The beauty industry is worth some $ 500 million a year and the Covid-19 pandemic has caused the proportion of online sales to rise sharply. Today, a London-based beauty startup is announcing a major fundraiser in hopes of reaping the rewards of this trend with a direct-to-consumer online storefront selling own-branded products.
Beauty Pie, which describes itself as a club of high-end beauty and wellness buyers – any consumer in the UK or US can buy direct, but when joining the buying club for a month (Â£ 10 / $ 15) or year (Â£ 59 / $ 59), big item discounts are launched – raised $ 100million, funding he will use to continue to grow into a set wider of categories and to target users with a wider set of sales channels and more infrastructure (warehouses, more pop-up retail) to source and sell its ‘core’ style products, characterized by clean and simple packaging, no frills, focused on the product inside.
âI don’t believe in business models where you spend tons on marketing,â Canadian founder and CEO Marcia Kilgore said in an interview. âSo we want to focus funding on opening new warehouses, moving into new territories and maybe a few pop-ups. We are Sephora and Costco.
The funding – a Series B – is co-led by Index Ventures and Insight Partners, with participation from previous backers Balderton Capital, General Catalyst and Latitude VC (a sister fund of the London-based seed investor LocalGlobe). Beauty Pie, founded in 2016, has raised $ 170 million to date. He does not disclose his valuation, but from what we understand, the PitchBook estimate of $ 1.33 billion is not accurate (close sources tell us the valuation is currently below $ 1 billion) .
Beauty products are a very discretionary purchase for many, and this is even more so for the high end of this market – expensive and luxury brands. Skin care, cosmetics, hair products and the rest are not in the same category of essentials as food, and if you absolutely need a product, there are always some really cheap alternatives.
However, the last year and a half of Covid-19 has had an interesting impact on this relationship. Many consumers saw the opportunities to go out and spend money on drastically reduced activities, and at the same time, they looked for ways to indulge themselves in these complicated times. Combining this with the fact that non-essential stores have been forced to close, or have seen their footfall drastically reduced, in many parts of the world, this has resulted in a huge boost in online shopping for products. beauty products, in particular beauty products. Indulging yourself has become a full-fledged beauty and well-being business strategy.
The key to Beauty Pie’s model is that she sources and buys premium products from a range of producers and sells them under her own private label. Much like Amazon in its own private label efforts and how it combines that with its own Prime buying club model, it allows Beauty Pie to sell products that rival the best in the market, while undermining those top brands. range in the process. It indicates that the mark-ups typical of brands are 10 times higher than the cost of manufacturing a product.
By offering products on two levels – one for those outside the club and one for those who pay a premium to be part of the club – it also means that the startup always makes a margin on the items it sells. The very simple approach is also reflected in the products themselves, which place more emphasis on what is inside the package than what it looks like on the outside, with the implication being that Beauty Pie focuses more on substance than aesthetics (ironic given that the end of the game is all about making us all look and feel better).
The model has so far been a success for the company, even with the first stumbles it and others have faced at the start of the pandemic. For Beauty Pie, when Covid-19 started it cut ad spend, Kilgore said, because he could see supply issues emerging, and he did so to handle the amount of demand he was going to have. receive, so that customers will not come back disappointed. This quickly recovered and the company now offers 300 to 400 references.
Kilgore says its customer retention rates are currently higher than Spotify and Netflix and twenty times higher than other D2C beauty companies, in part because of the buyer’s club model. Membership has more than doubled over the past year, with over 100% revenue growth, and the business also became profitable last year for the first time.
âAfter only 48 months of operation, Beauty Tartthe annual and monthly subscriber numbers are incredible, âDanny Rimer, partner at Index Ventures, wrote last December (possibly a blog post that subtly kicked off the fundraiser we’re writing about today). âAt Index, we’ve never seen such customer loyalty before. “
It also helps that Kilgore isn’t a first-time founder. She is also the force behind footwear brand Fitflop, Soap and Glory, and other clothing and beauty companies.
âMarcia has spent decades building businesses that genuinely treat customers the way she’d like to be treated, and Beauty Pie is the epitome of that philosophy. With its transformative value chain and membership model, [it] allows members to have their pie and eat it too: the best products at the best prices, âsaid Rebecca Liu, director at Insight Partners, in a statement.