Entrepreneurship is a game of probabilities and it’s better to learn from other beauty founder’s mistakes and avoid the cost & time of making those mistakes yourself, that are likely to lead you to failure.
I will dissect the top 8 mistakes that indie beauty brand founders often make. Let’s dive in!
Table Of Contents
1. Mistake 1: Passion for solution vs. problem
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
- The dire consequence of this mistake
Example of a beauty brand
2. Mistake 2: Not Validating Growth Engines: Paid, Loyalty and Advocacy
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Example of a beauty brand
3. Mistake 3: Lack of Focus – Problem, Consumer, Products, Channel
Problem: Lack of clear understanding of the exact problem to solve
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Consumer: Spread too thin across a broad target set
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Products: Having too many products
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Channel: Being everywhere, in terms of media or sales
- Frequency
- Why is this a mistake?
- How to avoid this mistake
Example of a beauty brand
4. Mistake 4: Overemphasis on Competition and Larger Players
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Example of a Beauty Brand
5. Mistake 5: Lack of Focus on Margins and Profits
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Example of a Beauty Brand
6. Mistake 6: Frequent Promotions and Discounts
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Example of a Beauty Brand
7. Mistake 7: Going to Retail Too Early and Ill-Equipped, With No Strategy
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Example of a Beauty Brand
8. Mistake 8: Poor understandng of the importance of cashflow
- Frequency
- Why is this a mistake?
- How to avoid this mistake?
Example of a Beauty Brand
Summary
Mistake 1: Passion for Solution Vs. Problem
Frequency:
High
Understanding the problem in the minutest of details is usually the case with most indie beauty brands.
Why is this a mistake?
Suppose you are really passionate about the problem rather than married to a solution. In that case, you will go the extra length to understand the problem in as much detail as possible to create and then/iterate a solution that actually solves the core problem.
-Lack of Engagement: Process
- Engagement, beyond superficial interactions, is necessary to comprehend consumers thoroughly. Without proper engagement, brands blindly follow trends rather than get to the core of consumer issues to create substantial value for consumers.
-Absence of Genuine Desire to Improve Consumer Lives:
- You only become a brand once you seamlessly integrate into the consumer’s life, and that takes effort to understand and then evolve your solution.
-Rush to Launch
- Entrepreneurs are very action-oriented and gung ho about their solution so their mindset is all around “how to launch” rather than “perfecting the solution or how to grow”
How to avoid this mistake?
a. The key is to pick a problem that has personal significance and connects with you at a deeper level. It could be something that you’ve been frustrated with in your own life or a cause that aligns with your values or sense of identity. Beyond motivation, to keep going when it’s tough, personal experience can help develop an in-depth understanding of the problem.
b. Not conducting enough consumer research before creating your solution. This can take the form of detailed surveys, but in-depth 1:1 interviews are critical to getting to the core of the problem. I recommend at least 50 1:1 interviews, but ideally, this number should be 100. Remember to understand the problem in as much detail as possible to achieve the desired results and all the challenges to it, which can include the trial and adoption for frequent use.
The dire consequence of this mistake:
Starting with an MVP(Minimum Viable Product) and then frequent and a bit too many pivots, each of which will cost you dearly both in terms of expenses and revenue stall or decline, and you will never be able to build enough momentum to achieve the desired profitable growth.
This is where the lean startup approach can backfire esp. with businesses that aren’t tech. I would go further to say that even for tech or tech-based businesses, starting from an MVP without prior research can decrease the probability of success.
Example of a beauty brand
Most of the under-performing celebrity beauty brands like ProD.N.A by Paris Hilton fall in this category. Celebrity beauty brands that just try to encash fame rather than offering innovation to build the category further usually fail, since they lack the drive to innovate rather than maximise their celebrity status. Rihanna’s Fenty is the best-performing celebrity beauty brand ever as she offered inclusive shades to the under-served market, aligned with her image and values.
Mistake 2: Not Validating Growth Engines: Paid, Loyalty and Advocacy Engines
Frequency:
Very High
Why is this a mistake?
I knew a CXO of a big beauty/CPG firm and he only had one question for startup CPG/beauty brands. How are you going to market this? It means you need to think through your marketing funnel, simply put, how you will or how effectively you can acquire new consumers, achieve loyalty, and generate word of mouth for your beauty brand.
Remember, there is no business without profits; profits come via revenues, and the consumers pay. If you cannot consistently and cost-effectively acquire enough new consumers, retain enough of them, and get decent word of mouth(advocacy) to feed the funnel back, you will never have a sustainable venture.
Just like the previous mistake, this mistake is tied to your ultimate foe, TIME, and you have to respect and make it your ally.
