The Big Frustrations Of Small Products
Mini product madness can be maddening to beauty brands.
Shrunken sizes are storming stores and e-commerce sites as retailers the likes of Follain, Belk and Sephora, where research firm The NPD Group spotted over 400 tiny items, cater to beauty customers coveting value, experimentation, and merchandise they can easily travel with and gift. In prestige makeup, NPD estimates sales of trial sizes escalated 58% year-to-date through September, and makeup sets containing little lipsticks and lip glosses are fueling the trend.
The mini movement seems innocuous enough. Who doesn’t like cute cosmetics? The diminutive sizes, however, don’t come at a substantially diminished cost to beauty brands. With shoppers expecting reduced price tags on them, the minis eat into profit margins, a financial consideration that will continue to be problematic as small items nab bigger market share. For indie brands on tight budgets, chasing the small size craze can be especially impactful on the bottom line, and sticking to regular product routines could be smarter strategy.
“From the manufacturing side, I’ve found it difficult for some of my clients to get it. Many think that, because the item is smaller, the price will be much lower, but this is hardly ever the case,” says Julie Hamilton, business and product development manager at contract manufacturer and cosmetics lab New Look Cosmetics. “The production work is still the same for a larger item, so all the labor cost stays the same.”
Jordan Erskine, president of contract manufacturer Dynamic Blending, explains minimum outlays for a brand don’t change for trial-sized products. “At low minimum order quantities, your unit price is not very attractive, and the same goes for minis. Minimums for full sizes start at 1,000 units. If we did a job where it was only .25-oz. sample sizes, then the minimums would have to be above 1,000,” he says, specifying, “At low quantities, they could be looking at $1 to $2 per unit at 1,000 to 2,000 units, but they could get that to $1 or cheaper if they were in the 20,000- to 30,000-unit range.”
Manufacturing mini sizes can be coupled with further production complications. Longer manufacturing periods are a possibility. “Oftentimes, a mini will require new tooling as they aren’t standard size. Our automated lipstick machine would need new silicon molds to shape the bullet at this smaller size,” says Hamilton, noting, “New tooling can take around four to 12 weeks depending on where it’s made.” Ursa Major has turned to different factories to handle the array of sizes it incorporates in its assortment. Supplementing its full-size product portfolio, the natural skincare brand has 5-ml. to 8-ml. sample packets, mini amenity sizes in .5-oz. to 1-oz. containers, and 2-oz. travel sizes.
While the manufacturing expenses don’t modify much for mini products, the retail prices do. “The customer is trained to think that, because they are smaller, they should be cheaper, and she should get variety for the lower price,” says Erika Shumate, co-founder of Pinrose, a fragrance brand selling a kit with nine 3-ml. rollerball minis at Sephora. “It’s a tricky spot for a young brand because we want to offer value, but, at the same time, we have to be really cautious about our costs getting driven up and not being as profitable on that product as other products.”
Brands don’t usually price mini products equal to conventional-sized products on a per ounce basis. At Ursa Major, an 8-oz. Face Wash is priced at $28 or $3.5 per ounce. The 2-oz. travel size version of the Face Wash is priced at $12 or $6 per ounce. By increasing per ounce prices, Ursa Major co-founder Oliver Sweatman says the brand ends up “with a margin that’s somewhere between awful and acceptable” on the travel products. In general, he figures margins on the travel sizes are 15 to 20 points below margins on full sizes. Ursa Major deals with the contracted margins because travel sizes constitute a quarter of its monthly unit volume.
Margins aren’t the only aspect of mini size pricing. There’s complex psychology in play as brands attempt to spur purchases of trial sizes and simultaneously not discourage purchases of larger sizes. “You want to motivate the consumer to try the product, so it’s not too expensive, but you definitely want your consumer to buy the full-size product and not feel there is a financial incentive to only buy the travel kit,” says Johanna Peet, founder of Peet Rivko, which sells a travel kit with a 1-oz. cleanser, 1-oz. moisturizer and .17-oz. face oil for $46. “It’s a balance.”
