The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
NEW YORK, United States — "Skyrocketing prices" and "decreased product sizes" are just some of the customer complaints that have recently dogged popular skincare brand Paula's Choice. Things began to shift in 2016 when the company, known for its effective and reasonably priced products, was acquired by private equity firm TA Associates and founder Paula Begoun stepped back from daily operations.
“PC [Paula’s Choice] has introduced a bazillion new products. If I recall correctly, Paula Begoun was in favour of a simple skincare routine, with occasional stronger active treatments. The list of products and suggestions for routines becomes larger and more Byzantine with the passing of each year,” wrote one user three months ago on Reddit, a popular discussion platform for beauty enthusiasts.
“So much for state-of-the-art skincare that is affordable to the masses,” wrote another in response. “I am old enough to remember when Paula’s Choice introduced non-flashy, state-of-the-art yet reasonably priced products and was constructively critical (without being snide or self-serving) of sub-par beauty products. That was when Paula was still founder and CEO. She was a badass.”
After Begoun sold the company to TA Associates, which also owns fashion brands Equipment, Current/Elliott and Joie, and appointed new chief executive Tara Poseley in 2017, some believed the admired and opinionated founder, known for taking other brands to task for products she sees as ineffective or misleading, had abandoned her core customers.
Begoun first got into the beauty business as a makeup artist after a history of acne and eczema. “No matter what products I bought at the cosmetics counter, it didn’t get better,” she told BoF. “For anybody who’s had acne, the first thing they do when they wake up in the morning is run their hands over their face to see what’s happened overnight. That’s how traumatic it is.”
Her quest for honest beauty led her to launch online, direct-to-consumer beauty brand Paula’s Choice in 1994, which quickly grew a cult following for products for the face featuring tried-and-true ingredients (vitamin C, retinol, antioxidants) that many brands did not use. (Today, such ingredients are a key feature of buzzy skincare brands like The Ordinary.) It was also uncommon at the time to be selling beauty online, to which Begoun credits her former husband "who knew the Internet."
The global beauty and personal care industry, worth $465 billion in 2017, according to Euromonitor International, is still dominated by multinational conglomerates like L’Oréal and Estée Lauder Companies. However, direct-to-consumer brands have been increasingly gaining attention “by being quick to offer products that address consumer needs [and] by tapping into niche areas first," said Euromonitor’s senior beauty and fashion analyst Kseniia Galenytska.
It was this convenience as well as her innovative formulas that drew ardent fans to Paula’s Choice. “[My first product] was the BHA lotion,” said Gabriel Pinkas, a Bosnian-based university professor, who first discovered Paula’s Choice in 2014 and has remained loyal to the brand since. “I loved it because it helped my oily skin, uneven complexion and clogged pores. Shortly after that, she launched a retinol product and [back then] none of the drugstore products contained actives like salicylic acid or retinol.”
In addition to her brand, Begoun launched the website Beautypedia.com, which contains reviews and in-depth ingredient dissections for over 45,000 products from more than 300 brands. (The site was born after she received thousands of letters from women across the nation asking for specific information about various beauty products, having read her books “Blue Eyeshadow Should Be Illegal” and “Don’t Go to the Cosmetics Counter Without Me,” which resulted in the first of many appearances for Begoun on The Oprah Winfrey Show.)
It seems illogical to slag off one brand for using mineral oil and then use it in your own brand.
But in 2016, things started to come undone, starting with Begoun’s decision to launch eye cream (the founder had famously dismissed the need for the product), which triggered a consumer backlash. “I have been telling my friends all these years that we don't really need to buy an eye cream and [we] should just use moisturiser instead, based on what Paula Begoun told us. But now, she’s selling eye cream? Why?” asked a customer on Reddit following the launch.
Some fans questioned her candour. “I have great respect for [Paula] sticking her neck out and taking on the brands and their claims. But I don’t understand how someone who has previously written a scathing review about an Eve Lom cleanser and cream [for containing mineral oil] can then bring out a product that contains mineral oil,” wrote industry veteran Caroline Hirons on her website in 2013. “It seems illogical to slag off one brand for using mineral oil and then use it in your own brand.”
Others queried whether she should continue critiquing other people’s products while running her own brand. (To which Begoun said: “Well, there are thousands of beauty brands out there, but I’m also the only cosmetics company in the world to recommend products other than my own. If you go to the La Mer counter, they would never tell you, ‘Clinique has launched this great new product,’ even though they’re all owned by Estée Lauder.”)
At the same time, as skincare has emerged as beauty’s growth engine, with sales outpacing makeup, according to data from NPD Group, Paula’s Choice faced competition from emerging skincare brands like The Ordinary, Cosrx, Drunk Elephant and Sunday Riley. “There are countless brands that have since come onto the market, like Deciem or The Ordinary, offering reasonably priced products and have become cult favourites,” said beauty-focused research firm Kline’s Naira Aslanian.
