The One Weird Trick Beauty Companies
Two weeks before Valentine's Day, Kim Kardashian West mailed various beauty editors — not me, hi Kim — one (1) chocolate heart the size of a toddler and one (1) wooden mallet.
The implied invitation, well-documented on social media, was to smash the heart open. After all that work for both the basher and the person inevitably asked to film the operation, the big reveal was a bottle of KKW Kimoji Hearts, Kardashian's second fragrance.
Today, the Kimoji Hearts page on the KKW Fragrance website is slapped with "SOLD OUT" in big, red letters. You can still click through to buy the fragrance, but instead of product information or even a waitlist, the site directs you to a buy a gift card for a future moment when, we assume, the fragrance is back in stock.
Anyone who has bought the beauty products that the Internet deems worth our time in 2018 — from brands like KKW Beauty, Too Faced, The Ordinary, and Pat McGrath Labs — has probably spent a late night online hitting refresh. Social media means customers know more than ever about skincare and beauty, from the moment a brand plans to release a new product to the benefits of every ingredient inside. Individual brands have the intense fandoms we more typically associate with pop stars and CW shows. Just like Harry Styles concert tickets and Off-White for Nike sneakers, new beauty launches have become must-buy events: Be there (online at the moment of the drop) or be square (left without peach-scented cheekbones or Kylie-approved matte lips.) Similar to Harry Styles and Nike, what may have begun as genuine stanning is eventually co-opted as the brands themselves stoke the hype.
But when products sell out in minutes, customers are left empty-handed and bare-faced. That may or may not be part of the plan.
Five days after Kim Kardashian's piñata of a Valentine confused customers, inspired editors, and most of all, generated headlines, Kimoji Hearts Fragrance sold out. Her fans knew the sell-out was coming, so the diehards copped their perfume immediately.
"It is very important to me to buy a product before it sells out, especially if it's limited edition like this fragrance was," a fan named Elyse explained to me. "I bought it on a hope that I would love it, which I 100% do, she did an amazing job, but even if I didn't the packaging alone was enough to buy it." By Kardashian standards, a run of less than a week may not even qualify as a success. When Kim launched KKW contour (the beauty trend that she helped mainstream) kits in 2017, the entire stock of 300,000 units reportedly sold out after just three hours.
KKW Beauty and Kylie Cosmetics may be the most vivid example of hyper-demand, but you don't have to be a Kardashian-Jenner to generate a beauty frenzy. Makeup lovers will remember when Too Faced launched Sweet Peach, a collection of peach-scented lip oils, blush, highlighter and eyeshadow that purported to work on every skin tone. The company scheduled an online release at 12:01 AM. Prepped for a rush of traffic, the brand created a "digital line" to process an onslaught of orders. By 2:41 AM, the line was over 90,000 people long. Two days later, Too Faced founder Jerrod Blandino himself stoked the hype on Instagram with posts informing customers about product availability. Even after (or, more likely, because of) the rapid sell-out, Ulta gave Blandino an award for Best Launch of the Year.
When Refinery29 asked him about the phenomenon, Blandino cited Sephora and Ulta Beauty's large customer bases as part of the reason why the brand's products are so difficult to keep in stock. "It would be almost impossible to work with Sephora and Ulta Beauty any other way because the numbers are so large," Blandino explained to R29. "It's a matter of something being loved with such intensity that the quantities you were hoping would last, don't."
For a brand like Too Faced, small product runs may be a necessity. But brands like Kylie Cosmetics and Colourpop, which share an in-house production facility in Los Angeles, can start manufacturing new product almost immediately upon sell-out. Even in-house, production often doesn't keep pace with demand.
Beauty brands, especially Internet-forward ones, often lean in to the perception that their products are impossible to nab. In 2017, Kat Von D partnered with Sephora to launch a year-long program that gave loyalists the opportunity to buy highly anticipated liquid lipsticks and more before the products "officially" launched. On the first Wednesday of every month, fans had 48 hours to buy that month's selection. If you missed your chance, you'd have to wait until the product actually launched, about a month down the road.
