Highlights from HBA: The Changing Face of Beauty Distribution

HBA is possibly my favorite beauty industry conference. I remember attending four or five years ago, and listening to Sarah Kugelman, Founder and CEO of Skyn Iceland, present her story on a panel about indie beauty brands. I decided I had to somehow find a way to be a speaker – I wanted to be just like her (funnily enough, we had coffee at the Javits at this year’s show, as we now often do, and I told her that story). For the past three years, I have been invited to speak and moderate various panels, which is both a pleasure and an honor.

The panel I moderated on Wednesday was possibly my favorite to date. It was a “Part 2” of a panel I moderated in 2010 on shifting trends in beauty distribution. Last year, that panel was composed of  Shop NBC, Bloomingdale’s and  bluemercury – I was moderating and presenting the brand’s perspective on the various channels (home shopping, department stores, independent beauty boutiques).

In this year’s panel on “The Changing Face of Beauty Distribution,” only “virtual” channels were represented: QVC, Hautelook, and Dermstore.com. Karen Doskow, Industry Manager, Consumer Products Practice, Kline & CO., set the stage for us by presenting some data on the personal care industry. Three key data points:

–          The US personal care market reached $36.5 billion in 2010, surpassing pre-recession levels

–          Industry growth bounced back after a dip in 2009, and was up 2.4% in 2010

–          The direct sales channel (TV, internet, person-to-person sales) achieved a 5.2% CAGR and is the fastest growing channel over the past five years (in comparison, over the same persio, department store sales decreased 3.5%)

–          Within the direct sales channel, the internet posted the highest CAGR, 26%, followed by TV shopping, 19.7%.

No need to further explain why the panel was composed of Allen Burke, Senior Advisor for Beauty for QVC, Paula Scandone, Vice President of Beauty, Hautelook, and David Olsen, Vice President of Business Development, Dermstore. As Allen Burke said in his opening comments, “a significant shift in beauty distribution is the fact that only virtual channels are represented here today.” Indeed…

Here are some highlights from questions I posed to the panelists:

The most significant shifts in beauty distribution in the last three years were identified as:

–          Consolidation (including consolidation between bricks and mortar and internet businesses; think of Walgreens and Skinstore.com for example, or Nordstrom and Hautelook)

–          The advent of mobile shopping; as Allen said, “today it seems almost old-fashioned to be shopping on your computer.”

–          The rise of flash-sale sites such as Hautelook

New sampling business models have emerged, driven by Birchbox, which launched its curated and edited box of samples in September 2010.

–          Both Paula and Allen agreed that this offers an opportunity to expand the reach of certain brands, without the need to internally handle shipping and handling. Indeed, QVC has now partnered with New Beauty on two of its “TestTube,” and plans on continuing this successful association.

–          A slightly different model is Dermstore’s BeautyFix program, which provides consumers full-size products in a mystery box.

The next question centered on the integration of bricks and mortar channels and virtual channels. There was no true consensus, other than the agreement that the consumer is now shopping across all channels. Allen discussed QVC’s partnership with Sephora, and Paula presented the cross-marketing opportunities between Hautelook and its new parent, Nordstrom – in effect, leveraging different consumer bases, introducing Nordstrom consumers to Hautelook, and encouraging the Hautelook consumer to shop preferentially at Nordstrom.

From a brand perspective, I proposed that the two keys to a successful mixed distribution channel is strategy (for example, how do flash sales fit in to your mix, how many times per year, on which products, etc.) and honesty with your partners (let your spas know you are going to be on QVC ahead of time; let your retailers know when your products will be discounted on a flash sale site).

Most interestingly to me, we then discussed the key success factors for the various channels, which are so very different from the key success factors needed in the spa channel (think training, gratis for staff, professional-only products), or in retail (think GWPs, in-store support, ads).

For Dermstore, David identified the keys to success as a true strategic partnership with the brand, brand visibility, and sampling. For QVC, Allen suggested that innovation and the experience of the shopper are key: “It is not about a good demonstration, it is about the experience.” For Hautelook, Paula identified assortment, value, and brand recognition as the keys to success.

HBA is an international show, and TV and the internet are global. We thus had to touch on the three companies’ international plans and experiences. David mentioned that Dermstore used to own dermstore.ca, prior to selling the business to Rogers Communications. While the internet is indeed global, the rules and regulations affecting the sale of personal care products differ country by country, making internet sales abroad complicated. Paula spoke of foreign Hautelook-like companies, including VentePrivée, but suggested that given the young age of Hautelook (3 years old), her focus was still on the US. Allen spoke about QVC’s experience in Japan, Italy, Germany, and the UK. His conclusions were not far off from David’s. Indeed, while US brands tend to do fabulous on QVC UK, UK brands have not been successful on QVC US. Perhaps it is not just the regulatory framework that makes global beauty selling complicated, but also differences in beauty cultures and consumer preferences…

I left the most controversial question for last – how has discounting impacted the various channels? David explained that Dermstore, as a general policy, does not discount. However, the company finds other ways to compete, including free shipping and gift with purchases. Paula is all for discounting, after all, that is the founding principle of flash sale sites. She suggested however that her consumer, while enjoying the discounts, continues to shop at full price. From her perspective, discounting is here to stay, and is should be part of a brand’s marketing strategy (notice, again, the word strategy; think about when and how and why you discount, don’t just do it). Allen closed the discussion by stating that QVC does not offer free shipping because a consumer should understand and be ready to pay reasonable shipping fees for a quality product, and that QVC will not offer a brand at a price that is higher than it is commonly found in other channels.

