WHY CUSTOMIZED BEAUTY BRANDS ARE SEEING DEMAND

Function of Beauty, which was founded in 2016 and currently valued at $110 million, requires customers to take a quiz on its website covering topics like hair type and hair goals to determine a personalized formula for shampoo, conditioner and leave-in products. The company has been growing at the same month-over-month rate between January and April, but that growth has continued organically despite a reduction in paid advertising, said Zahir Dossa, Function of Beauty co-founder and CEO. Function of Beauty reduced its advertising efforts by 50%, he said — largely affecting TV and social media ads — but the company maintained its ad spending on podcasts, with influencers and with direct mail, as that budget was already allocated. However, between March 15 and April 15, there was a 41.5% increase in search traffic to Function of Beauty’s website, as well as more than 70% increase in search clicks, he said.

Function of Beauty and hair care are not the only brand and category seeing a sales increase. Customized serum brand Atolla, which launched in September 2019, works by sending a kit to customers that include test strips to quantifiably measure issues like skin hydration and pH balance and receive a skin report stating their skin’s health. At the same time, the company formulates and ships out a serum. Atolla recommends a person to re-test their skin before any subscription renewal, so that its algorithms become more attune to skin changes, said Ranella Hirsch, Atolla co-founder.

Hirsch said there has been a “significant” increase in customers who had rarely or never previously shopped for skin care online before, notably Gen X and Baby Boomers. Hirsch attributed this to a few different factors: Because a person cannot receive an in-person consultation, they are attracted to the diagnostic elements of Atolla around issues like hydration and oiliness. Also, because Atolla promises to take the guesswork out of knowing what your skin type is, people are finding comfort in that process.

“There’s an openness to trying something that maybe those customers wouldn’t have done in a [pre-coronavirus] environment, where they would be able to be at Ulta touching and experiencing a product first-hand,” she said. “Our brand also matches up with the habits people [are developing] at home, where they are looking for routines and want to use something that measures progress.”

Hirsch declined to specify the sales increase over the last five weeks, but said that the previous five weeks saw an increase over expectations. The brand has increased its advertising by 50% beginning April 1, on Facebook, Instagram and TikTok. It also increased its email marketing by 30% starting mid-April — its emails go to 20,000 people.

Atolla had a physical partnership with Face Haus that was set to begin, but it has been postponed until Face Haus’ locations reopen. Its fulfillment space in New York City was also closed on March 17 due to social distancing, and the team had to scramble to find a new location in Hudson, New York which it managed to do within 37 hours, she said.

Meanwhile, Function of Beauty maintains five facilities across Michigan and Pennsylvania, and was planning on opening its new 130,000-square-foot facility in Pennsylvania in May that relies heavily on automation. That opening has been postponed until July, however a portion of it is open to help ease fulfillment bottlenecks from other locations, said Dossa. The company experienced varying lengths of delays in fulfillment and shipping, due to social distancing guidelines and ingredient supply chain issues, but has introduced Saturday shifts for workers to continue fulfillment, among other solutions, said Lorna Somerville, Function of Beauty CMO.

The brand had previously experienced (and survived through) Hurricane Harvey, which affected Texas in 2017 and damaged one of its main ingredient suppliers, she said. As a result of that situation, the brand has established a protocol of having multiple suppliers for critical ingredients or products to reduce future complications around a force majeure. For example, a fragrance that was meant to launch in April is delayed due to the fragrance manufacturer, but other products from different suppliers have been able to buffer the delays; a new lavender scent launched April 27, for example.

“They is so little room for error for DTC companies,” said Dossa. “Big companies can sustain multiple quarters [of sales decline] and still weather the storm. But for DTC companies, we can only go about a month before our existence comes into question.”