When the program started in January 2017, customers in the comment section of one beauty Instagram frantically tried to figure out the exact time the products went on sale. ("The sephora app says "coming today", but what time!? Anyone know!?" / "im gunna assume 9am PST because they said check back today in the mornig and someone said 12 pm EST which is 9 am PST.")
Fans' urgency wasn't without merit. A press release from the brand made sure to mention that at least one month's early release stock sold out in as quickly as three hours. It took some clever packaging, but the brand updated the concept of a department store preview sale for the internet era.
Kelly Alexandre, Senior Analyst at beauty and personal care market research firm Kline Group, confirms that the American beauty sector is selling out of products faster than ever. "Consumers have a fear of missing out and brands know this," Alexandre says. "Being able to tout that a product is 'sold out' is the new exclusive label that brands want to be able to claim, to entice more consumers. Not only does the exclusivity intensify demand, but it also creates buzz for a brand that may have not gotten the attention otherwise."
For a new brand, it's much more marketing-friendly to tout that a product has sold out instead of just acknowledging that they likely had a small product run in the first place. It's technically true, and it also leads to a FOMO factor.
I spent one semester as an economics major, so I assumed that the principle at play here was simple scarcity, in which the demand for a product exceeds its supply. But "branding, especially in fashion and beauty, marches to the beat of an entirely different economic drum," says Farrokh Langdana, professor at Rutgers Business School. Products that are heavily branded (Kat Von D Beauty has 4.2 million followers on Instagram, for example) have a higher prestige appeal. They can charge more, and they can ask more of their customers, like staying up until 2 A.M. for the latest palette.
But selling out of product may not be as beneficial as it seems. "Whilst sell outs can be great at launch, it certainly isn't a sustainable business model," says Nicola Kilner, recent former co-CEO at Deciem, the company behind The Ordinary and its consistently viral products. "When we launch any new product, we always make an introductory side batch so we can test consumer demand. Once we know the level, it goes into larger scale production."
Recently, Kilner was let go from the company in the midst of a series of controversial Instagram posts from the company's founder, Brandon Truaxe. In response to the drama, a few Ordinary fans went so far as to set products on fire on Instagram. It was an atypical (and certainly unplanned) way to generate hype, but the scrum did manage to keep the company's name in the headlines.
Perhaps the quintessential "sold out" brand, The Ordinary has spawned headlines like "Don't Be Surprised If This $10 The Ordinary Serum Sells Out at Sephora" and "Apparently, Sephora Can't Keep This $7 Hydrating Serum in Stock" (and on a bad day, "Why Are People Burning the Ordinary's Products?") Before The Ordinary launched its first foundation line in April 2017, the brand opened up an online waitlist that allowed customers to sign up to receive email alerts about the product. "We had 25,000 customers on the list for Colours before the launch," said Kilner. "This story went viral so by the time we launched we actually had 75,000 people on the waitlist. In the first week we sold over 200,000 units of Colours."
One trick to keep up with demand? Let a beauty giant who's been manufacturing product for decades help carry the load. Estee Lauder, having noticed The Ordinary's insatiable fandom, invested an undisclosed amount for a 22 percent stake in Deciem. (Estee has also invested in Too Faced and Becca, two other case studies in viral, youth-oriented beauty sales.) With the influx of resources, The Ordinary hopes to get to a place where sell-outs are the anomaly, not the norm.
As Kilner told us before parting ways with Deciem, a bigger space will help. According to Kilner, the plans as of early this year were to move the Toronto headquarters to a new, larger location. "The headquarters' new location which will be 4x the current size, in addition to opening a second Deciem factory," Kilner said. We're hoping this combination is able to increase our volume capacity by 7X."
An option that no one wants: Increase prices in order to lower demand. That's what airlines do, explains Thomas Wiseman, associate professor of economics at UT Austin. "Airlines put a lot of effort into figuring out the highest possible prices that will still fill their planes," says Wiseman. Beauty brands could do the same calculus, but they'd lose a few key benefits of selling out.
