Marketing Analysis: Colourpop Christina Debartolomeo, Ellis
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Marketing Analysis: ColourPop Christina DeBartolomeo, Ellis Martin, Yifan Ruan, Maggie Schwarz, Kayla Yee 2 Executive Summary FounDeD in 2014 by SeeD Beauty, ColourPop began with the iDea of selling $5 eyeshaDows online. InsteaD of competing Directly with conventional brick-and-mortar makeup retailers, ColourPop harnesseD the new wave of millennial consumers to occupy a niche space as an online-only makeup branD. By marketing solely on social meDia, ColourPop sells trenDy, fast-fashion-like proDucts. These wallet-frienDly, cruelty- free proDucts, promoteD through the use of online opinion leaDers, have resulteD in ColourPop’s gaining significant traction while revolutionizing the online makeup market of the beauty inDustry—just last spring, its new “Churro” highlighter solD out in 60 seconDs. In this paper, we will analyze the specific internal anD external environmental factors that have shapeD the company’s overall marketing strategies as well as assess ColourPop’s marketing Decisions anD positioning to offer our own preDictions for ColourPop’s future. Growth Strategy By utilizing Ansoff’s matrix to analyze ColourPop’s growth strategy, we founD that ColourPop takes aDvantage of both market anD proDuct Development. By engaging in market Development anD selling its proDucts in select physical stores rather than solely online, ColourPop has successfully entereD a new segment consisting of beauty proDuct consumers who shop in the brick-and-mortar Distribution channel. In November of 2017, ColourPop launcheD select proDucts at Sephora, anD this past February, ColourPop took some of its most popular proDucts to the shelves of ULTA Beauty. According to ColourPop’s founDer Laura Nelson, this was an attempt to “meet customers offline” in a more traDitional shopping setting. Selling in physical stores attracteD many new 3 consumers to existing ColourPop proDucts, who otherwise woulD not have maDe a purchase through the website. This growth strategy also DelivereD a unique and elevateD experience to consumers, as it alloweD them to test proDuct shaDes anD quality before making their purchase. Simultaneously, ColourPop implements proDuct Development by continuously introDucing new makeup proDucts to its current consumer segment. By expanDing its proDuct lines to incluDe new concealing proDucts anD extensive eyeshaDow palettes, such as the new Main Stage palette which offers 24 Different colors, along with its original eye anD lip makeup, ColourPop proviDes existing consumers with new proDucts. Ultimately, this serves to increase its share of overall cosmetics purchases compareD to its competitors. As a result of the implementation of these growth strategies, ColourPop has become almost instantly a popular, well-known branD among millennial women that now offers eyeliner, highlighter, anD lipstick amongst other items both online anD in select retail stores. Current Market Situation PESTLE Analysis Applying the PESTLE Analysis to the online segment of the cosmetics inDustry revealeD powerful insight into the macroenvironment ColourPop has to consiDer as it formulates its marketing mix. Politically, online makeup companies have to be aware of the Decision that the FeDeral Communications Commission (FCC) maDe in December to repeal net neutrality. Net neutrality forces Internet service proviDers to keep the Internet impartial; users can access any website or platform, anD no content is favoreD or promoteD over other content. Many small businesses rely on this principle to reach their 4 consumers anD to avoiD being overshaDoweD by larger companies that coulD use their market share or wealth to leverage their relative size anD position in the marketplace. With the FCC’s repealing net neutrality protections from promoting certain content, search equality will be compromiseD, anD the largest names in online inDustries will likely use their market influence anD money to dominate the ecommerce worlD. This shift coulD push many consumers to shop in brick-and-mortar stores, even if they typically prefer online shopping. Regarding the economic environment, the global beauty inDustry saw a 5-percent increase in growth in 2016, according to Euromonitor International. Much of this boom can be attributeD to online retail for makeup’s extenDing access to areas like Asia, a region in which online sales for beauty anD cosmetic proDucts is the highest, according to a 2016 article by William ReeD Business MeDia. In aDDition, DemanD for online makeup is relatively elastic because there are plenty of substitute makeup branDs available at a relatively wiDe price range (value to premium), as this is a highly fragmenteD proDuct category. The social component of the PESTLE analysis consiDereD