Rare Beauty and its Rare Success
Consumers are being bombarded by products all the time and it seems every celebrity and influencer is trying to build, launch, or sell something, frequently all at the same time. Many are making millions and even billions both on-stage and increasingly off-stage - thanks to a slew of entrepreneurial efforts that capitalize on their stardom and strong social media presence. There are plenty of examples such as Beats, Yeezey, Fabletics, The Honest Company, Casamigos, and many more.
The beauty and skincare industry is not exempt from this trend, with a stampede of celebrity endeavors. These ventures have been, in part, lured by the earlier successes of Kylie Jenner’s Kylie Cosmetics launched in 2015, currently valued at ~US $1 Billion, and Rihanna’s Fenty Beauty launched in 2017, currently valued between US $2-3 Billion.
But now, celebrity brand failures have started to pile up – as has been brilliantly reported by Bloomberg, Vogue Business, and BoF. As the wheat has progressively been separated from the chaff, Rare Beauty launched by Selena Gomez, has stood out in terms of sales, customer engagement, and reviews.
Why is Rare Beauty succeeding where so many others are failing?
More than 50 celebrities and influencers have launched cosmetic, haircare, and skincare brands in just the last three years. Image from Bloomberg News tally.
Alluring yet Treacherous Waters
After studying what it takes to launch a beauty brand, my conclusion is that it’s foolish for anyone, famous or not, to underestimate the complexity of this business. Unfortunately, many celebrities are just trend following, backing endeavors that don’t apply to their values and brand or focusing on activities that are not easily connected with their existing image. Queue the launch of Brad Pitt’s gender-neutral wine-inspired skincare line called “Le Domaine”, which was widely lampooned by industry participants for its price, among other things.
This is a seriously tough industry where distribution is intricate, production is capital intensive, the market is highly saturated due to low barriers of entry, generating brand recognition is painful, and meeting customer expectations is never-ending. Nonetheless, new entrants are lured by the potential for high profitability and the global total addressable market.
According to The State of Fashion, Beauty report by McKinsey “in 2022, the beauty market—defined as skincare, fragrance, makeup, and haircare—generated ~US $430 billion in revenue. And “The beauty market is expected to reach ~$580 billion by 2027”. Looking specifically at cosmetics globally, the total addressable market stands at US $80 billion globally, accounting for 19% of the market.
Changes in consumer behavior, evolving beauty perceptions, the rise of social media, and increasing consumer spending power are reshaping the beauty industry landscape. GenZ and Millennials are more sophisticated than ever, dedicating hours to online research to find the perfect product – one that’s effective, sustainable, and values-aligned. As the demand for wellness rises, there’s a discernible shift towards products and services that allow the customer to look and feel good.
Beauty has become less discretionary than ever and has become embedded in the daily routine.
Emerging brands, even after a successful launch, must contend with giants like L’Oréal and Estee Lauder. These conglomerates with vast resources, global distribution, and iconic global brands are constantly transforming to stay relevant. These conglomerates are not Blockbuster and Barnes & Noble.
Source: https://www.herstylecode.com/beauty/top-beauty-makeup-brands/
The Vision Behind Rare Beauty
As I discovered, by 2018 Selena Gomez had shared her journey and struggles with mental health. Social media had become challenging for her, which pushed her to leave it behind for a couple of years. “In 2020 she was interviewed by WSJ magazine ahead of her Rare album release. She admitted that some of the album was inspired by her journey with her mental health as well as her struggles with self-esteem.” This focus has become a centerpiece of her life, in both her music and TV. This personal narrative has resonated strongly with her fanbase, making her brand more authentic, relatable, and robust.
Unlike many makeup brands, Rare Beauty was conceived with a distinct mission, not merely to produce an overall good product. I believe Selena leveraged her vast social media platform to gather insights, identifying a gap in the beauty market—a brand that champions positive self-image, inclusivity, and mental health awareness, particularly among younger audiences.
A huge opportunity when looking at how consumers are becoming more diverse and where around one billion people globally are affected by mental health issues. Moreover, by 2050 more than half of the United States will be Hispanic, African American, or Asian. Globally, important centers of consumption have arisen in India, China, Southeast Asia, and the Middle East - an increasingly multi-polar world.
Rare Beauty’s value proposition sits at the intersection between beauty market trends, technology trends, and consumer needs & values.
Sources: Forbes, BoF, McKinsey, Rarebeauty.com, L’Oréal Annual Report, CB Insights, Yahoo Finance
The Team
In 2019, Selena Gomez embarked on a journey to build her own fully independent brand. Differentiating herself from many celebrity brands that used incubators such as Kendo by LVMH (Fenty Beauty) or Forma Brands owned by General Atlantic (R.E.M Beauty). She assembles a seasoned team to launch a small to middle-market-sized company – bringing onboard industry stalwarts from multiple successful firms. Starting with the person she chose as CEO, Scott Friedman.
From my research, this is an impressive guy who has been CEO/President of 5 different beauty companies and seems like a go-to person for this sort of endeavor. He is most well-known for Nyx Cosmetics which sold to L’Oréal in 2014 when he was CEO for an estimated US $500 million. Later, he became Bellami Hair’s CEO, which became the number one hair extension brand worldwide and was acquired last year by L-Catterton-backed Beauty Industry Group “BIG”, for an undisclosed amount.
It seems like Scott came in a “package deal” with Nikki Eslami, Bellami’s founder since she is the only other publicly recorded investor (New Theory Ventures) in Rare Beauty aside from Selena. Along with Nyx veterans: Joyce Kim – Chief Product Officer and Mehdi Mehdi – Chief Digital Officer. Katie Welch was hired as CMO, having previously served as the General Manager of Beauty at The Honest Company, founded by actress Jessica Alba. Elyse Cohen, VP of Social Impact & Inclusion, Rare Beauty President, Rare Impact Fund previously served as Deputy Director of former First Lady Michelle Obama’s Let’s Move! Overall, the entire team is impressive.
