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THE FUTURE OF ECOMMERCE

Episode 2 - The Future of Ecommerce for Beauty and Skincare Brands

We talk to Jay Hack, Donna Lopez, and Yarden Horwitz on computer vision, tbranding, and social search.

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Donna Lopez
Founder & Chief Executive Officer at MAKING LEMONADE
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Podcast transcript

I'm Derric Haynie, your host. Please email me with your feedback, requests, questions, problems, or if you'd like to be on an upcoming episode, it's derric@ecommercetech.io.

TRANSCRIPTION

Highlights:

 

Introduction

The global cosmetics industry is projected to hit $430 billion in sales by 2022 according to a report by The Allied Market Research. Ecommerce sales grew by more than 15% in 2017 but the beauty category grew sales by 23.5%, meaning this category is growing faster than others.

At the same time, only a little more than 10% of total beauty sales actually occur online, while many other categories are well over 50%.

So what's holding beauty back? A few things actually.

Discoverability, complexion matching and that overall value from physically being able to see the product and try it on, which will always be important, but technology may be overcoming that sooner than we think. Let's take a deep dive into the future of ecommerce. For beauty and skincare.

This episode, extracts insights from our recent virtual events so aptly called The Future of Ecommerce for beauty and skincare. To check out the entire virtual event and replays on demand for completely free, you could head over to beauty.ecommercetech.io.

How Computer Vision is Changing the Online Beauty Shopping Experience

One of the biggest surprises I had while hosting this event is the currently unharnessed power of computer vision and how it can truly change the world of beauty forever.

I interviewed Jay Hack of askmira.com and he explains how his company helps beauty enthusiasts find products that are relevant to them using computer vision. Here's what he said.

 

Jay Hack (Mira):

I was living in Singapore for one of the deployments we were doing. We were making artificial intelligence for banking infrastructure; completely unrelated, at least at surface level.

I had a friend who was from Singapore and she had a specific eye shape known as a mono-lid, which is sort of a flattened eye, if you can imagine that. And I'm sure you can imagine that when you have an eye shaped like that it's very difficult to put on eye shadow if you only see it on people who don't share your eye shape.

And she shared that with me. She said, 'Hey, I actually have a lot of difficulty finding tutorials online for people who share my eye shape–actually using makeup.'

To me as somebody who's been doing computer vision for 10-12 years, that immediately stood out to me as a great opportunity to apply the latest technology from the computer vision world and scan your face with computer vision, do the same for a bunch of influencers online and basically use that sort of mastery with people who can be very informative to you.

We have three and a half million videos, 9 million reviews from 29 different retailers. We have 5 million different images gathered from across the web and we've applied artificial intelligence to all of them to distill the core insight that people would gain from looking at that image. So we can present them in a very intelligent manner.

Just like showing my friend a video of a woman with her eye shape, to giving a product tutorial. We can show you an image of somebody in your skin tone putting on a product or show you a view of somebody who claims to have your same skin type in order to get you across that threshold to actually purchasing a product online.

 

And as Jay continues, he elaborates on how beauty has fallen behind today in ecommerce sales and how that might change in the future.

 

Jay:

This really gets at the core of the problem that we're solving in Mira.

So 11% out of context sounds low and I'll tell you it's super low. Like fashion does about 34% of all of its sales through ecommerce channels. Furthermore, you look at this category specifically and the consumers of them are super digitally savvy. They're on Instagram browsing beauty content. And another fun fact, somewhat of this 11% is the number two category on YouTube is beauty.

So the question is: why is it the case that you have this small product that ships easily, it's got a high SKU count, it's got an infinite shelf life for all intents and purposes. But people's browsing behaviors are not reflective of their purchasing behaviors.

And the answer is, coming from a cosmetics background, it's just such a complicated and experiential purchase that people traditionally have a lot of difficulty assembling that narrative for themselves: why they should be comfortable buying this product and spending their hard-earned money purely based on their online research.

You have this aesthetic concern of 'Is this product going to make me look the way I want to look in?'. Kind of getting back to our earlier conversation to understand what it's going to look like on somebody who looks like you or you need to see a representation of yourself applying that product.

Then there's the pigmentation concern around your skin tone. There's the qualities of a product.

Is it creamy? Is it long lasting? Is it going to be good for humid weather? Maybe you live in Singapore and even getting into the chemical composition of the product, because you're literally putting a chemical on your face today.

So unfortunately it's the case that even in 2020, the resources you have available for navigating this complexity around products are located across the super fragmented domain of online informational resources.

And that's, you know, YouTube for seeing representations of people who look like you putting on the product. And good luck searching for a bald-white-guy wearing Kat Von D Tattoo Liner. I would do it in order to find that. But a textual query is just not very well optimized for that type of information retrieval.

I think the most egregious example of people incurring a lot of friction when they're trying to learn more about products online is, if you want to understand what the ingredients in that product are going to do to you, you're really literally like copying the name of the ingredient from an ecommerce website and you're plugging it into the Google search bar.

You're kind of hopping back and forth and it's a relatively simple insight. Is this product to cause me to break out? Is this going to be bad for my skin?

