There are a number of brave and tenacious start-ups that have jumped into the ring of the personal care sector in recent years. Many of them have encountered difficulties that can become insurmountable, ranging from financing problems, minimum production requirements and, above all, logistics. However, others have come up with innovative and resilient business models, based on a keen and strategic understanding of the white spaces that lie at the margins of such a mature sector. With their digital native approach, these companies have found themselves in a very favourable environment over the past two years, with a significant advantage over other, less digitally agile companies. We take a look at two of them to better understand their value proposition and formula for success.
Cocunat was founded in 2013, expressing a "challenge" to the cosmetics industry at that time: to halt the massive use of toxic ingredients or ingredients of unknown toxicity. Championing the concept of "toxic free", Cocunat expresses a desire to be not "category killers" but "category leaders", offering an alternative and more transparent model. The complementary expertise & backgrounds of its two founders, Sara Werner (marketing) and Ignasi Faus (innovation and technology), has strengthened its competitive advantage as a digital native company.
Freshly Cosmetics is a Catalan company that has only been on the market for five years. It was founded by three chemical engineers (Miquel, Mireia and Joan) who arrived at an approach for their product offering based on Miquel's mother's hobby: making home-made natural soap bars. They now have an extensive range of natural cosmetics, make-up and even children's and pet cosmetics ranges, all with a 24-hour delivery time.
Freshly Cosmetics expects to close 2021 with a turnover of 55 million euros. In 2019, Cocunat had a turnover of €4 million, and in 2020 the confinement (as well as an internationalisation effort) gave a clear boost to their business: they turned over €32 million. Beyond leveraging the effects of the recent boom in online commerce, what are these two companies doing particularly well? Both are working on an offer focused on natural ingredients and sustainable packaging, responding to some of the most relevant trends in the sector at the moment (in fact, natural cosmetics is growing at 20% per year, compared to 3.2% in the conventional industry). But it is no coincidence that their time has come to shine as driving forces in the category.
Having technology at the core of their DNA has greatly enhanced the business of these two companies, allowing them to identify and tackle opportunities with pinpoint accuracy. When Cocunat decided to move from a "marketplace" model to launching products under their own brand, they did so by analysing accumulated data, turning noise into insights through artificial intelligence.
Knowing, for example, that 55% of their customers had curly hair was the seed that led to the exploration of what is now their most iconic product, the Curl Booster. Its development was guided by an exhaustive analysis of the buying patterns and lifestyle of their users, international trends in texture and scent, together with the right price point, and all of this added up to a successful formula that today sells one unit every 20 seconds.
Freshly also recognises the importance of data and information to make focused and agile decisions in terms of their offer and positioning, in fact, they have 20 programmers on staff. As a result of this focus on optimising the experience, among their 986,000 customers, 60% are repeat customers. Expressing the brand’s authenticity and proximity has allowed them to capture an important opportunity which, as they see it, was very difficult to tackle for bigger brands in the sector, which are burdened by a communication trajectory that’s incompatible with the natural space and can also have difficulties in approaching a younger audience.
The flexibility that both companies have in defining an appropriate communication strategy offers them a significant capacity to innovate and establish a very marked differentiation from the conventional sector. Both seek to cultivate an active and constant dialogue with their consumers. Authenticity is one of the great assets that has helped these companies to form relevant links with their customers.
Freshly, a brand created by young people for young people, has a team called Customer Love, which advises customers one-on-one regarding products and recommends personalised routines for each customer's needs. As for Cocunat, 90% of its ads feature real consumers, generating content for the brand based on home recordings of them using the products. If and when they use models, they tend to be unconventional, such as the 70-year-old woman who advertised their latest make-up line.
Finally, an undoubtedly determining factor in the success of these two digital native companies has been their skill in activating social networks: via influencers, micro-influencers and, above all, sweepstakes and promotions. Freshly sees social media as a crucial tool for active listening. Under the slogan "you choose, we make it happen", their Freshlylab platform invites consumers to be a part of the conceptualisation, prototyping and testing of new products. Cocunat allocates almost 30% of its turnover to online advertising through promotion on Instagram and a network of micro-influencers, and acknowledges that 70% of the company's new customers are obtained thanks to this strategy.
Both companies acknowledge that they are contemplating internationalisation to maintain growth momentum (currently 20% of Freshly’s and 62% of Cocunat’s turnover comes from abroad). Both have also expanded into physical shops, albeit with somewhat different approaches: Cocunat offers a selection of its products through the retailer Druni, while Freshly has opened three physical shops in major Spanish cities in the last year. These steps towards internationalisation and multichannel availability position these two companies to continue growing and demonstrating the clear potential ahead for digital natives in the cosmetics sector.