When E.l.f. Beauty entered the game, it brought something new to the industry, not only could the brand pump out products faster than anyone, but they were also able to set prices lower than all its competitors.
But now, with a new wave of startups entering the world of beauty, E.l.f. is aiming to speed up its process, even more, just to stay ahead of the game.
E.l.f. originally launched back in 2004 by father-son entrepreneurs Alan and Joey Shamah.
The family duo wanted to bring the same idea fast-fashion brands like Zara and H&M had, but making it relevant to the world of beauty.
Alan and Joey Shamah were also among the first to ditch physical stores to focus on selling cosmetics online.
Not only did sales soar, they nearly doubled between 2014 and 2017, bringing in $270 million.
With that, E.l.f. Beauty went public in 2016.
But it wasn’t long till other competitors entered the space, catching on to E.l.f.’s tactics.
With that, the beauty brand is expecting growth to slow down by 6-8 percent in 2018.
According to analysts, while a push into physical retailers like Target, Walmart, and Ulta boosted sales, it left the company with more unsold inventory.
And it’s beauty brands like Morphe and Limecrime, led by influencers and come with a built-in fan base, that are now fighting for the same space.
With that, E.l.f. has lowered their expectations but E.l.f. executives plan on focusing on what made the company successful in the first place: the ability to not only produce new items but also getting them onto shelves faster than ever.
Senior research analyst at Piper Jaffray, Erinn Murphy, notes:
“The tune of the story has changed from being an aggressive growth story. It seems like management is trying to be more prudent — returning to a place of ‘under-promise, over-deliver.’”
Going All-In On Innovation
Twice a week, about 35 of E.l.f.’s 413 employees in Oakland, New York and Shanghai video conference.
To come up with the next wave of products like:
- eye serums
- lip gloss
- and face masks
In a recent meeting, the group decided that the beauty brand’s most popular and successful lip exfoliators should be offered in a bullet form.
The reason behind this was because the original pot was deemed not consumer-friendly.
In addition to the new size, the brand decided to also expand the flavor options to:
- and grapefruit
Upon approval of ideas, development immediately follows.
And there are a lot of ideas.
In 2017 alone, E.l.f. Launched 128 new items – an increase of 40 percent from the previous year.
It takes about 22 weeks for a new product to hit the market, which is down from the original 26 weeks it took in 2016.
Some products can take as little as 13 weeks from conception.
E.l.f. likes to create cheap yet quality products, which according to E.l.f.’s vice president of innovation, Ellie Off, makes luxurious beauty products more accessible, therefore allowing their customers to experiment and have fun.
And when it comes to product development, everyone from top execs to marketers and researchers participate, says chief executive Tarang Amin.
Amin attends every product meeting.
To quickly compare E.l.f.’s timeframe to larger competitors like Revlon and Maybelline, the process tends to be much slower, with some products taking two years to launch.
In Shanghai, E.l.f.’s labs are next to production facilities, allowing teams the ability to simultaneously formulate a product and work on its design and packaging. Amin says that this allows for prototypes to be ready within a week.
And once a prototype is approved, E.l.f. usually places a small order ranging anywhere from 10,000 to 50,000 units, with one of its suppliers in the United States or China.
And while manufacturers typically prefer a big contract, Amin says that they’ll usually take a chance on E.l.f., with the hope that one of those orders will grow into a multi-million-unit blockbuster.
A Prized Website
E.l.f.’s sales have nearly doubled over the last three years, bringing in $270 million.
And the beauty brand can thank their website: elfcosmetics.com for a lot of that success.
The E.l.f. website sees about 28 million visitors a year.
With that, the brand has made to prioritize online sales.
According to Gartner L2, which tracks brands’ performance online, E.l.f.’s online sales have helped secure good product placement on major retailer websites as well as search engines.
Last year, E.l.f. ranked No. 10 in L2’s DigitalIQ beauty index, which tracks online performance, up from 20th in 2016.
And unlike larger cosmetics brands, E.l.f. does not look to celebrities for endorsements. Instead, they rely on website and search placement.
E.l.f. also mines over 135,000 comments in its website’s review section.
These comments allow the company to figure out ways to improve products even as initial sales figures are still coming in.
For example, when E.l.f. launched its first micellar water last year, the immediate consumer feedback on both their website and social platforms were far from pretty. Shoppers were not thrilled with the fact that the product contained alcohol and complained.
In response, the company got to work and reformulated the product within 10 days.
After the product was re-finalized, the brand sent a new version to everyone who wrote a review with a handwritten note from the R&D team.
“It drove a level of engagement that was so much higher than if we had tried to just minimize the risk to begin with.”