As the session came to a close, we all agreed that we were all still friends, despite differing perspectives. We also all agreed that it is amazing how different the beauty distribution landscape looks today versus five or 10 years ago. And that is what makes our industry, and this panel, so interesting… I am already hoping for a shifting distribution, “Part 3,” at HBA 2012.

A day in the life

I often am asked to describe a typical day – and my answer is always the same. There is no such thing as a typical day. But I wanted to describe this day. Between right now and 36 hours from now, I will have flown over the Atlantic, been in three US states, been on QVC live, all with a conference call and some emails in between. Welcome to my life. This is going to be a loooonnnggg day!

Friday May 14th, 5:50 am, Geneva, Switzerland (11:50 pm Thursday May 13th EST)

I am up, packing, getting ready for my flight. Coffee is a must, as is checking email at the kitchen table (next to my Mom, who is drinking tea checking email too, and to my Dad, who is eating breakfast and getting ready for a day of patients). 67 email messages between last night 11 pm (ie 5 pm DC time) and right now. I hate different time zones, and I hate sleeping when business is open on the East Coast.

8:30 am, Geneva airport, gate C-15 (ie 2:30 am Friday May 14th EST)

Continental Airlines is having a computer problem. We are supposed to board now, but only half the passengers are checked in. Luckily, I find an espresso bar and Wi-fi. I start up a conversation with the English gentleman next to me, who is also on that flight, and also on his computer. We talk about how traveling really is not that glamorous after all.

First few hours on the plane

I fall asleep before we take off, but wake up for the meal – am famished. I catch up on my reading – my two favorite magazines, Entrepreneur Magazine (the May 2010 issue has a great cover story on the founder of Le Labo, a fantastic niche fragrance company), and Inc. Magazine (where I read about virtual offices and sales tips). Next, some real work on a proposal for a potential distributor.

Next few hours on the plane

One more short nap (better sleep while I can), more work (need to revise the Alchimie Forever brochure), some distraction watching two episodes of CSI. Apply Kantic+ intensely nourishing cream, and Superpulse rejuvenating eye balm to eye contour. Repeat. Drink water. Repeat.

1:30 pm

My girlfriend and “QVC enabler” Nadia picks me up at Newark airport in her cute green Saab. The drive to QVC is scheduled to take about an hour and a half. We chat, catch up, then stop at a rest area for gas, Diet Coke with lime (need caffeine), dried mango (tastes like candy but gives the impression of eating something healthy), and our last call with QVC before the show – with their legal department.

2:30 pm

Call with QVC legal team. Notes to self: I can say firming, but not tightening; I can say my parents are both MDs but can’t talk about our medical spa Forever Laser Institut; I can say décolleté, but not bust. Nadia and I get back on the road, and talk about our respective boyfriends (of course).

4:30 pm

Nadia and I have arrived in the general QVC area, and should be heading to the hotel so I can take a nap, but we have an emergency – I need to get a manicure. Nails are key to looking good on TV. The cameras will do some close ups of me holding my product, and at this point, my hands are not ready. We walk in to “Nail Paradise,” and since we’re at it, both ask for a pedicure in addition to the “necessary” manicure. I love the new OPI Hong Kong summer colors and have been meaning to try them out. I pick “Jade is the new black” for my toes (Nadia looks at me like I am a crazy person, but then reasons that “green is the color of money, so why not.” And it matches my flip flops.). And “Lucky lucky lavender” for my finger nails. Nadia goes with a much more muted sheer for her fingers and coral for her toes. I explain to her that both green and purple are Alchimie Forever corporate colors. She is still looking at me funny.

6:30 pm

Check in to the Hampton Inn Great Valley. It is 7 miles from the QVC studios. The idea is now for me to take a nap, but I can’t sleep. Toss and turn. Give up and get up. Check email. Lie back down. Try to sleep. Finally fall asleep around 9:30 pm.

10:30 pm

Alarm goes off. I think by now I have been up for almost 24 hours, but I actually don’t feel that bad. A shower helps. Eye drops and makeup help too. I am supposed to arrive at QVC all dolled up, even though I have a salon appointment – that is for touch ups only. I never have a problem deciding what to wear, but tonight is a challenge. I am pitching our Alexandrite gel for neck and bust, so I want a top that shows off my décolleté. I brought four options (but two are red, which I forgot is a no-no color for TV), and Nadia brought 5. I end up borrowing her coral Banana Republic top. I don’t have the proper bra, but smart as she is, she jerry-rigs my braw straps with a hair band. What would one do without girlfriends in this situation? We pack a couple other tops, just in case the host is wearing the same color or something that really doesn’t match coral, our laptops, drinks, more dried fruit, and deviled eggs (I wanted an egg salad sandwich, but apparently no egg salad is to be had anywhere in this area).

