Talk about putting lipstick on a pig.
When Ted Rubin, head of marketing for E.L.F., a budget make-up company, talks about the Great Recession, he describes it as a welcome blessing, one part of “a perfect storm” that's helped facilitate stellar growth at the mostly online retailer over the past two years. Before the downturn, he tells Minyanville, “People would whisper about using E.L.F. They’d say, ‘Yeah, I use E.L.F. lip gloss, but I’m a M.A.C. buyer.’ Now, cheap is chic, and everybody is looking for ways to save a buck.”
E.L.F., which stands for “Eyes, Lips, Face” makes an entire line of make-up that only costs $1 a piece. That’s right: lipstick is $1, foundation, $1, even brushes are $1 per stick. Two other “premium” labels within the company are slightly costlier, at $3 and $5 per product, which still compares favorably to $30 and $50 per item for most department store brands, even if E.L.F.’s quality is described by many users as simply “fine.”
College students and budget-conscious women have been ordering E.L.F. make-up online since 2004, when the retailer launched, though the products are also now available in Target (TGT) and K-Mart shops. According to Rubin, E.L.F.’s growth has been fueled almost entirely by word-of-mouth and social-media marketing, another part of the storm that's propelled recent revenue figures.
The company doesn’t have a traditional advertising market, says Rubin, but it's used blogs, email, and networking platforms like Facebook, Twitter, and YouTube (GOOG) to reach millions of people in the US and around the world. In the past few years, these social-media outlets have hit a critical mass within a mainstream audience, enabling the make-up sellers to reach further and faster than ever before, according to Rubin. “Almost every day you’ll see another video entry from an excited E.L.F. shopper who has just received a package from us and wants to blog about it,” he says. The company claims more than 40,000 Twitter followers and 30,000 Facebook fans between its various sites. It also communicates daily with 400 bloggers.
And the third event to help E.L.F. reach its tipping point? A glowing, shine-proof review of its cheap products in O: The Oprah Magazine two years ago. When Oprah’s editors tell women to "go crazy without going broke" women listen.
Rubin will not disclose exact sales figures for the privately held company but would say that E.L.F. does tens of millions in sales annually. In the first quarter of 2009, sales were up 40% over the first quarter of 2008. In February 2009, online sales jumped 400% over the same month in 2008, according to Rubin. The company makes roughly 60% of its revenue from its website and 40% from brick and mortar stores.
So far E.L.F. hasn't opened its own shops and has no immediate plans to do so, though Rubin admits that the idea is “occasionally” discussed around the boardroom table. Such a move would put E.L.F. toe-to-toe with department store boutiques like Bobbi Brown or standalone stores like M.A.C., both owned by Estee Lauder (EL). For now, says Rubin, E.L.F.’s online business model and its prices put the label in a category of its own. "We consider everyone our competitor, and we consider no one our competitor," he says. “A M.A.C. fanatic might not ever switch to E.L.F, but she may put me in her car, or in her gym bag.
E.L.F.’s products, all made in China and sold with plain packaging, are quickly gaining fans abroad, too, in the U.K., France, Columbia, Japan, and India.
As the world pulls out of the current recession, the company expects to see demand for its butter pecan eye shadows or shimmering face whip stay stable. “Value will be at the heart of commerce for a long time to come despite upticks in the economy,” says Rubin. “Brands that ignore this new paradigm do so at their own risk."
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