kleiner Perkins Internet Trends report found that print accounts for 12 percent of ad spend while only representing 4 percent of total time spent—a 3x misalignment of spending.

Beauty category investment in print is mostly driven by celebrity and the allure of the magazine cover, yet celebrities’ ability to drive product purchase is decreasing as influencers’ sway is rising. According to Tribe Dynamics, 80 percent of the top 15 beauty brand collaborations for the first half of the year were co-ventures with influencers.

Over 70 percent of sales growth in beauty products is driven by younger consumers and social media influencers, according to Karen Grant, analyst at NPD Group. Simply put: capture the hearts and minds of millennials and you’ll win. But how?

First, understand how younger consumers discover and buy beauty, then build a strategy

Millennial consumers want products that feel special and unique. More is not better—lean on curation. When Kylie’s Lip Kits launched, only 15,000 units were released. Patrick Starrr’s collaboration with MAC will feature 12 items. Millennial consumers trust individual products versus entire lines. Whereas makeup bags used to be devoted to products from one brand, now they include hero products from many different brands.

Further, millennial consumers want personalization and diversity. Rihanna’s Fenty Beauty launched with 40 foundation shades to cover every skin tone. Fenty became the biggest beauty brand on Facebook, Twitter and YouTube, generating $72 million in earned media value in the first month alone, resulting in red-hot sales.

Instagram is now the dominant platform for beauty influencers

If YouTube ushered in the first wave of beauty influencers, Instagram is ushering in the second, potentially larger swell. A recent study showed that 75 percent of Instagram users have had their purchase decisions impacted by these influencers. PopSugar has developed a proprietary data tool, RetailRank, to track this engagement, and with it, brands can now understand which influencers, retailers and products are driving the most earned media for their brands on Instagram. Knowledge is power, and being part of the Instagram conversation is crucial. Avoid it at your own peril.

In summary, it’s time for traditional beauty companies to make a material shift into digital, social-first strategies via Instagram and in partnership with digital publishers who understand the cadence of social media marketing on the Instagram platform. The winning formula is Instagram plus smart digital publishers equals double-digit organic sales growth.

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This story first appeared in the March 5, 2018, issue of Adweek magazine. Click here to subscribe.

Geoff Schiller is CRO of PopSugar.