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What Fenty Beauty and Dollar General Have in Common

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On May 1, a new makeup collection will debut in five times as many stores as Fenty Beauty and Kylie Cosmetics combined. Yet it’s unlikely to get even a fraction of either brand’s press – after all, Vogue isn’t in the habit of featuring items sold at Dollar General.

I know what you’re thinking: why on earth does a chain of bargain-bin variety stores need a beauty line? Popular labels like Nyx and E.l.f. Beauty already sell plenty of products for less than $5, the 16,000 door-strong Dollar General’s maximum price point for its 150-item collection. And store-brand colour cosmetics sales are tanking, declining 25 percent in the US between 2013 and 2018, according to Euromonitor.

The key to Dollar General’s strategy – not to mention Amazon’s new house-brand beauty products and lines planned by QVC and others – is to set aside the old idea of private-label cosmetics.

“It’s all semantics,” said Julien Saada, chief executive of Maesa, the manufacturer behind Dollar General’s new collection, as well as private-label cosmetics and fragrance lines from H&M and Zara.

The term “private label” conjures up an image of generic products stuffed into bland packaging – cheaper imitations of popular brands. These days, however, retailers are rebranding private-label lines as “exclusives” that can stand on their own in the marketplace, Saada said.

For instance, the “Sephora Collection” brand, once ubiquitous at the LVMH-owned speciality chain, has seen square footage dwindle over the last few years. But consider some of the brands that filled that space, including Fenty Beauty, Kat Von D and Marc Jacobs Beauty. They were developed by LVMH’s beauty incubator, Kendo Holdings, and are sold exclusively at Sephora. They may be fronted by famous faces and benefit from top-notch marketing campaigns, but their business models have plenty in common with Sephora Collection and other private labels.

From Dollar General’s “Believe” beauty collection | Source: Courtesy

As a rule of thumb, whether an exclusive counts as “private label” comes down to ownership. If a retailer owns the line, which is the case with LVMH’s Sephora Collection and Fenty Beauty or Boots’ No. 7 collection, it’s a variation on private label. Founder-owned lines like Kylie Cosmetics or Pat McGrath Labs might be stocked exclusively by one retailer, but are free to expand their distribution when their contract is up.

Retailers may not need to dress up their private-label brands as “exclusives” for much longer.

Private label items, from food to cleaning supplies to medication, have a reputation – often unjust – for lower quality than their name-brand competition. That’s started to change, with many shoppers swearing by Costco’s Kirkland Signature products or Whole Foods’ 365 Everyday Value.

Brandless is a start-up based around the idea of turning a private label’s historic liabilities into their chief selling point. The company sells essentials, from snacks to baby products, simply packaged and at low prices. Beauty has been core to the company since it launched two years ago, but the retailer is ramping up its assortment with clean skincare, cruelty-free products and ingestibles. Prices are capped at $9.

Dollar General is similarly ramping up a stable of budget in-house brands, which include Good & Smart, a “better for you” snack line, and Studio Selection, its first private label personal care line, comprised largely of bodycare and facial wipes.

Saada said the makeup collection, Believe Beauty, is designed as an alternative to the chain’s current beauty assortment, which he said is comprised of the cheapest and “least interesting product from some of the leading brands of this country.” Saada said the brand could do $50 million in sales its first year. With the price point considered, this is a lot of units sold.

But even though the model may work for dish soap or mass beauty, when it comes to luxury, or prestige beauty specifically, some still think it might be best to steer clear of private labelling.

Instagram marketing is a non-negotiable today, which makes it tougher for a no-marketing, no-fancy packaging private label to get in on that. Brandless is emerging as an exception.

Private labelling is “going in the exact opposite direction” of consumer trends, which today is led by discerning shoppers with high expectations, from ingredients to a founder’s personal beliefs, said Tev Finger, co-founder and chief executive of Luxury Brand Partners, a beauty brand incubator that’s created labels from Oribe to IGK.

“It’s [private label] almost counterintuitive to what’s going on now,” Finger said. “The [brand] story and what you say is so important, more than ever, especially with how everything is getting called out.”

THIS WEEK IN BEAUTY
Dollar General to launch makeup brand. The variety store will introduce Believe Beauty, a 150 item makeup line where the most expensive item is $5, in almost all 16,000 of its doors.

Viva Glam turns 25. MAC Cosmetics celebrated the giving model’s anniversary with a campaign that features user-generated content, a first for the brand.

Younger people are taking more vitamins. Care/Of, Vitafive, Hum Nutrition and Ritual are raising millions of dollars to grow their “cool vitamin” brands for 18 to 34-year-olds.

Unilever is betting on “cool vitamins” too. The beauty giant purchased Olly, a brand of gummy vitamins and supplements, for an undisclosed amount.

Eos wants to be faster. The lip care line is creating “micro-batches” of product to compete with fast beauty brands by producing fewer units that have less lead time for production.

The Inkey List comes to the US. The UK-based fast beauty brand, known for its ingredient focused products that retail for less than $15, is now carried at Sephora.

Christophe Robin has a new owner. The French haircare brand, which has grown by 40 percent the past two years, was acquired by The Hut Group.

The Business of Beauty wants to hear from you. Send tips, suggestions, complaints and compliments to our beauty correspondent, Rachel Strugatz (rachel.strugatz@businessoffashion.com).