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Despite the difficulties of 2020, some beauty brands made strides that have set them up for long-term growth. Case in point: customized and personalized Function of Beauty, best known for its hair care products.
The 4-year-old startup closed out December 2020 with a $150 million Series B raise led by L Catterton, which it followed with a brick-and-mortar retail expansion with Target. And before that, the brand made several strategic moves, such as extending into body care and skin care, and launching national linear television ads.
Of the success, on this week’s episode of the Glossy Beauty Podcast, Function of Beauty co-founder and CEO Zahir Dossa said, “It’s getting borderline politically incorrect to ever say you had a great 2020, so I will not commit to having a great one. For the business itself, we’ve had some wins, but we had a lot of tough challenges to overcome, as well. Overall, I think it was a huge success with the ability to carry out all our ambitious plans, all in one year.” Reportedly, the brand has hit $100 million in sales, and it currently has a $1 billion valuation.
But there were hiccups, namely shipping delays and effectively communicating those issues to the customer in the pandemic-filled year. “We were negatively affected by much longer lead times and a harder time getting our products to our international customers, as well,” he said.
Dossa admitted that, in a way, the company is a technology-powered version of the defunct Estée Lauder Companies’ brand Prescriptives. “Prescriptives did custom foundation with people hand-mixing things, but we were the first to automate. And I think that’s the big difference maker of why we’re still around and continue to grow,” he said.
Here are a few highlights from the conversation, which have been lightly edited for clarity.
How personalization and customization can work in traditional retail
“There’s still a small percentage of customers that shop solely online. So, it does become increasingly difficult to get more and more customers and make Function of Beauty and what our model is about not a niche. Target was a perfect partner for us and overlapped really well with our customer base. It’s a really cool spot for [letting] customers, who are a little antsy about customization or don’t want to take a full step into it, have a really easy way of learning the benefits of customization and what makes Function of Beauty so great. It also [allows us] to get a whole other target segment of customers who frankly just prefer shopping in brick-and-mortar stores and getting products right when they want them.”
On possible exit opportunities
“I think anything is possible. I mean, the ideal case is global domination… At the end of the day, our real goal is to make personalization the norm, and we’re going to do anything and everything that makes that possible. If IPO is the right path, then so be it. If it’s a merger with with a big, traditional strategic, so to speak, then that could also be a possibility, or there is a world where we stayed private. We’re constantly assessing each and every single one of those options to figure out just what makes most sense and is most true for our brand.”
Can beauty companies be tech companies?
“There’s a new area of consumer tech companies, so tech companies that are really focused on delivering consumer products and goods. I definitely think we’re in that space. I think the downside of saying you’re just a tech company, it makes it feel like you’re almost all solutions-oriented and almost a service. You lose a lot of the beauty of the brand and that emotional experience that would distinguish us or would establish us as a beauty company or a consumer-first company. I think it is really hard to come up with, ‘Here’s, exactly what Function of Beauty is,’ when it comes to industries as a whole. I think we do high-end automated manufacturing better than anyone for being able to do products like we do. I think we have a stronger brand than anyone in beauty, as well.”