the pertinent cultural factors that influence consumer buying habits anD preferences in the makeup inDustry. Consumers of online makeup apply a trenDy aesthetic to their social meDia profiles; they seek to feature popular proDucts anD colors. According to a 2014 stuDy by TABS Group, millennials are increasingly turning to social meDia platforms for beauty aDvice from online beauty gurus in lieu of person-to-person interaction in the retail environment. AdDitionally, consumers are beginning to DemanD beauty proDucts that are natural anD organic. From a 2017 report by Fung Global Retail anD Technology, we also founD that 5 the market for male beauty proDucts is growing anD is expecteD to reach $60.7 billion within the next two years, a finDing that has resulteD from genDer roles becoming more fluiD anD allowing men to feel more comfortable expressing themselves through the use of makeup. Disruptive innovation in technology for online makeup is a growing trenD in the marketplace. For example, many companies, such as Birchbox, proviDe a subscription service for its customers—they senD customers proDucts from a variety of companies for a fee monthly. Consumers coulD easily begin purchasing from the prominent branDs featureD, such as Benefit or Makeup Forever. AdDitionally, some companies have founD ways to innovate their proDucts to create two-in-one options for on-the-go consumers. Ecommerce is bounD by a variety of laws, much like brick-and-mortar retail. Many of the laws vary from state to state, so online makeup companies must be strategic in their operations to maximize their profits anD business flexibility while staying within the guiDelines of the laws. AdDitionally, there are shipping restrictions on certain beauty items, such as nail polish anD perfumes, anD some proviDers allow shipments with some aDDitional contracts or fees. Online makeup companies must also must be aware of another law that concerns inventory—when small businesses grow, they must be sure they obtain proper leases within zoning coDes of their area to holD their inventory anD run the business. Makeup companies in general must be extremely careful about the environmental implications of their work. Many establisheD branDs have faceD large public relations crises when their practices of testing new proDucts on animals are exposeD. The online makeup inDustry is subject to consiDerable criticism for 6 environmental Damage resulting from its work, anD consumers can easily spreaD information of wrongDoings on social meDia to attack a branD. Competitor Overview Marketing Management Orientation ColourPop practices the sustainable marketing concept, through which it focuses on people, profits, anD the planet. The company strives to proviDe the best proDucts to its consumers while maximizing profit. AdDitionally, ColourPop Does not test on animals, as stresseD in its mission statement. The majority of ColourPop’s proDucts are vegan, anD those that are not are specifieD on the site. In the past, ColourPop has also collaborateD with No-Kill Los Angeles (NKLA), an initiative against kill shelters. All profits from this specific proDuct line went toward the Best FrienDs Animal Society, NKLA’s parent company. These measures protect animals anD therefore the planet. Competitive Overview Porter’s Five Forces Since ColourPop occupies a niche space in the beauty market, it presently faces relatively few competitors, the largest of which are Glossier, Lime Crime, anD Kylie Cosmetics. Kylie Cosmetics currently leaDs the online inDustry, with sales reaching $368 million total in 2017. While we were unable to finD accurate sales figures for the other competitors, the number of Instagram followers can be a gooD general reflection of the size anD strength of the company, as all of the companies cater to a primarily millennial auDience. Kylie Cosmetics, backeD by reality TV star Kylie Jenner, has 15.9 million followers, while ColourPop follows behinD with 5.7 million. Lime Crime anD Glossier bring up the rear, with 3.3 anD 1.1 million, respectively. 7 To analyze the competition, we implementeD Porter’s Five Forces analysis. As one of the few solely online makeup branDs, ColourPop occupies a niche space anD thus faces meDium inDustry rivalry, with competition mainly stemming from the aforementioneD companies. The threat of substitutes is high because there are many other affordable makeup lines available at brick-and-mortar stores that consumers can choose from. The threat of new entrants also poses a large risk, as there are relatively low costs anD few regulations associateD with starting a branD online, making it easier for new firms to enter the market. Supplier power is low because ColourPop manufactures, stores, markets, anD Distributes its own proDucts on its 200,000-square- foot campus in Oxnard, California. Buyer