Some parts of the retail sector have suffered badly during the COVID-19 crisis, most notably the fashion sector. Three months on, the words of Simon Wolfson, CEO of mid-range fashion retailer NEXT, still ring true:
People do not buy a new outfit to stay at home.
It might be expected that the same basic principle would be true of the cosmetics and beauty industry, but that’s not the case with e.l.f. Cosmetics which comfortably beat analysts revenue expectations when it turned in its latest numbers at the end of May, reporting a 13% year-on-year growth. According to CEO Tarang Amin at the time:
We believe that our fundamental value equation and digital engagement as well as our world class team's ability to adapt at ‘e.l.f. speed’ positions us well to weather the COVID-19 storm and continue to gain market share… Consumption in our retailer dot-coms and Amazon was up over 50%. We're also delivering 'wow!' moments, transforming social and further bridging the physical and digital realms...In the past few weeks, we have seen triple digit growth in sales on elfcosmetics.com and a number of our retailer dot-coms.
And while other retailers have been forced into shuttering their bricks-and-mortar stores, e.l.f. - it stands for Eyes. Lips. Face. - took the decision to close its own outlets around 18 months ago after some poor results and the realization that the physical shops only accounted for 5% of total sales, but cost close to $14 million a year to run.
The decision was taken to go fully digital, both direct-to-consumer via its own e-commerce operation and through third parties, including in stores such as Target and Walmart. Amin has no regrets:
We know our consumers and how to engage them with our number one mass e commerce site and reach on key digital platforms. We know how to make products people want, with a unique ability to launch Holy Grail first-to-mass products. We move at ‘e.l.f. speed’ with the ability to bring new products to market in as few as 13 weeks. We have world-class operations providing us the best combination of cost, quality and speed. We know how to go-to-market and grow through strong relationships with our national retail partners. We have expanded our shelf space from 11,000 to 110,000 linear feet in the last five years.
Founded in 2004 by Joseph Shamah and Scott Vincent Borba, e.l.f was set up to target a market for high quality cosmetics at affordable prices. The firm now boasts more than 300 products and a global customer base across 18 countries. More than half of sales now come via the company’s own online operation, with over 2 million people signed up to the website, which justifies what was, in the words of e.l.f.’s Vice President of Digital Ekta Chopra, a “tough” decision to pull out of owning retail real estate:
We didn't know how consumers were going to react. But we just took all those resources and dollars and made an effort to make our digital experience really amazing - something that connected your consumer journey during every single touch point, to make sure that we were harnessing consumer data and learning what our consumers wanted, informing our messaging strategies, our product strategies and then personalizing each experience.
Every eye, lip and face comes to life on our digital experience. [We are] offering an amazing consumer experience that brings in Augmented Reality and amazing video content and e.l.f Discovery, which is our content hub where you can learn how to play with your make-up and have some fun. And It all started with taking those resources in dollars and actually expanding our universe as a digital footprint.
Underpinning the e-commerce operation is the Salesforce platform and its Commerce Cloud offering. Chopra explains:
We have been on the Salesforce platform for more than two years now. Our digital transformation started with Salesforce and all the hard work and investments have paid off. Our overall digital business has grown tremendously across the full ecosystem. As we've looked at our future investments, it's about doubling down on digital even further. A great example was our mobile app, which was launched with Salesforce. We launched this at ' e.l.f. speed'. Speed at e.l.f. is very critical. We saw the app sales triple with little or no marketing whatsoever. Our downloads tripled. Our augmented reality feature got millions of views because consumers could not walk into the store anymore, so they tried on makeup on the app itself.
That last point relates, of course, to the onset of the pandemic and its impact on everyone's lives. In common with every other retailer, e.l.f. had to tear up its plans for 2020 as the virus hit home and lockdowns began, but Chopra says that the firm’s operating model was well-suited to adapt to the crisis conditions:
Change cannot happen without great leadership and alignment all across the board. Our CMO Kory Marchisotto always puts consumers at the center of everything we do. We used data and insights to inform our messaging and product strategies, to stay in tune with the communities we serve. This allows us to be agile and adapt to new things. We threw away any go-to-market plans we had and quickly pivoted and adapted to our consumers’ needs. We launched a page called e.l.f. Cares. which was about everything that we were doing to support the community, what we were doing internally keep the mental well-being of our employees by having these fun town halls. We’re doing all these weekly town halls to stay connected. Our consumer comments have been so heartwarming. It keeps the momentum going and makes sure we're doing right by our consumer.
As for e.l.f. itself, the shift to remote working wasn’t the revolution that it has been for many other organizations, as Chopra says:
My whole team is remote. I maybe have one or two people that were on site. So we were already in the practice of working remotely with lean teams, agile teams, globally as well as all over the US. So for us, the shift [to remote working] was very good and it was very easy to make. For the broader organization, tools like Zoom and Slack, have been really helpful.
In terms of commerce, it's in the cloud. We can run our business from anywhere and my business teams had no issues whatsoever. We didn't skip a beat. In fact, we were even more conscious about staying in tune and making sure we were looking at insights on a more constant basis and pivoting our strategies as we needed to.
For instance, skincare has all of a sudden become a bigger category for us because people are not really focusing on colour cosmetics, they're focusing on skin and making sure that they're taking care of themselves, self care. So that's how we sort of stay in tune and being remote has not impacted us in any negative way.
All of this, plus the seeming reversal of fortune stemming from moving out of the physical own-brand retail model, leads Chopra to one conclusion:
If you don't have a digital strategy today, you're already behind the curve and probably not going to survive. If you had plans, please accelerate them because it becomes even more crucial now. e.l.f. definitely has been ahead of the curve.