11:45 pm Friday May 14th

We arrive at the QVC Studios. This is the third time I have been on air, and what has now become somewhat of a routine is comforting. Check in as a guest, walk through the long hallway, pass the QVC cafeteria, the QVC store, and enter the studio area. The hustle and bustle is amazing. TV producers. Guests. Guests’ entourage. Hosts. Hair and makeup people. While I am going on air at 3 am, my host, Gabrielle, starts much earlier, so I have to be here now to meet with her. I have been on air with her before, almost a year ago to the day, for our Diode serums, and I love her. We reconnect. We discuss the key selling points of the Alexandrite gel. I remind her I am Ada (pronounced Ah-tta) from Alchimie (pronounced Al-shee-mee) and not Ada from Alchemy.

It’s finally Saturday May 15th, 12:00 am

It’s time for hair and makeup. Tonight, this is a 30 minute process, apparently my at home makeup job wasn’t so great. I will never get used to the airbrushed foundation. I look great, but it’s not really me. You can’t see my skin through the makeup. The fist time I went on air, I asked the hair and makeup people to not use foundation. They laughed. I don’t ask anymore.

12:30 am

I have 2.5 hours to go. It’s pouring outside, so there is no going back to the hotel (what with the hair and makeup and all). I watch Leslie Blodgett of Bare Escentuals on QVC – she is great, I try to learn from her about how she connects with her consumer (in particular as she is speaking about her Extra Firming Neck Cream). When her show is done and she walks past me, I almost want to introduce myself but can only imagine how exhausted she is. She gets to sleep for a few hours before having to go back on the set. Her product is on air 17 hours this week-end.

1:30 am

Time to catch up on emails again. I put in a good hour of productive work, eating my deviled eggs and more dried mango. I listen to the other guests, who seem to know each other, chat about flights, travel schedules, when they are going to sleep, when they will next be on air, and somehow my 36 hour day seems relatively normal. This is a different world.

2:45 am

I have butterflies in my stomach. I get miked. “Test, 1, 2, 3, Test, 1, 2, 3.” I look at my notes one more time (especially the list of things I am not allowed to say). I walk over to the taping area. This always calms me down. As electric as the air in the studio is, the room in which this is all happening is completely quiet except for the host and the guest currently on air. There are two people moving furniture around, but otherwise the room is empty. There is no audience (even though millions are watching). There are no camera-men. Everything is computer-controlled. The huge cameras move around like alien robots, I love watching them.

3:00 am

Beauty Beat starts. The first product on air is the TSV – Today’s Special Value – the Bare Escentuals Faux Tan self tanning product and brush. I watch Gabrielle and her guest Jessica, a trainer for Bare Escentuals. I watch the model and her long tanned legs and wonder to myself if I can purchase the legs. Focus. Concentrate. I look at my notes again. I look at the screens below the huge cameras, and see that in 30 seconds I’m up. 30 seconds is so short on a normal day, but in the QVC world, 30 seconds feel like an eternity. In 30 seconds, thousands of dollars worth of product could be sold. In 30 seconds, props could be moved and furniture rearranged. In 30 seconds…

 3:09-3:14 am approximately

Watch it here. A few seconds into it, I remember to smile… I am not nervous anymore, I am thrilled to be on air.

3:15 am

As soon as it started, it is over. This part is always anti-climactic. Must be the adrenaline working itself through my system. Months of preparation, of coaching, of calls with various members of the QVC team, all for 5 minutes. Now, the moment of truth. In the “Green room”, there are computer screens that show the numbers. Every possible number, but the key number is $ per minute. I spend the next 35 minutes watching the screen, watching the numbers go up, watching the other guests on air (I met Dr. Denese, she thought I was in my 20s, I told her I was 32 and thanked her for the compliment; she is gorgeous!), watching their numbers too. Nadia and I rehash every second of my 5 minutes and discuss what worked, what I could have done better. We finally make ourselves get up and leave (we could both have spent the rest of the nigh – morning – watching those screens).

4:00 am

Back at the hotel. First stop: bathroom to wash off all of this makeup. Our Excimer cleanser does the trick. Too much adrenaline to sleep, so we open a bottle of cab and chat, like two girlfriends at a sleepover. We debate the pros and cons of sleeping in pajama pants versus pajama shorts. I open my computer and write parts of this. We chat some more. Nadia’s last words “I’ll stop talking soon.” Then, finally, sleep.

7:00 am

Alarm goes off. Where am I? What day is it? Right. Must. Get. Up. Autopilot. Brush teeth, get dressed, pack. Drive to Paoli train station. Begin the journey back to DC. As I finish writing this, I am on the second train, from Philly to Washington DC. Listening to Citizen Cope and typing and happy. The sun is shining, the scenery is beautiful. At this point, I don’t know if I am tired or not, but I am happy writing and sharing this with you. I’ll be back in DC by 11:30 am, and it will still be Saturday May 15th (ie 5:30 pm Geneva time). By then, I will have been up just about 36 hours. And it won’t even be noon… Anyone want to go out tonight?