Many founders underestimate the importance of consumer acquisition, often subscribing to the ‘build it, and they will come’ mentality. The next level of this mistake it acquiring at a significant loss expecting CLV to make it profitable in the long run. With hardly any barriers to entry for new beauty brands and an explosion of the indie beauty space, helped by beauty stakeholders like specialty beauty retailers and influencers who thrive on newness, CLV is a very dicey concept and will always be an inflated number, especially during the first 2-3 years as founders tend to be very optimistic about their ventures.
Most indie beauty brands have a loyalty % of around 20% and what I recommend is >45% if you want to be on the exponential growth curve or for creating a virtuous cycle of profitability to grow on your terms.
Again, advocacy is the ultimate test of your beauty brand’s projections as that’s free consumer acquisition. The less word of mouth, the more paid consumer acquisition you need to make.
How to avoid this mistake?
a.Study the effectiveness of all 3 growth engines. For consumer acquisition(paid), find out which media and channels your target consumer frequents the most and are most open to influence.
b.Please find out the cart size of your most loyal consumers and why they are loyal versus the others. Measure the percentage of new consumers who are influenced by word of mouth.
Then, deliberate and experiment to improve each of the 3 growth engines till you can achieve a virtuous cycle for growth.
c.Instead of calculating CLV over 3 years, you should focus on making a new consumer acquisition profitable within 3 months. You need a mix of organic and paid channels, which are scale-friendly with your resources.
d.For loyalty, validate your loyalty hypothesis and then double down on the same to increase your loyalty %
e.For advocacy, first measure the advocacy and then create a deliberate tribe strategy to up your advocacy.
Example of a beauty brand
A notable example is Bite Beauty. Originally renowned for offering edgy & innovative, yet safe beauty products, the brand made a drastic pivot to ride the ‘clean beauty’ wave. The rebranding came off as a trend-driven move rather than a genuine response to core consumer needs, leaving their loyal customers alienated.
I predicted doom for the repositioned brand, and it doesn’t exist anymore.
Most Indie beauty brands that need help to cross $1M in annual revenue make this mistake. Not validating and optimizing growth engines is the reason for the glass ceiling at every growth stage of a beauty brand from seed to early-stage, growth-stage, late-growth stage and so on.
Fluide, a beauty brand that closed down recently, serves as a poignant example. Fluide was a cause-driven brand with a passionate intent to bring about societal change. However, their unwavering vision pulled them towards a challenging strategy that became difficult to execute profitably when the going got tough. Their story highlights the importance of balancing a strong vision with a flexible, adaptable strategy.
Mistake 3: Lack of Focus - Problem, Consumer, Products, Channel
1. Problem: Lack of clear focus on the exact problem to solve
Frequency:
Very High
Why is this a mistake?
2 reasons, the first is that entrepreneurs have limited resources, whether time, money or people and the secret sauce is resourcefulness, so instead of spreading yourself too thin or being blinded by the next shiny object, you need to focus on one problem, channel, consumer base, etc.
The second reason, which is the real reason for the first reason and ties in with the first mistake and then with the second mistake, is that you don’t understand the problem in absolute detail and have never validated your growth engines. So, you never get enough traction with your brand while you see a few newer players doing very well. You start thinking that adding features to your solution, launching more products, or getting into newer categories is the solution.
How to avoid this mistake?
If you have to try new things, after you understand the core problem for the consumer, try with the intent of either validating the real problem or validating growth engines, knowing very well that you are experimenting. Before that, deliberate a bit and think how the new initiative will help you solve the core problem better for more of your target consumers.
2. Consumer: Spread too thin across a broad target set
Frequency:
Very High
Why is this a mistake?
For everybody is for nobody! A broad focus fails to generate a strong “this brand is for me” feeling.
This ties into understanding your core consumer’s problem in great detail.
How to avoid this mistake?
a.To start, hone in on a specific, tight-knit, self-identifying niche, but one that leads to other niches or segments. This strategy is similar to the bowling pin strategy: knock over the lead pin for the domino effect on others.
b.You can target a broad audience if you are a blue ocean brand. However, it still helps to start with a narrow audience to perfect your solution and validate the growth engines, and get a better ROI on your marketing.
3. Products: Too many products
Frequency:
Very High
Why is this a mistake?
Too many products can thin your resources, leading to logistical & inventory complications and a lack of leverage. Slow-moving products take as much space, time, and money to make as the hero products.
How to avoid this mistake?
a.Focus on a limited range of high-profit, high-volume products that contribute to solving the core problem.
You need 2-3 hero products and not much else in the beginning.
b.Even one hero product is better than 10-12 average products with no cult following and less than 40% repeat purchase rate.
