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By: Jessica Dudley (group leader), Heather Cunningham (co-leader), Natalia Espejo, Jennifer Lacenera and Dudley Williams
Posted: June 4, 2014
- PDF of "Accessible Beauty" (PDF 2.17 MB)
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Progressive Rationalists will understand their individual impact on the world. Consumers will not want to stop using beauty products, but they will want to do so with less environmental and social impact. In order to address this need, the beauty industry should provide clarity around three key operational business aspects: sustainability, profit, and social responsibility.
Everlane, an online clothing retailer, has made clarity a priority, providing radical transparency to the consumer. In 2012, the brand shocked the fashion industry by providing a simplified cost breakdown of a designer tee shirt. They then compared this cost with a typical designer’s suggested retail price, revealing that the average designer markup was more than seven times the manufacturing cost.
Everlane typically doubles the cost of creating a garment and takes pride in providing complete transparency on every product it creates. Everlane CEO Michael Preysman has shown the industry that “sometimes making 100% profit is enough” (Soller, 2013).
According to Jessica Blotter of Fast Company, “If your brand story does not authentically and meaningfully contribute to the well-being of society or the environment, your brand will not be viewed as important.” To meet the needs of the Progressive Rationalist, the beauty industry must not only continually improve upon sustainability efforts and social responsibility, but also do so in an authentic manner and effectively communicate this to consumers. Effective communication will be extremely important as brands will need to own their story, otherwise they will leave themselves open to brands such as Everlane, who will highlight any lack of clarity.
Brands that fulfill the higher order needs of convenience and clarity must not ignore the importance of price point. Progressive Rationalists may be willing to pay a premium when certain needs are addressed, but the amount of disposable income will remain finite. If consumers trade up by paying a premium for one product, they will want to balance that by trading down on another product or service. Looking beyond the beauty industry, brands such as Warby Parker and Harry’s have proactively addressed this issue, and, as a result have drastically disrupted their respective industries.
Warby Parker entered the eyeglass industry with the introduction of their innovative online direct to consumer distribution model. To purchase glasses, consumers choose up to five frames online. Samples are then shipped to the consumer’s home free of charge. The consumer has five days to determine which pair they would like. Once they decide, they order directly online with their prescription and return the samples at no cost. By shipping samples to individuals in their homes, Warby Parker eliminates the need of a physical retail showroom. Without costly brick and mortar locations across the country, they are able to offer high quality frames for just $95 and donate a pair of glasses to someone in need.
Warby Parker is a brand that is offering the price point of a private label but the quality and design of a high-end brand. Competitors such as Lens Crafters have been forced to retaliate by creating their own $99 offerings in order to compete.
Warby Parker Co-Founder Jeff Raider partnered with Andy Katz-Mayfield to create Harry’s, applying a similar online, direct-to-consumer model within the razor industry. Harry’s has taken the notion of cheap razors and elevated it to include high quality, design, and style. Their tagline of “respecting the face and wallet, since like…right now” is executed through accessibly priced offerings that are half the price of their competition. These brands were introduced by outsiders who exploited the weaknesses of each industry’s stagnated distribution model. They created affordable products in creative ways by disregarding industry conventions. This is the same way innovative giant Apple changed the face of both the technology and music industry with its own accessible-distribution model.
In the beauty industry, private label is following a similar model and making significant inroads, recently becoming one of the fastest growing segments of the mass market. In 2013, private label skin care represented 10% of the overall mass skin care market, growing 4.4% from the prior year versus market growth of just 1.8%. Furthermore, private label color cosmetics, while small in absolute value, saw an astounding 71% growth (IRI, 2013). Within prestige beauty, private labels such as Sephora are creating changes to the way prestige consumers shop in luxury with their upcoming offerings of innovative single-use products, including sheet masks, nail polish, and eyeliner. These small, affordable products provide an easy way for the consumer to test products without making a large monetary investment. Traditional wholesalers have historically been unable to offer profitable products in small sizes due to prohibitively high production costs. As direct to consumer retailers, private labels are able to recognize 100% of retail sales revenue, typically 40% more than what wholesaler brands receive.
In order to compete with these private label offerings, brands will need to make strategic shifts in their business models. An immediate and tactical solution that will protect market share and enable brands to compete in this arena is to partner with retailers and build their own private label options. Established brands will provide manufacturing and supply chain expertise to the retail partner, sharing selling expenses in order to alleviate financial constraints. The Progressive Rationalist is continuously weighing her needs, trading up and down based on value. By offering a private label option, companies will enable consumers to trade up and down to their products across all price points and distribution channels seamlessly.
Global and domestic shifts in economics, changes in demographics, and rapidly evolving technological advancements will place the beauty consumer of 2030 in a vastly different reality than the one that brand marketers are familiar with today. To evolve with the Progressive Rationalist, brands must challenge industry conventions, just as Subway, Everlane, and Warby Parker have done.
Brands that leverage the Progressive Consumption Equation will connect with Progressive Rationalists and speak to their higher order needs. Hyper Accessibility allows brands to meet the consumer locally, innovate outside of the boardroom, and provide a new level of convenience. Providing radical transparency will give consumers clarity around brand sustainability, price points, and social commitments, minimizing the risk of competitive spin. Finally, brands that enter private label will position themselves to be available when the consumer trades up and trades down.
Progressive Rationalists will no longer invest in brands or products alone. The path to purchase has changed and brands must incorporate higher order needs into their business strategy in order to create the value that the consumer demands.