Why beauty startups are going to fail

WHY BEAUTY STARTUPS FAIL

Why do beauty startups fail, never take off, or never succeed?

Beauty startups fail for various reasons in this highly competitive emerging beauty market, with a continuous influx of new beauty brands, amidst competition from the incumbent early-stage beauty brands. But the majority fail because they never take off or even taste success.

Let’s deep dive and get to the core and fundamental reason for the beauty startup’s failure, peeling one layer at a time.

Table of Contents

1. Founders give up

Why do founders give up?

2. Lack of critical no. of consumers

Why do beauty founders never have a critical no. of consumers?

3. Growth engines aren’t optimized: Not resonating with consumers: lack of desire 

Acquisition

Loyalty

Advocacy

Why is there a lack of consumer resonance & desire: reflected in below-average growth engine performance?

4. Lack of deep consumer understanding

Why is there a lack of deep consumer understanding?

5. Lack of a deep dive endeavor and process

-Steve Jobs fallacy

-Over-reliance on testimonials & reviews

-Not trying hard enough to improve on benchmarks

-Mindset

-Fear of sunk cost

So, What’s The Ultimate Solution

Summary

1.Founders Give Up

Beauty startups fail only when you give up! There’s no better definition of failure.

There could not be a more prominent symptom of failure. Starting a beauty business is challenging, and the founder may run out of money, patience, or energy. Additionally, life may get in the way, causing founders to lose focus on their startups.

Five Dot Botanics-why beauty startups fail

One example of a beauty startup that failed because the founders decided to move is Five Dot Botanics, an award-winning, plant-based skincare brand that tried to disrupt the beauty industry by going against the grain of a laundry list of ingredients. The founder, Zaffrin O’Sullivan, also had a full-time job while pursuing her beauty brand and eventually decided to reap better returns on her other endeavors.

Another example is Stowaway Cosmetics founder Julie Fredrickson, who decided to move on from her venture because of severe health issues she developed while the band was still gaining momentum.

Why do founders give up?

2.Lack of Critical No. of Consumers

The usual reason beauty founders run out of money, patience, or energy is a lack of critical number of consumers. A startup must attract enough paying consumers to generate profits and sustain its business.

The product should appeal to perfect strangers beyond friends, family, and local, and the number of such consumers should be enough to make the venture profitable.

We are Fluide: why beauty startup failed

One example of a beauty startup that failed due to insufficient consumers is: We Are Fluide.

Laura Kraber founded “We Are Fluide” to create a space that celebrates and showcases gender-expansive beauty and the underrepresented faces and voices in the beauty industry. Drawing from her experiences as a parent of New York City teenagers, she wanted to provide a platform for young people to express their creativity and authentic selves. Her vision was to build an inclusive and welcoming online community that challenges the traditional notion of beauty and encourages everyone to be comfortable in their skin.

I spoke to Laura a few months back; she was extremely passionate about bringing change. Her site was very well done and very aesthetically pleasing. Still, the brand never really took off because of the lack of profitability to scale DTC or funds to launch with retail, ultimately due to a lack of enough consumers and consequent profits.

Why don't beauty founders have a critical no. of consumers?

3.Growth Engines aren't Optimized: Lack of Consumer Resonance

Resonance reflects in the lack of validation for the three growth engines: Acquisition, Loyalty, and Advocacy hypothesis, which is the reason the brands never have a critical mass of consumers leading to the beauty startup’s failure.

How?

First Growth Engine-Acquisition

The lack of profitable acquisition beyond consumer lifetime value indicates a lack of validation for the acquisition growth engine. If you are a bootstrapped beauty brand, you need to ensure that your consumer acquisition is profitable, meaning invest in initiatives that deliver a profitable acquisition without worrying about recouping profits over the consumer’s lifetime. The next best thing is a funnel with near-term profitability.

e.g., if you sample beauty products at an event and dole out coupons, and the coupons expire in 7 days, did you make a net profit after a week?

The funnel applies to any channel, even if you have money to spend or advertise.

Why?

In today’s hyper-competitive acquisition channels, with the ever-decreasing consumer attention span and proliferation of products and brands, you need to think of short-term funnel value rather than consumer lifetime value.

This is the story of most indie beauty brands that fail to establish a consistent & sustainable new consumer acquisition channel year over year and eventually stagnate. They either become a hobby or a lifestyle business, but the founder often quits.

Second Growth Engine-Loyalty

Now, even if you have validation for profitable consumer acquisition, you need to up that profitability by an X factor, and that’s possible by up-selling and cross-selling your products & bundles, consumers sticking with the products for an extended period, and the dollar value/loyal consumer should trend up.

An above-average, loyal consumer base will save you from endless dependence on the hamster wheel of new consumer acquisition.

What determines loyalty?

Solving the Core Problem

The consumer gets the promised results which could be in the form of higher quality versus competition for the same price or slightly more price, or in the form of solving the core problem that fits the need of the consumer better, or if you solve an unsolved problemthen, of course, they have no choice.

How Do You Know Whether Your Loyal Consumers are a Result of Solving the Core Problem?

Validation for your Loyalty Hypothesis with an above-average percentage of loyal consumers. The percentage varies by category, and at the risk of oversimplification, I recommend targeting a loyalty of close to 50% and above for it to spiral your growth upwards.

Laura Kraber, in her interview with Beauty Independent, cited lack of loyalty as a critical factor in her beauty startup’s failure to scale and succeed, and relying solely on introducing new products is not sustainable as it merely replaces previous offerings, making it challenging to establish growth and expansion.