"One benefit is that it's a way of getting attention – selling out often generates news coverage, which we see that effect in concerts and sporting events as well," says Wiseman. "Another is that low introductory prices can act as a signal of quality and reliability. The firm is willing to sacrifice revenue up front because it's confident that once consumers try the product they will buy it over and over in the future."
Economists agree that a brand is better served by stretching to keep up with a demand in the long run, instead of maintaining a reputation for sold-out products. "While initial sell-out is great for generating consumer interest and creating a strong PR talking point, if this situation continues over time, the brand may lose customers who will look to competitors who offer comparable products that are in stock," says Dimitri Koumbis, professor at the Rutgers Master of Science in Business of Fashion. That helps explain all the fans who, unable to get their hands on a Kylie Jenner Lip Kit, turn to "dupes", or duplicates, products that are similarly formulated and achieve the same effect.
For customers, a viral product presents both a draw and an inconvenience. "If something is limited edition or is something that I've been anticipating for a long time, I always want to be one of the first people to grab it," Erin Christman, who waited in line for the Too Faced palette, told me over Twitter DM.
Christman is enough of a beauty junkie to intuitively understand which product drops are worth waiting up for and which she can wait to buy until normal business hours. "When different brands release new products that I know will be restocked because they're permanent additions, I'm not in as big of a rush," she says. Her beauty collection is made up of viral products like the Jaclyn Hill x Becca face palette and Nicole Guerrero x Anastasia Beverly Hills highlight palette, offerings fronted by popular beauty bloggers.
"If I've seen a product raved about by multiple influencers or if it's an influencer collab, odds are that I tried to get it as soon as it launched!" says Christman. Influencers can monetize their communities by creating their own products, but quality matters: The same fans who stay up to snag a limited edition palette will also be the ones who post a 20-minute YouTube video review.
The social media component of these sales can't be ignored: Twitter lets customers comisserate about the latest launch; Instagram lets brands give their customers up-to-the-minute updates about what's still available. (Rihanna has even named it the #RIHstock.) "Social media is just pervasive, literally in the palm of your hand, potentially 24-7, in a way that brick and mortar experiences are not because you have to choose to walk into a store," says Natalia Mehlman Petrzela, professor of contemporary American history at The New School. "As companies have come to use 'influencers' to blend sponsored content in with original, non-branded, posts, it has become far harder to distinguish when exactly we are being advertised to versus browsing through photos of friends or even celebrities, a dynamic that never allows us to fully escape the marketplace." Customers who already know their loyalties often aren't hand-wringing about this blurry line. Whether they covet the Kim Kardashian aesthetic, can't wait to Instagram The Ordinary's normcore packaging, or truly hope to support Jeffree Starr, fans today know exactly what they want.
After the initial rush of unwrapping a covetable product wears off, quality is what ultimately keeps a customer coming back. "People will find out quickly that a product is poor, and the company has missed its chance to take advantage of their ignorance by charging a higher price," says Wiseman. By virtue of their media attention, viral brands like Kylie Cosmetics are perhaps even more susceptible to criticism. But quality is derived from customer satisfaction, and some customers are satisfied just to own a product with their favorite brand's name on it. As 19-year-old Naé advised me, "I really recommend people to try Kim's products! I know they may get hyped up, but the hype is right!"
It takes a certain type of plugged-in, devoted customer to respond well to sell-outs. As Koumbis points out, it's these militant customers that are most susceptible to an inflated sense of urgency. "Many brands that cater to a more fashion-forward consumer may look to create artificial demand in an effort to draw consumer interest," he says. Fashion-forward consumers are also more likely to be online, ready to engage in of-the-minute sales.
I'll leave it to you to figure out when hype is deserved. But is there a difference between the intrinsic demand for a product, and the frenzy created by a viral marketing campaign? Not one worth spending time on, economists tell me. Some customers value the eyeshadow with the biggest color payoff, others want to scoop up the palette that none of their Instagram followers have yet, and some want both.
"We can't expect companies to behave any other way except to use every tool they can to increase consumer demand," says Petrzela. "If desire of a product deliberately made scarce is 'artificial' what kind of consumer desires are 'real'? The ones for products that satisfy basic human needs like hunger and shelter?"
