What Indie Beauty Companies Can Teach Entrepreneurs About Scaling While larger companies rely on their popularity, indie brands are attracting customers by using more focused approaches.
By Warren Becker Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Indie brands aren't disrupting just the tech sector. Every industry from manufacturing to skin care is feeling the pressure from small companies with big ambitions.
One such startup, HelloAva, recently launched to help skin care junkies make smarter purchases. HelloAva uses chatbots to discover each individual's preferences and personal style, then makes recommendations using that information. No major makeup brands offer this service yet, but as companies such as HelloAva breathe new life into old services, enterprise competitors must either adapt or be taken over by smaller organizations.
Nothing frightens a big company like a disruptive startup with scaling potential, but few startups make the leap from industry disruptor to major player. Founders of small companies must understand their advantages so they can press the attack before copycats steal their thunder.
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Beautiful disruption
The focused approach used by indie brands differentiates them from big businesses and gives them a branding advantage that's hard to match. One of Cosmetic Solutions' clients, Dr. Gary Goldfaden, founder of natural skin care line Goldfaden MD, believes the story of his company's ingredients -- their quality, efficacy and source -- is one of the biggest reasons his brand is succeeding.
"We are experiencing a global movement toward a cleaner and healthier existence, and consumers are completely changing their beauty routines and limiting what they put on their bodies," he said when I spoke with him recently. "This is a huge opportunity to bring our vision of clean yet effective solutions and unique products to a broader audience."
Goldfaden's final line about reaching a broader audience speaks to all founders who want to grow their companies: Understand where your advantage lies, and find your opportunity to push forward ahead of the market. While larger companies rely on their popularity to attract new customers, indie brands are capitalizing on common values they share with customers.
As consumers' concern for the environment grows, for example, small skin care brands are reaching nature-loving customers better than larger brands. If customers agree with a brand's story or connect to a founder's charisma, the brand reaps an advantage in terms of customer attention.
What the beauty industry teaches founders about scaling.
Not every company needs Steve Jobs at the helm to succeed, though. Founders who can't charm an audience can still run and scale companies successfully by following the examples of others. Rising beauty brands follow a few basic rules of success that apply to any industry.
Related: The Perfect Product Is a Myth. Here's How to Scale the Almost-Perfect Product.
1. Resist overwhelming customers with choices.
Don't throw hundreds of options at customers -- too many can quickly backfire. According to research from Northwestern University's Kellogg School of Management, the phenomenon of "choice overload" can leave customers dissatisfied with their final choices -- or, worse, can cause them to abandon their shopping altogether.
Instead, give them a few options with clear purposes that align with the brand's image. Not only does this help the brand grow in an increasingly personal buying culture, but it also keeps costs down by limiting product diversity. Foundation shade-finding app MatchCo, for example, initially offered a single product and focused on selling only that. According to Women's Wear Daily, the founders preferred this approach because it helped them establish a strong base before they began branching into riskier areas.
2. Listen to early adopter feedback.
Build a strong social following, get your biggest advocates' opinions on everything and live by their feedback. These people already need and care about the product, so they are better positioned than anyone to direct the brand's next move. Don't add a new product without data that proves current customers will welcome the addition.
According to a study by Olapic, more than half of consumers are more likely to buy products after they see other customers post relatable, positive social posts about them. Beauty company Glossier has used this strategy to great success, building a rabid social media fan base that's happy to promote its products and using feedback from followers to inform company strategy. According to founder Emily Weiss, Glossier's revenue is "up 600 percent year over year, and the brand has tripled its active customer count over the past 12 months."
Related: 7 Ways CEOs Should Engage on Social Media
3. Focus on fulfillment.
Master shipping and logistics before considering expansion. Amazon Prime has become a game changer: With its two-day shipping now the common standard, consumers have little patience for slow shipping. According to Access Development, 60 percent of shoppers will take their business elsewhere if a company fails to offer satisfactory delivery options -- so make sure you can fulfill orders quickly enough to meet expectations.
Packing and shipping from a garage is fine, but if your company starts receiving 10 times as many orders, customers will have to wait longer for their products, and the customer service experience will suffer. Either build sufficient in-house systems or use a reputable fulfillment partner to eliminate delays and keep buyers happy.
4. Price with the future in mind.
Establish retail prices for your target market with the cost of goods and profit margins in mind. Calculate wholesale and distributor pricing up front to keep margins profitable and ensure there's enough room for future discounting and promotions. As sales improve and order quantities increase, how will those numbers change? Will high prices turn customers toward cheaper competitors of similar size, or will low prices catch up, limiting your company's ability to grow?
Price still trumps all other purchase factors, including customer service and convenience, according to the 2016 BigCommerce State of Omni-channel Retail study. Adjust pricing before scaling because after the growth begins, changing the offering becomes much more difficult.
Software developers and cosmetics companies might not have much in common, but they both want to grow businesses that will enjoy long-term success. Follow these tips to scale smarter, and be prepared to take advantage of new opportunities as they arise.
