How Natural Beauty Brand 100% Pure Took Over Distribution To Control Its Own Destiny

Ric Kostick, co-founder and CEO of 100% Pure, has a confession to make. “I’m not that good at convincing buyers to take the brand,” he says. “We aren’t really partnered with any big retailers, and it might be my fault.”

Kostick is a bit too hard on himself. In 2005, 100% Pure premiered at Bath & Body Works before QVC carried it from 2006 to 2009. The natural beauty brand is currently available at Dermstore, Pharmaca, The Detox Market and troubled chain Beauty Brands. In 2017, it launched Puristry exclusively at Anthropologie, although the organic skincare line has now moved on from the specialty retailer and is sold digitally.

Still, struggles to score major wholesale deals caused 100% Pure to shift its distribution strategy from traditional third-party retailers to its own stores, a Chinese subsidiary and Amazon, where it’s set to introduce the brand FreeOF in March. The new 100% Pure commands its fate in a way that was previously inconceivable.

100% Pure Fashion Square Store
The natural beauty brand 100% Pure currently has 15 stores across the country plus an in-store shop at Banana Republic in New York City.

“Growing through a larger retailer is a lot riskier. Growing through this model is less risky. It might be slower growth, but it’s less risky slower growth,” says Kostick, who started 100% Pure 15 years ago with former girlfriend Susie Wang and her brother James. “I feel more stable with this model and, ultimately, I feel it can scale bigger.” His thesis has proven right so far. Today, 100% Pure’s business is four times what it was upon its exit from QVC and, according to Kostick, the $25 million-plus company’s sales leapt last year by a percentage in the “teens.”

Stores have been at the center of 100% Pure’s distribution pivot. In 2006, Kostick and Wang spotted a space for lease while they were getting coffee in Berkeley. After securing it and spending $20,000 on construction, the pair toiled tirelessly in the store early on, and it paid off with consistent annual profits. Wanting to replicate its success, 100% Pure located in the San Jose shopping center Santana Row in 2010 with a store that immediately yielded returns.

The San Francisco Airport Authority visited 100% Pure’s Santana Row location and courted the brand for a unit in the San Francisco International Airport that bowed in 2012, but the brand pushed retail expansion into high gear two to three years later when it opened nine stores – a West Hollywood, Calif., store has since closed – and branched out beyond California to cities such as Seattle and Annapolis, Md.

“Growing through a large retailer is a lot riskier. Growing through this model is less risky. It might be slower growth, but it’s less risky slower growth.”

Recently, 100% Pure stretched its retail network to 15 stores with locations in Scottsdale, Ariz., at the shopping centers Fashion Square and Kierland Commons, and Newport Beach, Calif., in upscale outdoor mall Fashion Island. In addition, it placed an in-store shop at Banana Republic in New York City. Yearly, same-store sales have been rising in the double digits at 100% Pure’s units.

“You open a few stores, and you can do the same volume as a big account. The stores are synergistic with digital because they give your customers an experience, and they can touch and feel the products, which they can’t do online. At the stores, they get in-person education, too,” says Kostick. “Also, customer acquisition costs are getting so expensive online and, at a physical store, depending on your rent and economics, you may be able to acquire customers at a lower cost.”

This year, 100% Pure is pulling back on its retail spread to concentrate on fostering the customer base at its stores. Kostick is experimenting with vegan eyebrow services and Korean-style facials to draw people to the stores. The average basket size has climbed from $45 to $60 in the stores due to increased staff emphasis on upselling and product explanation. The average basket size for 100% Pure online is $80. The brand incorporates RetailNext’s camera system at its stores to measure analytics and instituted Myagi’s training program that rewards retail employees virtual badges.

100% Pure Founders
100% Pure co-founders James Wang, Ric Kostick and Susie Wang

“Our conversion rate is really great: high 20% to 30%, but we aren’t getting traffic I want to get, so we are focusing on driving more traffic. If we drive more traffic, then, in 2020, we will open up more,” says Kostick. “You don’t want to spend too much capex if the economy is shaky. I rather focus on cash flow. Once we improve on that, we can do more capex.”

Meanwhile, 100% Pure is raising its profile on Amazon. Six months ago, it went live with 100% Pure on the giant e-commerce platform and has registered $1 million in sales through it. Kostick estimates its Amazon revenues could at least double this year. The upcoming clean beauty brand FreeOF is tailored to Amazon, but perhaps could filter into the masstige market two to three years down the line. Its products are expected to be priced in the $20 range.

Kostick asserts Amazon can deliver information to customers directly from brands and address their desire for transparency. “I suspect transparency is going to become a bigger trend in beauty, and it’s something I will be working on over the next two years,” he says. “Amazon can fit into the transparency model because it allows you to create content related to your products. We can provide transparency around the ingredients and factories.”

“I suspect transparency is going to become a bigger trend in beauty, and it’s something I will be working on over the next two years. Amazon can fit into the transparency model because it allows you to create content related to your products.”

Speaking of factories, 100% Pure originally controlled its production, but resorted to outsourcing manufacturing as product demand escalated. The transition has brought its share of difficulties. Kostick reports the pace of innovation isn’t as fast at outside factories as an in-house facility, and 100% Pure has faced out-of-stocks as its contract factories failed to keep up with orders. He is planning to reinstate internal manufacturing to establish a mix of in-house and outside production.

“We would have done 30% higher in revenues last year if we didn’t have the out-of-stocks,” says Kostick. “Cash flow is really key for building the business. We are not VC-backed. We roll our profits back into the business. In order to do that, you need high cash flow and, in order to do that, you have to turn your inventory fast. In order to turn the inventory fast, you need to manufacture yourself.”

China is another key contributor to 100% Pure’s future revenues. The company has formed a subsidiary in China that spurred over $1 million in 2018 sales, albeit at a slight loss. In 2019, 100% Pure projects sales in the country to double and eke out a gain. Kostick sees interest in cruelty-free beauty surging in China, and cruelty-free 100% Pure is poised to capitalize on that interest. Chinese shoppers can purchase its products on Tmall Global, JD.com and VIP.com.

100% Pure
100% Pure is pressing the pause button on its store expansion this year to focus on driving traffic to its locations.

“Running a business in China, you need to operate like the Chinese. You can’t operate like an American business inside China. I have a Chinese team. I let them do it their way,” says Kostick. “You can lose a lot of money in advertising there, so you have to be really careful about what you spend on. My China team wants to grow fast, and they could if I gave them a lot of funding, but my goal is to grow profitably. I’m a big believer in slow and steady growth.”