4. Channel: Being everywhere, in terms of media or sales
Frequency:
Medium to High
Why is this a mistake?
Channels & media are hyper-competitive, and you need to truly stand out and focus on moving products from the shelf or gaining attention and engagement on media platforms.
How to avoid this mistake?
a.Develop a sequential go-to-market strategy for both sales channels and media.
b.Perfect your concept in a channel’s limited geography before expanding.
c.Fish where the fish is! Focus on media and a channel where you can influence most people who are most motivated by the problem you solve!
Example of a beauty brand
Glossier is a prime example of a beauty brand that had to raise close to $100M even when it had revenues of a little more than $100M. The brand lost its focus on profitability and launched in categories that it opposed, such as makeup. The brand has its flagship stores and cult favorites and has now partnered with Sephora to scale up further. Can it maintain the same level of loyalty at brick-and-mortar? It’s too early to say, but I doubt it.
Mistake 4: Overemphasis on Competition and Larger Players
Frequency:
High
Why is this a mistake?
It’s the equivalent of getting lost in the noise around you and so focused on others that you forget your strategy. Constant comparison with competition, especially larger players, can lead to distraction diverting your attention from crucial aspects like core business fundamentals necessary for profitable growth.
In any analysis & strategy, context matters; bigger brands are at different stages of growth and have momentum, resources, consumer base, etc.
And, every brand is different when you look at the entirety of price, place, product, and, of course, the brand idea.
Competitive analysis matters but the objective is not to blatantly copy your competition.
When you are an early-stage beauty brand, the only thing you need to worry about competitors is NOT BE LIKE THEM!
How to avoid this mistake?
Differentiation, Relevance, and Authenticity
a.Differentiation:
Create a distinctive brand identity and promise that stands apart from your competition. It’s not about being different for the sake of it but being different in a way that adds value to your consumers, aligned with your core promise that solves the core problem of your consumers.
b.Relevance:
Ensure your brand promise is relevant to your consumer’s needs, preferences, and aspirations.
c.Authenticity:
Make promises you can keep. Organize your efforts to uphold the values and promise of your brand. Authenticity and consistency are crucial in building trust and loyalty among consumers.
Example of a Beauty Brand
A prominent example in this context would be Revlon. The company, according to several industry analysts, seemed too engrossed in monitoring its competitors in the mass beauty segment, consequently overlooking evolving consumer preferences. As consumers began prioritizing self-expression and acceptance of individual flaws over the pursuit of unrealistic beauty norms, Revlon struggled to pivot accordingly, leading to a notable dip in their market relevance.
Mistake 5: Lack of Focus on Margins and Profits
Frequency:
High
Why is this a mistake?
Margins act as the financial fuel to drive sustainable growth. In today’s times, your best bet to succeed is by creating a virtuous cycle of profitability.
Especially when you venture past $10M, you will likely need channels to scale further, factoring your biz model. Every channel will take a huge cut from your margins. With high volumes, small changes in margin can derail your entire growth plan.
The two biggest cost centres will be people and inventory, which you can pay for after the channel partner takes their cut!
Then you need more resources for further investments in marketing, product development, and more.
How to avoid this mistake?
a.The ultimate goal should not just be growth, but profitable growth. Before embarking on any initiative, consider its potential impact on profitability. For example, calculate channel profitability using this formula: Volume*(Gross Margin % -Channel Margin %)-Sales & Marketing Expenses.
Here’s an interesting fact to note: A 1% increase in price can increase profitability by 11.1%, while a 1% increase in volume only increases profitability by 3.3%. Additionally, a 1% reduction in variable costs can increase profitability by 7.8%. Therefore, focusing on this order can significantly improve profitability.
Example of a Beauty Brand:
Farsali Beauty boldly withdrew from all beauty retailers, including giants like Sephora, as it wasn’t profitable enough. They observed that a staggering 80% of brands in such retail outlets were also struggling with profitability.
Another example is the Purely Byron beauty brand co-founded by Elsa Pataky. The brand incurred a loss of $3.6 million in 2020 and was reportedly never profitable. This was largely attributed to the brand’s inability to strike a balance between growth and profitability.
Mistake 6: Frequent Promotions and Discounts
Frequency:
Very High
Why is this a mistake?
It’s like being the party host who always lures guests in with a free bar, only to have them disappear when they have to pay for their drinks. Frequent discounts and promotions can initiate a vicious cycle that is difficult to escape.
Consumers start expecting continuous sales, which can lead to forward buying (although this is debatable, some may argue it’s beneficial or doesn’t occur at all) and erosion of brand differentiation. Furthermore, regular margin loss can harm the business’ financial health.
