Just over four years ago I wrote an article for Seeking Alpha on the skin care business. I was bullish on Estee Lauder’s prospects at the time, despite it being near record highs. Of course since then it has just gone up in a straight line. When the business is working it can be great. High margins and loyal customers. Even Revlon does well and has more than tripled in value and it has a long history of missteps. It certainly wasn’t a well run company in 2012 when I wrote about it. But everybody wins in the skin care business. Or do they?
A Look into The Revenue Trends in Skin Care
Selling skin care products on the internet is very challenging. Manufacturing is the easiest part. Anybody can come up with an idea, some attractive packaging and a story. Private label manufacturers are a dime a dozen. Some even extend credit. It is a very competitive business. Making products is simple. Selling them is very difficult. Ideas and operational execution really have limited value these days. What matters is marketing. And it is nearly impossible for a new brand to launch and gain exposure without a massive advertising budget. This is why I continue to marvel at the amount of dreamers in the space with the “next hot idea” like a men’s skin care line (like this one I wrote about) or an organic scrub collection.
Lots of skin care products are sold on Amazon right now. It is a competitive marketplace. Margins are razor thin and most products are simply the same private label version of the same thing that is made by a handful of manufacturers. Online advertising has become challenging. The costs for media buys has skyrocketed as the large brands like the Estee Lauder’s are bidding up the price of traffic for branding initiatives. Companies need deep pockets in order to compete. Expect to spend $10 for every dollar that you make and then hope that your product is compelling enough that the customer will keep coming back. It has become a zero sum game of sorts. This is a major reason that I started this website. I believe that the publishers are doing better than the product sellers. It isn’t easy to grow traffic organically either but we are giving it a full effort.