What Can Further Prevent Loyalty?

Even if your brand and products solve the core problem, the consumer might not get the desired results because they don’t know

How to Correctly Use for the Desired Results?

This is achieved by 

a. Making it easier for them to get the desired results

b. Educating them on how to get the right outcome

Pro DNA by Paris Hilton: Beauty startup failure

ProD.N.A by Paris Hilton is an example of a beauty brand that failed to resonate with consumers despite all the money and fame. This is very likely to be caused by the failure to optimize any of the three growth engines.

Why is there a lack of consumer resonance?

4.Lack of Deep Consumer Understanding

All three growth engines fail for an early-stage beauty brand because of the need for deep consumer understanding.

To create a compelling promise, a beauty brand needs to know its target audience’s preferences, pain points, and behaviors.

Becca Cosmetics: Example of why beauty startups fail

Becca Cosmetics is an example of a beauty brand that took off but failed. Even though the brand’s eventual feuds with influencers who collaborated with Becca to launch its bestsellers along with a social media fiasco around inauthentic women of color pics fuelled the demise, at the core, it was a lack of a thorough understanding of their consumer’s problem and an attempt to solve it better than anyone else rather than using big name influencers to capture paid buzz for sales.

After the brand fell out with its star influencer, Jaclyn Hill, Becca Cosmetics partnered with other celebrities for co-creation, but the products did not resonate well with the consumers.

Why is there a lack of deep consumer understanding?

5.Lack of a Deep Dive Process & Endeavor

Lack of a deep dive endeavor and process vs. relying on a handful of testimonials, reviews, and regularly compiled useless surveys: which could help but in the absence of consumer resonance(point above, you need to deep dive into the above information)

Below are the reasons for the lack of a deep dive process, ultimately leading to beauty startup’s failure

Steve Jobs Fallacy

The famous Steve Jobs quote, “The consumer does not know,” is a proxy many beauty founders use to avoid digging deep into what their consumer truly needs or why they buy. 

Solution: The consumer might not know what they need, but they do validate what they want or desire. Also, it’s the founder’s job to unravel why the consumer buys or what she needs.

Comfortable & Over-Reliance on testimonials and reviews

Solution: The testimonials and reviews help, but they rarely tell you about the role the brand plays or could play in the consumer’s life in overcoming her enemies.

Not trying hard enough to improve benchmarks

This has to do with a lack of knowledge about average category performance metrics such as loyalty %, CAC and word of mouth contribution to acquisition, etc.

Solution: Speak to other brand founders across a spectrum of relative success, find out where you stand, and then carve out a plan to improve your numbers, keeping the end goal of growth in mind.

Mindset

Only Money Matters. The founder focuses on outside factors rather than factors in her control. 

Solution: By all means, look for all funding avenues but don’t skip the growth fundamentals.

Fear of sunk cost

Fear of facing the hard truth, invalidating your assumptions, having to revamp the business, and starting all over again.

Solution: The truth is you probably need more tweaking than revamping. But, think of the change this way: Ignorance and denial aren’t bliss and ultimately will be the reason that your brand won’t resonate with consumers leaving you with lack of critical number of consumers leading to lack of profitability and eventually life will get in the way and you will be forced to quit.

If you are open-minded and want to succeed rather than live in your fantasy land, you will up your odds of success. 

 

So, What's The Ultimate Solution to Avoid Beauty Startup's Failure?

Everything is great when you have a process, if not a strategy, to listen and probe deeper to understand your most loyal or potentially most loyal fan’s deepest needs and emotional enemies that haunt them.

The objective is to create love at first sight with a brand your consumers genuinely desire.

Listen(consumer heartbeat) + Learn(why she buys)

Observe data, conduct regular surveys & occasional deep-dive interviews to uncover insights around her life’s rituals and their outcomes & then dig even deeper to learn how her purchase, your brand, can help achieve those outcomes, avoiding a series of unfortunate events that, in the end, cause beauty startups to fail.

 

Summary-Why Beauty Startups Fail

why beauty startups fail to take off

We dug deep into why most beauty brands fail to take off or fall from glory after they tasted some initial success because of support from investors or retailers. Mainly, we analyzed why bootstrapped or even funded beauty brands never take off.

Beauty founder fails when she gives up; she gives up because she loses patience and energy or life gets in her way. The above is because the beauty startup couldn’t get to a critical number of consumers to spiral the growth up via profits.

The inability to reach a critical mass of consumers is due to the failure to optimize three growth engines: Acquisition, Loyalty, and Advocacy. You need all three to be above a specific minimum performance, and at least one should perform above average, if not extraordinarily well.

Failure to optimize growth engines is due to a need for a deep understanding of consumers as to why they buy the category and why they buy or would buy your brand.

The lack of an unmatched consumer understanding is due to various factors, including Steve Jobs’s Fallacy, overreliance on testimonials and reviews, fear of sunk cost, lack of awareness about category benchmarks, and a mindset focused on external factors like funding & retail is the only way to succeed.

To understand your most motivated potential super fans, you must establish a process that helps understand how you solve their problems, unsolved problems, most profound emotions, and fears.

A process that facilitates regular listening to consumers and a periodic intervention to deep dive into all data, surveys, testimonials with 1:1 interviews, focus groups & ethnographic research of your super fans and potential fans is the key to creating a promise that spells a love at first sight for the brand to be truly desired.

Want to ensure that your beauty startup doesn’t fail? Book a call for a free evaluation.

 

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