What Beauty Brands Think Of Shifts In Retail Business Models
In this edition of Beauty Independent’s ongoing series posing questions to beauty entrepreneurs, we ask 14 retailer and brand founders and executives: Many retailers are moving away from traditional wholesale business models to consignment, revenue-share and other arrangements with brands. What experience have you had with these different models, and what do you think of them?
- Victoria Ferguson Founder, East 29th
This was the most shocking for me when we started. We launched in July of 2020, so when stores began to carry our products, I didn't know the “traditional” model. Every store had different rules and arrangements, which left me feeling confused and a bit disheartened. I've tried to place myself in the retailers' shoes taking on a new brand during a global pandemic, but it can be confusing when keeping track of all the stores.
I ask myself if each store's exposure will help it get into the right people's hands. If so, I am more lenient with the arrangements, but, if not and it could potentially hinder our growth due to their strict guidelines, I haven't been afraid to walk away and say no. It's understandable for the industry to evolve, but, when it comes to taking away too much profit from a new brand or a new business, I do have reserved feelings. I've made some exceptions, but have made it known this won't always be the case if orders continue as anything worth having is worth tending to.
Now, knowing that these options are out there when I'm shopping, I check the business's website to see if I can purchase directly. I know how hard it can be to create while also trying to make a living. That being said, building these relationships with retailers is vital for our growth.
- Emily Heitman CMO, LEEF Organics
For the most part, we have not seen our partners pivot business models, but have certainly been approached by prospective partners who desire to conduct business in these more alternative ways. I guess you could call us traditional. As a brand, it is very important that our partners believe in our products and, you could say, invest in bringing them in because they believe in them and the fit for their customers. Skin in the game has been the traditional analogy. It is a mutual investment on both sides. From the brand perspective, its premium quality efficacious products and, from the partner, it's the dedication to get those products in the hands of the consumer.
- ANNA PERSAUD CEO, This Works
In 2020, one of the most overused words was an “unprecedented,” but it really was and continues to be so for the majority of businesses. To that end, I think it's wise for business owners to be open to new methods of distribution and revenue generation, but that needs to be carefully balanced against the risks involved, as the solution to a short-term business issue can cause longer-term problems when you're faced with accepting stock returns, for example.
We have definitely made changes to our business roadmap over the last 12 months, but these have focussed on our distribution, customer retention programs and marketing investment with the aim of protecting our brand, maximizing our existing revenue streams and taking considered chances when opening new distribution.
- Keta Burke-Williams Co-Founder, Aspen Apothecary
We have been approached by different retailers, from boutiques to showrooms. Some are sticking to traditional wholesale, others are moving more towards a consignment model. As a brand who creates our products in smaller batches, we like the idea of the control and flexibility consignment provides us, but it also creates a few more operational headaches managing inventory.
We were surprised that some concept/showroom retailers reached out, attempting to charge what is essentially a slotting fee with no alignment on a merchandising schedule or training days for their salespeople, which didn't feel like a good start to a partnership. We currently have two partners that we feel represent our brand well and are excited to begin to partner with more retailers who align with our brand values and vision as we continue to grow.
- Salome Sallehy Founder and President, Sugar Sugar Wax
Our business was a COVID baby, and we have intentionally steered away from many retailers because of circumstance. The retail space has been transforming for years now, and COVID really brought the demise of retail to the forefront. We have been working with smaller retailers on a more traditional exchange model, and that has been ideal for us in addition to our DTC model.
Smaller retailers that are well embedded in their respective communities are working wonders augmenting the Sugaring tidal wave that we’ve been creating. Frankly, the larger retailers are proving more difficult to work with in the current environment. They’re not bringing the value that they once did, so the demands and concessions that they require don’t seem justified.
- Aminah Sagoe CEO and Founder, Emmaus Beauty
I have had experiences with the consignment model, and I think it is a great way of getting your products on retail shelves, especially for indie brands. Let’s be honest, not many retailers want to tie down their money on products/brands that aren’t mainstream. So, instead of staring at your products in the warehouse, why not give them to retailers on a consignment basis? Nothing ventured, nothing gained, right?
- Liz Kirby Founder and CEO, Betoken
We have never done a revenue share with a retailer, but we have done consignment on occasion. I have not found it to work very well because I feel like, if the retailer doesn't buy the product ahead of time, they have less incentive to sell it. It's no skin off their back if it sits on the shelf, and then they might try to return it to you months later when it doesn't sell. I only ever offer consignment for a business owner who is a friend or for a local small business who I know really loves the product, but just doesn't have a lot of capital.
- NATALIA BEDNAREK Co-Founder, Herla
Looking at the consumer shopping behavior and market dynamics I think that most online retailers will eventually transition to a drop-ship model. It’s an easy and efficient way for brands to sell at major retailers. And the retailers don’t risk too much as if they had to purchase a lot of products from a brand. This applies especially to newer indie brands that may not have too much brand awareness just yet.
I think it is a very fair solution for both sides. One challenge I find with this kind of model is unfortunately very little support from a retailer to promote the brand’s product, increase website presence and help introduce the brand to the retailer's customer base. It’s really up to a brand to work on building its awareness, and create and execute a marketing strategy. Thankfully, today’s consumer is open to purchasing products from up-and-coming brands and is relying on their own research and world of mouth to discover new products.
- Anastasia Bezrukova Co-Founder, Minori
We haven’t launched yet, but we are definitely exploring new ways of approaching the wholesale business. We are considering value-based marketplaces such as Dough and drop-ship marketplaces such as the one Hudson’s Bay is launching in Canada. These options give tremendous e-commerce exposure to young brands without the headache of dealing with a giant retailer, EDI setups and setup costs. I used to be a beauty buyer before starting my own brand, so I understand how challenging it can be for small brands to navigate the traditional wholesale business model. I think it’s important to explore all options and be available to your customers wherever they shop.
- Olowo-n’djo Tchala Founder, Alaffia
In partnering with many retailers in different channels over the years, I have seen instances of business models that are outside of what you would consider to be “normal” retail. In many of these scenarios, I have seen that the reason for these models come from an understanding of how to best serve their consumers in their respective retail environment. At the end of the day, serving the consumer is one of the most important things, so if there is a way for us to work with our retailers to ensure this happens, we do so.
- Belinda Kǒkóèkà Bassey Ephraim Founder and CEO, KOKOBÉRNA
We launched in February 2021 and look forward to experiencing these different business models as we engage with retailers. However, the shift from traditional wholesale business models to consignment, revenue-share, etc., demonstrates flexibility within the industry to engage in thoughtful arrangements that are considerate of smaller independent beauty brands' operational capacity whilst giving brands the platform to present their offerings in a retail environment (online and offline), authentically engage with customers and grow their businesses.
- Stacey Lee Founder, Rude Cosmetics
We have recently started looking into this business model and have warmed to the idea of sharing the risk. From one perspective, it can be viewed as the retailer storing your product in their location and only paying for it whenever a purchase has been made. It is a win-win solution with the only downside being that your products are not readily available and locked in the retailer’s location. I believe this issue can be resolved with realistic calculations of sales expectations.
- Dimitra Davidson Principal, Indeed Labs
Changes are always taking place in the very dynamic world of retail. As a global brand that sells to retailers all over the world, we have adapted our business based on the various needs of retailers.
- Jaleh Bisharat Co-Founder and CEO, NakedPoppy
Our goal is to be the easiest retailer a brand can work with. In addition, many of the clean products we carry are from small independent brands. So, we maintain wholesale relationships with them to keep our partnerships simple and respectful.
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