Cover Story: Colour me digital

This article first appeared in Digital Edge, The Edge Malaysia Weekly, on December 14, 2020 - December 20, 2020.
Cover Story: Colour me digital
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How local cosmetics brands are thriving online

This year, cosmetics companies, like many others, were thrown for a loop. Before Covid-19 changed the world forever, people who bought cosmetics would use testers to try out the different colours on themselves to see whether they suited them. Some make-up brands even provided counters to give customers a quick makeover so they would buy not only the products they came for, but a whole suite of others as well.

Once the pandemic hit, however, communal testers were no longer made available because of hygiene and potential infection concerns. This move had an adverse impact on the sale of cosmetics worldwide. In fact, when department store Robinsons closed for good in Singapore, a key element of the story was how make-up counters had suffered because of the pandemic as people were not allowed to test the products, which made it harder to get new customers.

Things may be tough worldwide for the industry, but some Malaysian home-grown brands are going digital to fight back.

Adlina Nadirah, for example, launched Velvet Vanity in 2016. From the outset, she had intended it to be online-focused, growing brand awareness through the company’s website and social media platforms before penetrating department stores a year later.

“Even then, our focus is still online, through our digital sales channels. In fact, over 95% of our revenue is generated through online sales. Over the years, some customers have asked us to penetrate drugstores so that there are more places they can test our products. These requests have since died down,” says Adlina.

Similarly, Nita Cosmetics founder Aznita Azman leveraged digital technology to establish the colour cosmetics brand in 2017. She tried to enter the department store market a year after, but realised that some stores were highly selective, prioritising international brands over home-grown ones.

“By the second year, our brand was fully recognised and we managed to have a presence in some department stores. In hindsight, it was good that we held off on it in the first year. It gave us time to build and strengthen our online presence, which allows us not to rely on a third party to ensure business continuity. Today, 80% of our revenue is generated online,” says Aznita.

Meanwhile, SO.LEK cosmetics co-founder Dahlia Nadirah says sales via the brand’s online channels have grown 120% since the Movement Control Order (MCO) was announced in March. “We were quite nervous at the time, thinking that our overall sales would be severely affected, especially as we can no longer participate in weekly bazaars like we used to. Having seen the numbers, however, we are glad that customers continue to trust and support us.”

Noor Diyana Che Othman, co-founder of the brand Oh Most Wanted (OMW), is thankful that the company was launched at a time when internet penetration in the country was high enough that people could trust purchases via e-commerce. She believes the brand would not otherwise have even taken off.

“I cannot imagine starting the business when the internet was not as accessible as it is today. We are grateful that a lot of our customers — whether first time or existing — are so used to buying things online that they don’t mind not testing the products first. Of course, it helps that they trust our brand,” she says.

Establishing customer trust is not as easy as it sounds, though. Adlina says it took many years for the company to refine its digital channels so that it was able to provide a great buying experience. This includes improving its customer service and ensuring seamless payment processes.

To make it easier for customers to purchase their products, many local brands are selling their products on large e-commerce sites such as Shopee. Adlina says this opens up the brands to customers who may want to use only one platform for all their online purchases.

“Before we hopped onto Shopee, our website was already stable enough to cater to high-volume orders. We also offer our customers our own loyalty programme. But Shopee offers vouchers, coins, cashbacks, and, sometimes, free shipping. So, we do understand that some people may want to buy our products there. It also helps that they have an app, which allows our customers to make purchases on the go,” says Adlina.

Social media: Do or die

Globally, the colour cosmetics market is projected to reach US$9.5 billion (RM38.7 billion) by 2023 with a compound annual growth rate of 7.4% from 2017, according to a report by Allied Market Research. Asia-Pacific is expected to witness the highest growth rate in the global market, owing to high demand from emerging economies such as India, China and Indonesia.

Focusing on sales via online channels means the players will need to have a strong digital marketing strategy, which includes having a solid presence on social media platforms. According to a report released by Deloitte last month, the penetration rate of social media in Malaysia is the highest in Southeast Asia at 81%, with an average daily use of two hours and 45 minutes. This is followed by Singapore at 79%, Thailand at 75% and the Philippines at 67%.

The report states that social media has become a driving force in directing traffic to shopping websites. Rising user flow and activity have made social networking the major media for attracting customer groups.

“When sharing a commodity with family members, classmates and friends, young customers are more likely to be stimulated and influenced to shop more, a phenomenon known as ‘grass planting’. Shopping is often followed by sharing, together forming a cycle of ‘sharing-purchase-sharing-purchase’,” the report explains.

To succeed, cosmetics brands have no choice but to be social media-savvy, says Noor Diyana. She adds that the technology allows customers to experience the products vicariously through photos and videos that the company uploads.

“Part of our strategy is to use influencers or key opinion leaders. Depending on the number of their online followers, we categorise these individuals as macro, micro and nano influencers. They have to show and thoroughly explain the products — the colours, textures and swatches — so that their audience would be persuaded to make a purchase.

“Of course, before we hire the influencers, we have to make sure they are suitable for the job. Aside from making sure that their follower numbers are genuine, we also need to ensure that their audience belongs to our target market. Certain influencers have mainly male audiences that have no interest in make-up products, which means it would provide us with no sales conversions,” she says.

Velvet Vanity’s Adlina concurs, saying that the brand focuses on featuring real people instead of A-list celebrities. Photos and videos will not be heavily edited, making the content more relatable to its target audience.

She says: “Since early this year, before the pandemic, we have been trying to feature a lot of real people through ‘raw’ content instead of a full-blown commercial advertising campaign. We focus on inclusivity as well — Malaysia is a diverse country, which means there is a wide range of skin tones. So, we do try our best to visualise our products on as many skin tones as possible.”