Beauty brands are concerned consumers won’t trade up to full-size products after purchasing trial sizes. Their concern is legitimate. “We sold individual mini-sized products on our website. We received tons of small orders. It cost us more to process all the little orders than we made. Plus, customers were opting to purchase the trial size versus a full-size product, so that was a loss there as well,” recounts Cindy Holland-Rodriguez, co-founder of the beauty brand Chalet Cosmetics and natural cosmetics manufacturer Indigo Private Label Cosmetics. Given the headaches and margin pressure, she says, “Minis are great to give customers a chance to try products, but, for the indie brand, it’s hard to make any profit on mini-sized products.” Hamilton declares, “I wouldn’t advise any of my smaller brands to get into minis at the beginning unless that was their concept.”
Not all emerging brands have faced consumer unwillingness to ascend to larger sizes. Sweatman and Peet of Ursa Major and Peet Rivko, respectively, find that customers don’t rely on travel sizes alone because full-size products provide better value. Shumate says, “I get the worry about losing out on the cash customers might have spent on a bottle if they buy kits, but I hope the customer will come back and purchase a bottle. I have confidence that she’s going to like our fragrances, and she’s going to want to come back.”
Certainly, small sizes aren’t going away. Instead, mini fortunes are growing. Youth To The People is working on a mini trio of its cleanser, cream and serum, and a mini treatment set that will include its Superfood Mask. Captain Blankenship currently proffers mini sizes for select bestsellers, but will be introducing them for its new shampoo, conditioner and liquid soap launching later this month. Captain Blankenship founder Jana Blankenship reasons, “People do like to try out before they invest in a full size. For us, we also think it is important to have products that you can travel with. As a mom on the move, having clean green soap to use in public restrooms and hotels is huge for me.” Greg Gonzalez, co-founder of Youth To The People, says, “Minis provide an opportunity for people interested in our line to try it out at a very approachable cost.”
In March, Pinrose is releasing 9-ml. fragrance travel sprays. “To be honest, I thought about it cannibalizing our bigger bottle business, but the reality is that we hear requests from customers,” says Shumate. “We know our girl is on the go. She’s going to work. She’s going to school. If we can have a Pinrose product in her bag while she’s getting ready at SoulCycle, I want to be in that bag. I don’t want to be forgotten in her bathroom. I think this form factor will meet the customers’ needs.”
For brands relying heavily on the direct-to-consumer channel or subscription box services, mini sizes are practically unavoidable. “If you aren’t offering in-person sampling through a wide wholesale network, you need to think of other ways to get people to feel comfortable trying a line that they haven’t tried before,” says Peet. “We see returning customers buy a travel kit first and then buy The Essentials Kit, which has three full-sized products and bundled pricing.”
Beauty brands suggest they can’t bow out of small sizes because of consumer demand, and more stores are jumping on the mini phenomenon. Sweatman mentions Ursa Major recently picked up a juice concept with four stores that prefers to bring in travel sizes. “When people come in there with a gym bag, they don’t want to throw two bigger bottles into it,” he says, emphasizing “impulse and portability” contribute to the appeal of travel sizes.
Shumate asserts brands are going to have to settle on small-size product scenarios that pencil out for them. “It can be more expensive for the company, but we have to meet the customer where she is. It’s on us to be innovative as business owners,” she says. “It might be scary for the industry that has been doing business in the same way for a long time. It messes with projections and business models, but I’m not scared of it. Staying relevant requires reacting to what the customer wants and figuring out a business model that works.”
- The mini movement is gaining momentum with retailers such as Sephora, Follain and Belk marketing the tiny goods and consumers rushing to purchase them. In prestige makeup, NPD estimates sales of trial sizes escalated 58% year-to-date through September, and makeup sets with mini items are big for the holiday season.
- Mini products are pinching beauty brands’ bottom lines. Brands don’t have to shell out much less to manufacture small goods just because they’re small, but shoppers expect to pay less for them. Sweatman of Ursa Major details margins on the brand’s travel sizes are 15 to 20 points below its margins on full sizes. Some beauty industry experts recommend indie beauty brands spare their profit margins and steer clear of mini merchandise.
- Pricing minis is a complex matter. Generally, the price per ounce for the small sizes is greater than the price per ounce for regular sizes. Brands try to offer minis at an approachable price to encourage trial, while not making them overly approachable so that customers won’t trade up to larger products.
- Despite difficulties associated with the mini phenomenon, it’s growing. Brands are ramping up their mini production, and retailers are boarding the small-size bandwagon. They reason customers like the portability and affordability of mini products.