1. Brand Control—Ability to tightly control brand messaging and develop a direct customer relationship that transcends traditional retail.

  2. Customer Communication—Ability to have a direct conversation with the customer to drive repeat orders, establish a bond, upsell, receive feedback, resolve problems or simply say thank you.

  3. Customer Intelligence—Ability to collect detailed data about individual customers, from purchase rates to product preferences to consumer demographics.

  4. Consumer Insights—Ability to test anything and everything to a subset of consumers before rolling out to the entire customer base, from new products to new marketing campaigns to packaging changes.

Furthermore, once established, D2C brands can then leverage their direct consumer connection and loyal customer following to expand faster and with more certainty into additional distribution channels, including traditional retail. The market is rewarding early D2C movers, such as Dollar Shave Club, which employs a subscription-based distribution model for men’s grooming and lifestyle products. In 2017, Dollar Shave Club was acquired by Unilever for $1 billion, reflecting a five times multiple of revenue, after only five years of operation.

SOCIAL MEDIA—LEVELING THE PLAYING FIELD

Social media has shifted the power and influence of how beauty brands and products are perceived, away from the multi-million advertising budgets of global consumer conglomerates, and into the hands of consumers, influencers, and beauty brands that are adept at effectively integrating and managing social platforms. Previously, brick and mortar retailers served as the primary brand curators and high-priced Madison Avenue advertising campaigns served as the mechanism to deliver brand messaging and awareness. Today, positive online customer reviews, authentic Instagram followers, loyal Facebook fans and social influencers have supplanted shelf space and advertising as the primary source of verification and acceptance for brand credibility, product efficacy, and quality. Furthermore, successful social media strategies can create authentic bonds with consumers who truly want to be a part of the brand, all at a fraction of the cost of a traditional branded consumer advertising campaign.

The impact of social media is most readily observed in the color cosmetics category, where online influencers have built social empires with tens of millions of followers. With 29 million followers, Huda Kattan ranks as one of the top beauty influencers in the world, having been named one of Forbes’ “Top 2017 Influencers in Beauty” and TIME’s “Most Influential People on the Internet.” Huda Beauty, launched in 2013, is one of the fastest growing influencer-driven color cosmetics brands, with an estimated $200 million in sales, and recently received a minority investment from TSG Consumer Partners. As a reference point, Huda’s 29 million followers is 9 million more than MAC Cosmetics and 20 million more than Maybelline. Too Faced Cosmetics, another social media darling with more than 11 million Instagram followers, sold to Estée Lauder for a reported $1.45 billion, representing a multiple of over five times revenue and the largest acquisition in Estée Lauder’s history.

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