Sources: Forbes, TheOrg, LinkedIn
“How do you scale from a scrappy, early-stage startup with a handful of employees to a growth-stage company with hundreds, or even thousands, of employees? Hire the right executives.” A16Z
For those who underestimated the 30-year-old singer-actor-influencer, Selena has showcased the vision of an exceptional and serious entrepreneur. So far, this team has taken the company from launch in late 2020 to US $90 million in revenues in 2022, on top of numerous accolades. Although not quite an exact comparable by-product, Naturium skincare at similar revenue levels was just acquired for $335 million – giving us an idea of the value the brand has created in a short period of time.
Enjoying the article? Share it with friends and colleagues to spread valuable insights!
Click to share and keep learning.
Creating the Brand
Rare Beauty has effectively harnessed Selena Gomez’s extensive social media following on Instagram and TikTok, giving the brand a unique global launchpad and a competitive edge. But just leaving it there would be only looking at the surface of what’s happening. I wanted to dig deeper and understand how exactly they are succeeding and why – researching as well as looking at the company’s social media accounts Instagram and TikTok, user-generated content, reviews, etc. In my opinion, a significant part of their strategy revolves around establishing a clear and unique brand identity.
To begin with, they are using the playbook of many great companies and trying to create a distinct brand as a core differentiator and not just be another commodity. This video by Seth Godins’ video on “Nike's Brand Strategy” really helped to see things clearly. By harnessing a deep understanding of her target audiences’ values/beliefs/needs it allows them to identify and build an assertive brand identity.
“A brand is a set of expectations, memories, stories, and relationships that, taken together, account for a consumer's decision to choose one product or service over another.” – Seth Godin.
They have clarity on their target audience, mainly younger generations, and thanks to Selena have conviction and clarity on what their audience stands for and they built a brand around that.
Source: McKinsey
According to Rex Woodbury, “Gen Z is the largest generation in the world—two billion members comprising 30% of the world’s population—and the generation commands $360B in spending power, up from $143B just four years ago (36% compound annual growth rate).”
With more nuance Katie Welch, Rare Beauty’s CMO would describe the company’s audience as “not so much a demographic as it is psychographic. If someone on TikTok is interested in beauty content or content that is more about their self-worth and mental wellbeing, then that might show up in their feed.”
Examples of behavior shifts happening right now
Examples of behavior shifts happening right now; Sources: (1) 2020 First Insight Report, (2) 2021 Global Data Report, (3) 2023 Cigna Survey, (4) 2022 Walton Family Foundation Study - Image by Rex Woodbury - Digital Native
Rare Beauty’s ethos revolves around authenticity, being comfortable in your own skin, accepting and making an active call for inclusion, and creating self-awareness for mental health. Which is what their target audience seeks. The epitome of this is user-generated content on TikTok like that of katarinaterentieva and that of alltootrechearous.
And more than just hanging a mission statement on the webpage, both Rare Beauty and Selena are making a promise to deliver something to their customers – to carve out a space in an industry that is characterized by unrealistic beauty expectations. And they are walking the talk by having a good quality product, great customer engagement, community building, consistent messaging, a Rare Impact Fund, and more.
Coherence between the brand’s mission and delivery.
This drives loyalty, engagement, higher retention rates, and ultimately higher spending!
Additionally, one of the brand's biggest hacks is its use of positive psychology to resonate with its audience. From product names to social media messages, they encourage self-acceptance and a positive self-image. In essence, customers gravitate towards Rare Beauty because they perceive a unique value proposition stemming from the brand's genuine commitment to its promises.
In a nutshell, the reason customers are willing to select this product over its substitutes is because they believe Rare Beauty has a unique value proposition due to the exceptional coherence between their promise and delivering to its customers’ expectations. In my opinion, at least.
“How did Coca-Cola build their moat? They deepened the thought in people’s minds that Coca-Cola is where happiness is. The moat is what’s in your mind.”- Warren Buffettt
The Woman Behind the Brand
If I had to only use one adjective to describe Selena, it would be resilient. To tell her story and understand who she is, is to look at the life of many of us. It’s a striking thought, but a real one. She has been able to surpass poverty, stiff competition to stand out, overcome self-image and mental health issues, and an auto-immune disease all while millions of people on every corner of the planet watched.
I don’t believe in idols, but I can recognize acts of bravery. Undressing the soul publicly requires courage, and if done genuinely it can reward you with trust, recognition, and appreciation. Let me be clear, this is not about how I see Selena, this is about how the world and her followers see her:
Source: Twitter, Instagram, and TikTok
“I will always start with my health and my well-being. I’ve had a lot of issues with depression and anxiety, and I’ve been very vocal about it, but it’s not something I feel I’ll ever overcome. There won’t be a day when I’m like, ‘Here I am in a pretty dress—I won!'” Selena Gomez
Part I - Final Thoughts
Many challenges remain. While Selena has given her glitter to Rare Beauty to shine, will this be enough for the company to exist as a successful standalone brand? As customers become more conscious and continue to lean into clean beauty, will the current product formulation and ingredient selection be good enough? Will they be able to keep up with beauty trends or will they be able to use their platform to trend set? Does too much of a direct association between Selena and Rare Beauty make the company less appealing for a potential acquisition from large conglomerates (BoF & McKinsey)? Is an acquisition the endgame?
As a great post in Safal Niveshak analyzing Warren Buffet and Charlie Munger pointed out:
“If a business requires a superstar to produce great results, the business itself cannot be deemed great.”
Subscribe to Unbound. to receive Part II of my deep dive into Rare Beauty and all future content.