How to Compete With CeraVe and The Ordinary | The Business of Beauty, BoF Professional

NEW YORK, United States – Brooke Langstaff, 41, never agonised over skin care products. She bought whatever she could find at her local drugstore, usually from labels like Aveeno, Neutrogena and Clean & Clear.

Then the pandemic hit. With dry skin and nowhere to go, Langstaff splurged on Tatcha’s $68 “Dewy” cream because Jeffree Star recommended it. The richly textured moisturiser, lavender coloured like the antioxidant-packed Japanese purple rice it’s made from, comes in a jar of the same shade, emblazoned with the brand’s gold logo and crest. A miniature gold spoon for application is held in place by a gold loop on the cap.

“Since having that gold spoon I am spoiled,” Langstaff said. “There are other Tatcha products that don’t have it, and I’m like ‘Uh, I have to dip my pinky or nail into it?’”

Langstaff said she won’t go back to drugstore skincare – even though a 1.7-oz. jar of Tatcha is 13 times more expensive than a 2.5-oz. tube of Aveeno moisturising lotion.

Langstaff is going against the prevailing trend in beauty, where brands that market themselves as cheaper than luxury products, but just as effective, have seen their popularity soar. The internet has made it possible for consumers to compare ingredients across brands, and social media accounts gleefully note when there’s little separating prestige products from their drugstore counterparts other than an extra $50 a bottle.

Comparison shopping has ramped up during the pandemic, as consumers stuck at home shifted spending from makeup to skin care and social media tutorials became an even more popular way to pass the time. The ingredient-first approach of many influencers has driven much of these new skin care purchases, a departure from the brand-first approach that led for decades. Brands like CeraVe, The Ordinary and The Inkey List have benefitted.

This is a problem for prestige beauty labels – which now see brands like The Ordinary, which counts a $7.20 AHA 30% + BHA 2% Peeling Solution as a bestseller – as a “key competitor,” said Marjolein Jonker, a manager in the consumer practice of Kearney, a management consulting firm.

“My clients now really track these mass brands,” Jonker said. “A few years ago that would have not even been a topic.”

For Shanna Warner, a 41-year-old office manager at an environmental engineering firm in Greensboro, N.C., it’s going to take more than a gold spoon to get her to pay prestige prices for skin care. She swears by The Ordinary and Good Molecules, which sell various serums, from hyaluronic acids to vitamin Cs to niacinamide, for as little as $6.

So what would it take for her to buy a higher-end skin care item at full price?

For starters, she said she’d like to see prestige brands follow The Ordinary’s lead and put the concentration and percentage of active ingredients on the packaging.

“I can’t tell how much vitamin C is in there,” she said, referring to one brand’s $74 serum. “When I finish my sample bottle I won’t be replenishing it.”

Luxury labels have to adapt to a new reality where customers are turning to drugstore brands and mixing high and low. The middle of the prestige market is the most affected, according to Jonker. A person who typically bought $65 moisturiser is more likely to trade down to a drugstore brand if the formulas are comparable. A La Mer customer who just bought the line’s newest product, a $650 concentrate, is less concerned about price.

“Luxury brands are still there and have a legacy, but they’re slightly threatened by the fact that the consumer is more sophisticated and really wants to understand the reason why they need to pay a premium,” said Charles Rosier, co-founder and chief executive of Augustinus Bader Skincare, best known for The Cream, which sells for $265 each.

For prestige players, launching a product looks very different than it did even three years ago. The over the top packaging and expensive assets and advertising tactics once key to launches have been replaced by more “real” user-generated content, lighter marketing budgets and value-driven products with active ingredients at the top of the list.

In the absence of high-touch, in-person shopping, Jonker suggested prestige labels capitalise on aspects of the online experience that differentiate from mass offerings, like personalised virtual consultations and ornate gifting and packaging options.

“The Ordinary is still very much just a brand.com where you buy your products and that’s it,” Jonker said.

Pretty websites and gold spoons elevate the experience. New products that promise never-before-seen benefits work even better.

Product innovation is how Augustinus Bader Skincare gets people to keep buying its The Cream, in regular and rich versions. The brand relies on the research of its co-founder, Augustinus Bader, director and professor of Applied Stem Cell biology and cell technology at the University of Leipzig in Germany, to justify its prices. The brand released six products during Covid, including an exfoliator, $85, a face oil, $230, and a cleansing gel, $65.

“You can see hyaluronic acid serums sold by brands for $200 or $300 – and you have The Ordinary selling the same serum, the same ingredient in the nice bottle for $10,” said Rosier. “I understand that a savvy consumer may buy the one from The Ordinary.”

Learnings from a complex Bader developed to treat burn victims without surgery or skin grafts in 2007 were adapted for commercial skin care – and to help fund his future research. Rosier explained that the company charges a premium because of the 30 years Bader himself spent researching in the field, plus the cost of certain ingredients.

“Skincare is much less a story about celebrity or trying to sell something for 10 times the price,” Rosier said. “You can no longer build a long term, sustainable business and require a premium from the consumer if there is not a clear reason.”

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