The Kylie Jenner Coty Deal Investment Club |
| Posted: 26 Nov 2019 01:23 AM PST As you have probably heard in the mainstream media, Kylie Jenner recently announced that she has sold a majority (51%) stake of her company Kylie Cosmetics to Coty for $600mm, a deal which values Kylie Cosmetics at $1.2BN. According to her sister Kim, she had been planning to sell it for around a year. Kylie officially started Kylie Cosmetics in 2016, after Kylie Lip Kits debuted in 2015 and sold out within a minute. Jenner's mother, Kris Jenner, then brought in Canadian e-commerce platform Shopify in late 2015 to outsource sales. The company was renamed to Kylie Cosmetics in February 2016 and production was increased. By the end of 2016, the total revenue was $300 million. She used $250,000 of her earnings from modelling gigs to pay an outside company to produce the first 15,000 lip kits. After spending months teasing the kits on Instagram, Kylie then announced the launch via social media just a day before they went on sale–November 30, 2015. The kits sold out in less than a minute. Re-sellers started offering the $29 product on eBay for up to $1,000. Kylie Lip Kits relaunched as Kylie Cosmetics on Shopify in February 2016, this time stocked with 500,000 lip kits in six shades. It then went from strength to strength - in November 2016 her holiday collection snagged nearly $19 million worth of orders in the 24 hours after it launched! By the end of 2016, Kylie Cosmetics was selling over 50 products (not products for over 50s, mainly Gen Z lol), with revenue of $307 million–for a company less than a year old. For any startup, this is outstanding. However, since then, sales have declined. Also, the majority of customers who have tried it once have not returned: a report from Rakuten Intelligence found that 60% of the Kylie Cosmetics customers shopped the brand just once from June 2016 through to May 2019 (this does not include brick-and-mortar sales) but it demonstrates the important problem of customer loyalty to the brand. This drop has been blamed on issues with product quality and packaging (as well as numerous customer service complaints). We can see on Trustpilot there were 76% 'Bad' ratings. With this in mind, it seems a smart move by Jenner to cash in. Coty are hoping that this will allow them to expand the brand globally and enter new categories. In particular, the Chinese luxury market is hot right now - a recent Bain report showed China now represents 33% of the global luxury market (up from 1% in 2000). This is linked to the rapidly growing middle class. In 2016, Coty acquired Proctor and Gamble's Beauty brands (collectively known as Galleria) for $12.5bn. However, this hasn't panned out too well for them (recent debt refinancing of $8bn). Will this inspire a trend of social media influencers to adopt a similar business model of developing their own brand using their direct relationships with their consumer fans, and then selling out to large luxury firms? Or is this unique to a superstar like Kylie Jenner, who topped the Instagram list in 2019 for charge per post: $1.3mm per Instagram post! So in conclusion, a superstar leveraged her massive fame to sell a product. Outsourcing the manufacturing and packaging to Seed Beauty (a private label producer in California), with Shopify handling the sales and fulfilment and her mother Kris handling the Finance and Public Relations. Now, in a period where people are calling for a nearby recession with the inverted yield curve, she has cashed in to the tune of $600mm and still has a 49% stake. So even if it goes downhill, she's banked $600mm. If it goes well and Coty expand the brand, cool. If that isn't based and redpilled, I don't know what is... https://www.youtube.com/watch?v=Az0OeKNtoEU Brave Browser: https://brave.com/fin894 [link] [comments]  |
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