The more I hear of the way that bigger retailers are operating in the beauty industry, the more I feel that it is only a matter of time before we lose some of our wonderful independent small brands. It’s a huge ask to expect the consumer to understand the inner workings and the business side of how beauty retailers operate but it’s just shocking sometimes. I know how a lot of it works, and I am still shocked myself at further revelations.
So, to explain a little bit. For smaller brands – even those that maybe to all outside appearances don’t seem that small – it’s a nightmare to be in a high street retailer. You start out thinking that if only your brand could be on the high street, then all your problems would be solved, but in fact, they’re only just beginning. I’ve been hearing a lot recently about a certain retailer that takes small and new brands into store and the minute they start to be successful, the retailer demands a percentage of the business (up to 50% of equity) to keep the brand on their shelves, totally changing the initial agreement.
Now, it is very hard for a small brand to willingly pull out of a high street position; it could very well be the end of the business. And while the store does help to bring the brand to the consumer eye, once the terms change and the brand can’t afford to – or just won’t – give away a portion of equity in their business, the retailer just heads off to abroad and brings out cheap replicas of the product that has recently departed. If every small brand bowed to pressure and gave a portion of their brand to the store, it would mean a beauty landscape ruled entirely by one or two stores.
Beauty consumers are already manipulated enough by what is known as ‘badging’. Basically, the same products in different packaging. So, while you think you are having a lot of choice, in fact, you aren’t. What you are being convinced into buying is made in the same place by the same people to the same textures – the only thing might be a slight colour variation and other than that it is literally the same gift-boxed palette by another name. They’re able to squeeze the factories to make cheaper products with little investment in design and formulation.. because it’s all the same. It means the margins are massive. If big retailers decide that they want a stake in every independent beauty brand they can get their hands on, to squeeze as much money as is physically possible out of both the brand and the consumer, then we will lose our independent brands and they’ll all be controlled by one retailer’s vision which equates to profit grabbing to the detriment of quality. You can kiss creativity goodbye altogether.
You already see copies of brands made by retailers – they’re everywhere – so it’s important that if you love a brand you don’t fall for the copies. It’s the bigger picture thing – the more you support your favourite brands, the more strength they have in the market place and the less likely it is that they will disappear.
I know of one very innovative brand that is caught between a rock and hard place. Being inside one of the bigger retailer outlets accounts for 80% of the brand’s business. Yet, the margin they have to give the retailer is massive – over 70% – making it hard to carve a living. Are they better off to leave and have their presence and profit shrunk by 80% and build up again from there, or to just suck it up. Many brands are in the awful position of having to suck it up. Worse still, making changes with no notice for terms of payment – i.e. instead of paying you for the product they’ve bought to sell in store within 30 days or whatever, the retailer changes it to say, 90 days, you can see that a small brand’s cash-flow is basically screwed. In some cases, it leads to emergency bank borrowing, and banks are hardly rushing to lend in this climate. So added to the already impossible situation of not being able to supply more product because you can’t afford the ingredients or compontents to make more til you’ve been paid, you can add the hefty charges of a bank loan, if you’re lucky, to the pile of problems.
You might also want to ask how it is that last year, the retailers had very modest sales growth and yet disproportionately high profit growth. Brands are shaved to the wire on beauty and it’s just not fair because behind each brand is just a regular person trying to make a living. You could not pay me to start a beauty brand in this current climate. What brands want – and it is literally there for the taking – is a more ethical way of working where profits come to all sides but in a fairer way. It’s also what beauty consumers need in terms of innovation and creativity. So, what I cannot understand is why another retailer doesn’t just say, ‘fine, come to us..we’ll operate more fairly, we’ll all still make a profit and we’ll have the best and biggest range of beauty in Britain to offer customers.’ I’m no economist, but if all the small brands moved elsewhere for better and fairer terms, then the retailer doing all the greedy squeezing is going to be left with egg on their faces and some deservedly empty shelves. Small brands really need some kind of umbrella organisation that gives them more bargaining power as a whole and not being in the precarious position of swimming with sharks alone. The safety in numbers thing would apply perfectly here, and it’s time.. you know, it’s really time.
This kind of stuff leaves me feeling chilled to the bone and fearful for the future of beauty in the UK. It’s horrible, manipulative and bullying, and yet your average consumer has no idea what goes on behind the scenes. I wonder, if they did know who, what, where, when and why, if it would change shopping habits? I can tell you without a doubt that it has changed mine.