Working at her parents' San Fernando Valley fragrance and cosmetics shop in her teens, it always bothered Toni Ko that inexpensive lipsticks, blushes and eye shadows looked as cheap as they cost.
So, when the 32-year-old started producing make-up for her own company, NYX Los Angeles Inc., six years ago, she had a clear idea of what she didn't want to sell: kitschy cosmetics products with screaming logos. Instead, Ko boxed her make-up in black and kept the labels to a minimum, with the brand name, NYX, scribed in basic white and black lettering.
"It is all about the design. It is all about the packaging," she said. "I had to be a manufacturer to deliver the quality I wanted."
Despite the stylish packaging, Ko kept her product prices between $2 and $6. She believed that price-conscious consumers would reject poorly packaged products if given the option to buy items in high-quality packages.
The approach has worked. Ko estimates that NYX will generate $12 million in revenue this year. And she's yet to see the results of a $1 million advertising campaign she recently started in several magazines aimed at Hispanics.
Now, Ko faces the challenge of expanding her distribution and getting her products to mass-market consumers. She's betting drugstores and supermarkets will agree that her products' distinctive look separates them from the pack.
But it's tough going for a new offering to squeeze into mass venues. Major cosmetic companies such as L'Or & #233;al SA, Revlon Inc. and the Procter & Gamble Co. control 80 percent of the mass market and take up most of the shelf space.
Newer brands typically target department stores and upper tier make-up shops like Sephora, owned by LVMH Mo & #235;t Hennessy Louis Vuitton SA. At the higher price points, stores are more willing to experiment with brands.
Lower-price retailers tend to bank on proven performers.
"Basically, the supermarkets are saturated with some of the bigger players," said Jose Tovar, managing editor for the global new products database at Mintel International Group Ltd.
Ko, who immigrated to Southern California from Korea at 13, is used to resistance. When she started NYX at 26, she said people didn't give the company a chance.
"They didn't take me seriously because I am female and I am a minority and I am young," she said.
Still, Ko had confidence in her product. She invested $250,000 she said she saved working at her parents' store and rented a 600-square-foot space at the California Market Center to establish NYX.
She designed the sleek packaging without the extensive consumer research of a major brand. Instead, she tested the products out on her friends and family, whose approval she took as a sign that the products would sell.
And to get sales off the ground, Ko tapped into Korean-owned wholesalers in downtown L.A. to distribute her product. Although she wants to sell her product to all ethnicities, her ability to speak Korean gave her entr & #233;e into the Korean community and to small Korean-owned shops.
At first, she specialized in eye pencils, manufactured in France. The product gave her a staple that could be produced relatively cheaply (products like foundations that need to be formulated for individuals are more expensive). She expanded to add lipsticks, lip glosses and eye shadows, but the eye pencil remains a core item. She manufactures most products in China and Korea to keep costs down.
In the first year, Ko said she generated $3 million in sales, covering her initial investment and more. She plowed the profits back into her company. "Every single dime, I put back into my business. I just took $5 a day for lunch," she said.
Last year, Ko moved the company into a 76,000 square-foot facility in the City of Commerce, where she has enough room for expansion.
She got a big boost about four years ago when a manager at Walnut Creek-based Longs Drug Stores Corp. called her. The manager was approached by a customer who asked for NYX and was interested in getting the products in the store.
Unlike drugstore chains that centralize buying, Longs allows store managers to make stocking choices. That helped NYX get into Longs, and the company is now distributing products to 200 Longs stores.
Since then, NYX also has expanded geographically with distribution deals in Australia, Mexico, Japan and England. Ko estimates that NYX's current distribution is 30 percent international, 10 percent mass-market U.S. chain stores, and 60 percent small domestic shops.
But Ko has bigger goals. Among drugstore chains, she thinks Deerfield, Ill.-based Walgreen Co. would be a great outlet for her product. "I like their cosmetics department. It is very well organized," she said.
Ko said she would eventually like to see NYX swallowed by a larger company.
"I want this to live on for a long time," she said. "For a brand to survive that long, it has to be managed by a corporation."
For reprint and licensing requests for this article, CLICK HERE.