The beauty industry is valued at around $500 million annually, and the COVID-19 pandemic has led to a sharp increase in the proportion of online sales. Today, a London-based beauty startup is announcing a major round of funding in hopes of cutting the booty of that trend with direct-to-consumer online storefronts selling self-label goods.
Beauty Pie, which describes itself as a buyer’s club for high-end beauty and wellness products – can be purchased directly by any consumer in the UK or US, but when one can buy a month (£10/$15) or Joins the shopping club for a year. (£59/$59), deep discount per item – has raised $100 million, which it will use to continue expanding across a broader set of categories, and targeting users with a wider set of sales channels and more infrastructure Will to (warehouse, more pop-up retail) to source and sell its “Basics”-style goods, typified by clean and simple, no-frills packaging, with a focus on the product Is.
“I don’t believe in business models where you spend too much on marketing,” Canadian founder and CEO Marcia Kilgore said in an interview. “So we want to focus funding on opening new warehouses, moving to new areas, and maybe some pop-ups. We meet Sephora at Costco.”
The funding — A Series B — is being co-led by Index Ventures and Insight Partners, with previous backers Balderton Capital, General Catalyst and Latitude VC (a sister fund to London-based seed investor LocalGlobe) also participating. Beauty Pie, founded in 2016, has raised $170 million to date. It’s not disclosing its valuation, but from what we understand, the $1.33 billion estimates on PitchBook aren’t accurate (close sources tell us the valuation is currently under $1 billion).
Beauty products are a very discretionary purchase for many people, and this is even more the case for the higher end of that market – the expensive and luxury brands. Skincare, cosmetics, hair products, and the rest aren’t in the same category as food, and if you absolutely need a product, there are always plenty of cheap options available.
However, in the past year and a half, the living conditions of Kovid-19 have had an interesting effect on that relationship. Many consumers have significantly reduced opportunities to go out and spend money on activities, and are also looking for ways to pamper themselves in these difficult times. That coupled with the fact that many parts of the world were forced to close non-essential stores, or saw significantly less footfall, and it has created a spurt for online shopping for beauty products, and especially good ones. given a big boost. Treat Your Beauty & Wellness has become a sales strategy.
The key to Beauty Pie’s model is that it sources and buys in high-end products from a range of producers and sells them under its own private label. Not unlike Amazon in its private-label efforts and how it combines this with its Prime Buying Club model, it lets Beauty Pie sell products that compete with the best in the market, while outselling those high-end brands in the process. also reduce. It says the typical mark-up for brands is 10 times the cost of making the product.
By offering products in two tiers – one for those who are not in the club, and one for those who are paying a premium to be in the club – it also means that startups can still keep a margin on those items. makes what he sells. The very simplistic approach is also reflected in the products themselves, which emphasize what’s inside the packaging that looks like the outside, implying that Beauty Pie’s own focus is on substance more than aesthetics (ironically). is that the end game is about making us all look and smell better).
The model has been successful for the company so far, even with initial stumbling blocks, like others, it faced at the start of the pandemic. For Beauty Pie, when Covid-19 kicked in, it took its foot off ad spending, Kilgore said, because it could see supply issues shaping up, and it did so to manage that. This was going to be so in demand, so that customers would not return disappointed. It soon intensified again, and now the company has around 300 to 400 SKUs.
Kilgore claims that its subscriber retention rates are currently higher than those of Spotify and Netflix and twenty times higher than those of other D2C beauty companies, partly a result of the buyers’ club model. Members more than doubled in the past year, revenue increased by more than 100%, and the company became profitable for the first time last year as well.
“After only 48 months of operation, Beauty PieDanny Rimmer, a partner at Index Ventures, wrote last December that annual and monthly client figures are unreliable. “At Index, we’ve never seen customer retention like this before.”
It also helps that Kilgore isn’t a first time founder. He is also the force behind shoe brands FitFlops, Soap & Glory and other apparel and beauty ventures.
“Marcia has built businesses for decades that truly treat customers the way she wants to be treated, and Beauty Pie embodies that ethos. With its transformative value chain and subscription model, [it] Insight Partners Principal Rebecca Liu said in a statement, “Let’s members try and eat their pie: the best products at the best prices.”