Stella McCartney breaks into Beauty.

This week, it emerged that the LVMH-owned brand was set to enter the beauty sphere with a new clean skincare line. The launch, first reported by WWDwill be released early next month on the brand’s website, with three rechargeable products priced between $45 and $140.

With the line, the brand is set to join a long line of Fashion brands that are banking on beauty to boost their top and bottom lines, including longtime cast members Chanel, Dior and YSL and new entrants. like Gucci, Valentino and Hermès. These large heritage companies have traditionally dominated the make-up and skincare industries as far as fashion brands go into the beauty space, while fragrance was the typical route for smaller players, often via a partnership agreement. license with a beauty giant like L’Oréal or Coty. But now, smaller, younger luxury brands have growing ambitions to crack into cosmetics and skincare.

There is certainly room for optimism in beauty, as growth in the wider industry has exploded in recent years. This year, Dries Van Noten and Off-White both launched makeup products alongside their fragrance debuts. They joined Louboutin and Victoria Beckham, who both got into makeup before the pandemic. But it has never been so difficult to enter the sector.

“It’s just a very crowded market right now, there’s a lot of start-ups going on,” said Ariel Ohana, managing partner of independent investment bank Ohana & Co. currently facing are not necessarily the other major fashion houses, but the independent brands that are entering the market today.

Why brands focus on beauty

When done right, beauty can be a lucrative business for fashion houses. In brands like Dior, Chanel and Saint Laurent, it serves as an entry point into the brand, offering ambitious shoppers who cannot afford a bag or shoes a way to buy a brand. In fact, beauty is the cash cow for these companies, allowing them to reap the benefits of high gross margins and high retail without diluting or damaging their brand image.

For luxury houses smaller than a Dior or a Chanel, establishing a robust beauty business can be a fast path to scale, while also serving as an effective client acquisition tool. that allows the next generation of luxury buyers to start a relationship with a brand. Since Puig-owned Dries Van Noten launched its beauty collection in stores in March, the brand has seen greater footfall from younger customers buying the line for the first time alongside existing and older customers, a Ana Trias, director of brands at Puig, told BoF in a May 2022 interview.

“You can reach a very large audience, given the very low absolute average price of these products,” said Luca Solca, luxury goods analyst at Bernstein. “Brands are hoping to convert some of these consumers to other product categories…later.”

This dynamic becomes even more crucial in the current market outlook. As the luxury sector has rebounded from the pandemic, the dire state of the economy means small and medium-sized fashion companies face more challenges as middle-class shoppers and spendthrift shoppers become more discerning in terms of purchases.

The fashion brands that will benefit the most from this momentum are the biggest brands with the strongest DNA – Chanel, Louis Vuitton, Dior, Hermès – while smaller brands are likely to find the market more difficult as buyers reduce their discretionary spending on expensive clothes and high-end shoes.

Beauty, however, is a relatively recession-proof category. The prestige beauty sector has remained buoyant during the pandemic and continues to show strong growth, with sales in the first quarter of 2022 up 19% year-on-year in the United States, according to the market research firm NDP. In difficult times, beauty can be a beneficial activity for small fashion brands to fall back on.

“Beauty is a more stable business than fashion,” said Wizz Selvey, founder of branding and retail firm Wizz & Co. generally come from products that are lines of continuity, therefore less seasonal than fashion.

From an M&A perspective, fashion brands that successfully break into the beauty market can demonstrate their ability to transcend categories, which is evidence of strong brand equity, said Ariel Ohana, partner. director of independent investment bank Ohana & Co. That, in turn, she said. , enhances a company’s attractiveness to investors.

“If you can demonstrate that your brand isn’t specific to one vertical, but really can span multiple verticals, then your brand is so much stronger,” he said. “It just leads to higher valuations and better marketability, which means: it’s an easier brand to sell tomorrow.”

Tom Ford is a good example: the company, which started as a ready-to-wear company, generates hundreds of millions of dollars a year selling perfumes and cosmetics through a licensing agreement with Estée Lauder. The lipstick alone is said to generate $500 million in annual sales. Now the brand is said to be in talks with a beauty conglomerate over a deal that could net the label a $3 billion valuation.

Obstacles to beauty

However, that doesn’t mean it’s easy for a fashion brand to break beauty in today’s market.

With new players constantly entering the space, the industry is increasingly complex to navigate, especially for a brand whose expertise lies in apparel and accessories. In terms of infrastructure, small and medium fashion brands face a huge scale disadvantage. Even Burberry, a £2.8bn ($3.3bn) megabrand, has struggled to grow its beauty business internally, outsourcing management to Coty in 2017, just four years after integrated.

This is probably why, recently, smaller fashion players have taken advantage of the expertise and buying power of large groups to get into beauty. Stella McCartney has parent company LVMH, Dries Van Noten has parent company Puig and Off-White has operating company, Farfetch-owned New Guards Group, whose new beauty arm is led by industry veteran Cassandra Gray, founder of the beauty retailer. Gray purple.

Fashion brands have an advantage over other beauty start-ups in that they already have an engaged customer base, but that’s just not enough to stand out. In today’s market, fashion brands cannot simply launch a line and expect only the brand to sell a product.

“You have a lot of competition and you have to bring either innovation or integrity to the market in terms of what you do, it’s not just about trying to leverage what you already have. “, said Ohana. “In today’s environment, where there’s so much going on in the beauty business, it just won’t work.”

LVMH knows this and sees Stella McCartney as having an advantage. McCartney’s reputation as a pioneer in sustainable fashion has the potential to give her credibility with female beauty consumers looking for “clean” options. Stella McCartney’s beauty brand will reflect the fashion brand’s core values, said Stéphane Delva, director of new beauty projects at LVMH, in a statement to BoF: its formulas are vegan and cruelty-free, its products are refillable and its packaging is recycled.

“Stella pioneered the conscious fashion industry like no other,” Delva said. “There was an opportunity to leverage his experience and expertise to change the skincare market as well.”