On Instagram, Paula’s Choice has 89,700 followers, trailing Sunday Riley (218,000 followers), Drunk Elephant (308,000) and Deciem (364,000). According to Tribe Dynamics, which measures social media engagement for brands, Paula's Choice accumulated $1,680,911 of earned media value (EMV) — the equivalent cost of traditional advertising that would garner the same exposure as the mentions of a brand or campaign — for the second quarter of 2018, sitting among other skincare brands such as Jergen's and Dove. (In comparison, the industry average for the top 10 mainstream skincare brands for the whole year was $35.6 million of EMV.)
“Do [new direct-to-consumer brands] pose a threat? Some do. But Paula’s Choice still has a strong positioning in the market,” argued Aslanian.
Today, Begoun is no longer involved in the day-to-day running of Paula’s Choice, which now has a global team of 200 employees. Revenue hovered around $70 million in net sales in 2016, according to market sources. But the privately held company declined to share recent figures.
For Poseley, who joined Paula's Choice from Lululemon where she was chief product officer, the brand was in dire need of a reboot. "If you ask what my biggest priority is right now, it's awareness. I want to take Paula's Choice from being the best-kept secret to be the worst-kept secret," she said. "I was trained by Mickey Drexler at the Gap to lead with product. There's a lot of marketing-driven companies that lead with marketing, but if you're thinking about bringing the best product possible to your customer, you will win."
The brand remains primarily a direct-to-consumer business — 90 percent of sales come through the channel — although the brand is also carried by 10 retailers globally, including Selfridges, Nordstrom and Birchbox. "The retail partners we pick are much more about being strategic, helping us build awareness and really helping us to drive education [of the brand and its products]," Poseley said.
Part of Poseley's strategy also includes boosting speed-to-market. "They've been fast, but not as fast as they could be. The company needs to play more aggressively to its entrepreneurship and get product to market more quickly," she explained. Beauty brands, which work with longer innovation timelines, have traditionally moved more slowly. But in a world where trends and demand for newness now move at the speed of Instagram, 'fast beauty' brands like NYX, Colourpop and Kiko Milano have shortened their innovation cycles and are getting products to market quicker than ever before.
If you're thinking about bringing the best product possible to your customer, you will win.
Poseley is also focused on introducing more products, hence the launch of an eye cream, which was the number one product search on Paula’s Choice for years. Speaking to BoF, Begoun insisted that she has never been against eye cream. “My eye cream has always just been my face moisturiser [and] people didn’t believe me that you could use a well formulated face cream around your eyes.”
As for the concerns around product price, which has increased on average $1 a year over the past five years, Poseley said: “I want to be at the forefront of new ingredients, but sometimes those ingredients are going to be more expensive.” She noted that a “scientific” and “no-frills” approach to product development and packaging has always been fundamental to the brand. “We do not fairy dust, and we will never fairy dust. To our customer it [might seem] that we’re getting more expensive, but to me, that’s us driving innovation.”
For Selfridges, which exclusively picked up Paula’s Choice this April, business has not been impacted by recent criticism. “Customers want products that are effective and no-nonsense, so it is hardly surprising that we have had such a positive response,” said Emily Saunders, beauty buyer for the London department store.
Some fans, however, are not convinced. “Paula is relying on old credibility [but it] looks like she forgot what she used to say in her books: ‘good skincare should not be a luxury, it shouldn’t be expensive,’” said Pinkas. “Raw materials and formulations don’t make the high price, insane margins do. And no skincare line should have a range of a zillion different products that are essentially the same.”
“I feel that by selling the company, Paula failed so much of what she previously stood for,” he continued. “From a consumer rights advocate, she became a greedy corporate, the one she used to criticise the most.”
Begoun is adamant that despite the changes to the company, her priority will always be her consumers and using scientific research to back her product claims. “I want to educate people so they don’t use what doesn’t work," she said.
"I feel like a lot of [indie beauty brands] today are trying to do what I do. Some of them have produced good products, while others have just copied our products — some of them well, others not so well," she continued. “All you have to do is take a look at my work and I think it speaks for itself, but you’re never going to make everybody happy,”
“Paula has been fighting the good fight for truth in beauty her entire career. We have always been and will continue to be a purpose-led brand,” added Poseley.
Editor's Note: This article was updated on 5 October 2018 to clarify that Caroline Hirons' comment was from 2013. In addition, a previous version of this article misquoted Tara Poseley saying 'Paula has been fighting the good fight for truth and duty.' This is incorrect. The correct quote is 'Paula has been fighting the good fight for truth in beauty.'