The brands also need to upload content regularly to keep their audiences engaged. According to Aznita, the Nita brand’s Instagram account uploads content at least three times a day. “As the saying goes, out of sight, out of mind. We have to constantly upload to be present in our audiences’ feed.”

Aznita says during the initial MCO, there was a lot of fear and uncertainty among Malaysians. Therefore, the Nita team did not think it was appropriate to post its normal content. “Despite this, we knew we could not stop our upload momentum. In fact, we had to be even more aggressive now that people were home and had more time to consume content.

“So, we started uploading content that had nothing to do with make-up, such as cooking and pets. Somehow, this approach worked; our viewership went up significantly during the early months of the MCO, which subsequently helped our audience keep our brand in mind,” says Aznita.

Because mask wearing is now compulsory in all public places, there has been a decline in the sales of SO.LEK’s lipsticks. As such, Dahlia de­cided to focus the company’s marketing efforts on its other products instead, such as nail polish and mascara. “We are also currently big on sponsored posts to attract customers, spending a notable amount on advertisements via Instagram and Facebook.

“One thing I realised during this pandemic is that the Facebook audience is willing to spend. Most of them had not heard of us before we started advertising on the platform. But they asked a lot of questions and ended up buying, which is a pleasant surprise to us.”

She explains that, if the brand spends RM60 a day, it can reach up to 12,000 Facebook users. Since Facebook also owns Instagram, advertisers can add Instagram advertisements to Facebook advertisement campaigns. This means the brand can easily choose to make its advertisements appear on both platforms.

“If we spend about RM1,000 on sponsored posts on these platforms, we can probably get about RM11,000 in sales. This is not a bad investment, but I expected more. That being said, if we were to spend RM1,000 in bazaars, we would probably get slightly less,” says Dahlia.

Currently, Noor Diyana, says OMW’s main platform for social media is still Instagram, but the company has started to establish its presence on TikTok, replicating trendy content on the platform. “Recently, our videos of TikTok challenges went viral. In one of the videos, I did the ‘Barbie Challenge’ (where users use make-up to recreate Barbie’s doll face), which generated over a million views. From that video, we have managed to get orders from the US, France and Mexico.

“We will expand our presence on TikTok and further explore other platforms. Our strength is in content creation, so we will use whatever platforms are available to us, be it Instagram, Twitter, Facebook or YouTube, to reach our target market,” says Noor Diyana.

The pandemic has had a severe impact on the income of many Malaysians who have suffered pay cuts and even job losses. To help these individuals make some income, the local brands have introduced and strengthened their reseller programmes. “It is quite easy; all they need is a smartphone. For Nita Cosmetics, the resellers would need to create an Instagram account, buy products from our website and sell it in their own capacity. This extends our audience reach, aside from helping to boost our online sales,” says Aznita.

Post-Covid-19

To adapt to the new normal, big brands in the cosmetics industry have started to leverage augmented reality (AR) technology to allow their customers to try products virtually. The brands that have introduced this feature include Chanel, bareMinerals and Bobbi Brown. Through these platforms, users can upload their photos and virtually try on products such as lipsticks, eyeshadow and mascara sold online and offline.

Cosmetics giant L’Oréal recently introduced a variety of AR experiences for its customers, including its first lens for Snap Camera, which lets users of the desktop app virtually try on looks from brands such as Garnier, Lancome, L’Oréal Paris and Maybelline. This follows the company’s acquisition of Modiface, a developer of technology for the beauty industry.

“While I think this is a very good idea, it can only be done by well-established make-up brands that have the financial capability to do so. It is not exactly something that we small businesses can realistically execute,” says Velvet Vanity’s Adlina.

Dahlia concurs, saying: “This is something that will definitely help with sales, as it is possible that customers will not be able to try on the makeup products physically for the next few years to come. However, this is not something that local brands can afford to offer. In the meantime, we are trying to work with our designer to create an Instagram filter with SO.LEK’s make-up colours so that our customers can visualise their faces with our products.”

With the ongoing uncertainty and challenging business environment, will the local make-up brands retain or let go of their offline presence? Adlina says the brand is choosing to retain its offline presence, as it is important for those who have issues buying online.

Similarly, Noor Diyana says the company will retain its offline presence because it is one of its branding tools. “Sure, it is not cheap. Some stores charge quite high front and back margins. Aside from our having to pay for advertising and promotion, delivery and visual merchandising display, our products are also placed on consignment. This means that if the products expire, they will be returned to us.

“Still, we worked extremely hard to penetrate these stores and we think it will have a long-term return. This is why we chose to retain the offline presence,” says Noor Diyana.

When it comes to challenges, Aznita says one of the biggest hurdles in the company’s growth over the past few years was increasing competition. She says when Nita Cosmetics was in the development phase in 2016, there were fewer than 10 local brands in the cosmetics industry. Today, there are more than 500.

“The more I think about it, the more I am thankful that we started early and had a good amount of time to build our brand. If we had started last year, we would probably still be struggling to maintain our presence. Our goal currently is to increase our brand awareness and be a household name nationwide, not just in the main cities,” says Aznita.

Meanwhile, Adlina says her biggest challenge is limited resources. Velvet Vanity’s products are manufactured in Malaysia and, while the products are of high quality, the manufacturer is unable to meet the brand’s demand for variety.

SO.LEK’s Dahlia says the company initially looked to have its own factory by its sixth year in business, but this plan may have to be put on hold because of pandemic-related uncertainty. “Right now, we are just focusing on thriving with what we have. We want to be around for the next 10 years, so we cannot be reckless. Hopefully, when the economy gets better, we will be able to execute our plans.”