How to avoid this mistake?
a.Instead of constant price cuts, focus on creating and communicating value. Differentiate your brand and demonstrating a deep consumer understanding for the feeling that this brand gets me!
Also, keep promotions strategic and around conceptual initiatives with higher perceived value without heavy discounting.
b.If you do 30%-50% off too frequently the consumer will eventually forget why else she should buy your brand!
c.Promotions and discounts should have an objective that aligns with your marketing strategy. Is it for loyal consumers, new consumers or for advocates?
Example of a Beauty Brand
A notable example is JCPenney. Although not an indie beauty brand, its journey offers an important lesson. JCPenney attempted to transition from frequent sales to everyday low pricing. However, due to its previous high-frequency promotions, customers were conditioned to shop only during sales, leading to a severe decline in sales during the transition.
Without naming any indie beauty brand names, it is not hard to think of beauty brands that are always on sales. Check the last 10 newsletter emails and see what % are about umbrella discounts on all products.
Mistake 7: Going to Retail Too Early and Ill-Equipped, With No Strategy
Frequency:
Medium to High
Why is this a mistake?
Entering the retail sector too early and without a solid proof of concept for velocity can be like taking a knife to a gunfight. Retail is a capital-intensive arena where 95% of the game is sell-out, and merely 5% is sell-in. The sequence in which you approach this also matters significantly.
How to avoid this mistake?
a.Develop a Go-to Retail Strategy. This involves being financially prepared and having a proof of concept for velocity and category development using tried-and-tested shopper marketing.
b.A few other checks before entering brick-and-mortar stores is building a solid online presence and following, achieving high DTC conversion rates and loyalty.
c.Create a sequential go-to retail plan, starting from a beachhead and channel partners that are a fit with your target consumer base and the support you need to succeed.
Example of a Beauty Brand:
A case study in this context would be Athr Beauty. Tiila Abbitt launched this ground-breaking beauty brand, which championed sustainability. They brought in over 20 brands with a Good Vibes Beauty Box, pursued fair-trade sourcing, and adopted green packaging initiatives.
Despite their strong value proposition and sustainability credentials, they faced significant setbacks. The brand decided to pull out of 1200 stores at Sephora due to low velocity on the shelf attributable to a lack of funds and a scalable proof of concept for moving products.
Mistake 8: Poor Understanding of the Importance of Cash Flow
Frequency:
Very High
Why is this a mistake?
Cash is the ultimate daily fuel, while profitability is the ultimate goal.
You can be profitable without sufficient cash to pay recurring expenses, which can stop your business’s motor.
How to avoid this mistake?
a.Look at all your cash flow conversion cycles from sourcing, manufacturing to final billing cycles and see how you can improve them and make them more efficient to have the cash needed for planned or anticipated growth.
Example of a Beauty Brand:
During the pandemic and immediately after, numerous beauty brands especially with huge assortment and who were present in retail channels, which contributed to the majority of the sales closed down, suffered a big cash jolt because of the manufacturing and sourcing delays, causing the cash to convert slower and leading to an inability to meet expenses.
Recently, Beauty Bakerie has closed down, citing a declining trend around glam looks. The brand had a $14.7 million investment. Even though I don’t have all the facts, it is evident that investors might have yet to be willing to support the brand any further, likely driven by the fact that the brand is losing/likely to lose cash with every sale, the ultimate metric that makes investors back down.
Quick Summary
In the thrilling journey of establishing an indie beauty brand, founders frequently face a minefield of potential missteps. Here’s a quick recap of the top 8 mistakes and how to avoid them:
- A lack of genuine passion for the problem vs. solution can become a never-ending route to product-market fit
- Not validating all 3 growth engines: paid, loyalty and advocacy is going to impact the profitability and sustainability of the venture
- A lack of focus, whether on the problem, consumer, products, or channel, can dilute a brand’s impact. Brands need to comprehend the problem thoroughly, cater to a specific niche, focus on high-profit, high-volume products, and implement a sequential go-to-market strategy.
- Overemphasis on competition and larger players rather than playing to your strength and focusing on core consumer, taking decisions factoring your beauty brand’s growth stage into account
- A lack of focus on margin and profits prevents you from growing sustainably
- Frequent promotions and discounts create a vicious cycle of diminishing profits
- Going to retail without a proper proof of concept around velocity and category development inhibits profitable scalability
- Not prioritizing cash flow results in an inability to invest in resources & meet expenses needed for growth
The above list might not be comprehensive but it does capture the core mistakes the early-stage beauty startups make inhibiting your eventual success.
Do check out my article on why beauty startups fail.
Jump accelerates women-led, early-stage beauty brands with a fit & full solution using first principles