But the amount of work you have to go through in order to get to that result that you're convinced that it is or is not good for you is significantly higher than it needs to be. This two-hour long process, we call it 'attack of the tabs' where you have to go to 50 different websites, do this research and price comparison, etc.

That's what's really led to this ethically low ecommerce engagement in the beauty industry.

 

Think about this. With the rising power of beauty bloggers and vloggers, the rise of the digital native vertical brand deeper relationships with each individual customer than the previous retail experience of the 20th century and this new power of computer vision, brands will be able to hyper cater their product lines to their customers. Possibly even building a product in a one to one capacity for each customer.

Can't find the perfect shade of blush or foundation? Never again. But to harness this power, you as the brand need to find a creative way to get more information from your customers. And as you know, I'm a huge data nerd myself.

Understanding the Different Types of Data Collection for Ecommerce

Let's listen to Jay explain the difference between implicit and explicit data collection. And maybe this will give you an insight in what you need to be collecting in your business.

 

Jay:

I think that there's, there's two types of input you can take from a customer or consumer. And one of them is explicit where you ask them: what do you use?

And the other is implicit and that's maybe somebody's browsing behavior. Put it this way, if you were to sit over somebody's shoulder and watch every Instagram post they looked at, how long they looked at it as well as every YouTube video they watched, you'd have a much better idea of what types of products they were likely to actually enjoy to put them in their box.

As of today the best solution is if you have a Shopify landing page, the extent of your analytics are going to be what people say in the comments under Instagram posts. What you see on Google analytics is people come to your Shopify landing page, what percentage of them are converting, what assets end up increasing that conversion.

Fortunately there's a much better way like using data analytics and data science and machine learning, you can actually figure out what things should I be doing in order to optimize that funnel.

 

So I'm wondering about you right now. Are you collecting any implicit data or are you trying to collect any more explicit data from your customers? Are you really trying to learn and understand them and are you using all of the data sources available to you?

Odds are with my experience in beauty myself, you're not doing anything.

While some brands have started doing great surveys and getting that information from the consumer directly, maybe there's something more you can be doing to understand their behavior. So my first piece of homework for you today is to think about another important and valuable data point that you need to know about your customer.

Whether that could change the way you build your next product, whether could change your marketing message, change the influencers that you're going to hire to promote your products. Think about what data point might help with those decisions and figure out a way to start collecting it.

How to Build the “Authentic Brand Connection”

This leads me to my next talking point, which is all about deepening that quote, authentic brand connection. How can you as a beauty brand stand out and build relationships in a crowded and highly competitive space?

For that, we bring in Donna Lopez. She's been in beauty since the beginning of her career on the floor of Sephora.

She advanced to doing merchandising buys for home shopping network HSN where she was in charge of choosing which beauty products were hot and which we're not; often selling, selling millions of dollars of products in minutes.

Then she continued to craft the entire industry by being director of brands at BOXYCHARM, a beauty box subscription, and that's where I met her. Now she runs making lemonade where she helps beauty brands tell a story tying together the product and marketing experience to be meaningful and authentic.

Here's what she said about the opportunity brands have today to stand out with an anonymous case study from a major beauty brand.

 

Donna Lopez (Making Lemonade):

Connection is the new influence.

Influencers are a key part and I have built many companies including boxy charm, off of a strong powerful influencer strategy. But just going to any influencer or building out and going to the top 10 most powerful, largest following influencers will only get you so far.

You cannot connect with anybody in this world unless you really know who you are. Right? And I think with brands, one of the biggest keys is not only knowing who you are as a brand, but it's also knowing who you're not.

I took on a client last year that had an incredible following, millions of followers on social media and had the lowest engagement out of any of their competitors. They were probably one third of the engagement, the conversation that any of their competitors had.

The reason for that was I would look at their feed; their brand is known. The reason why they got to the millions of followers that they did is that they are the quirky, colorful, fun brand at an extremely affordable price. But you're getting the quality of a brand that you would find in Sephora.

They weren't leaning into that. What they were leaning into was I looked on their social feeds and all of their marketing collateral and it looked like a Fenty campaign met a Revolve campaign, came together.

That was what the story that they were putting out into the market and they had essentially lost their entire community. Imagine having 3 million followers and getting maybe 500 likes and a few comments on every post. That's not a strong moment for this brand.

So it was really important that we took that learning and said "Okay, you know who you are. You are a quirky, fun, colorful brand." Lean into that, go back to your grassroots and know who you're not. You are not Fenty and you are not Revolve.

So let's really understand the content that we're putting out there. Just because it's trending for many brands doesn't mean that it will trend for you. And so it's extremely important that you really know and understand who you are, but you just as importantly understand who you're not.

So what I did in that moment was I sent their social media team out into a parking lot, and I said ‘Go shoot content. Forget all of the expensive, creative photography studio. I want you to go shoot. 50% of your content needs to be shot in this parking lot.’

I got a lot of pushback initially, especially from the board of directors.

Just trust that this is who your customer is. She wants to see something that is relatable to her. She wants to see the formula of the product coming to life. She doesn't want to see somebody and you know, a beautiful, you know, 1950s car looking like a fashion campaign. She wants to see what this product actually does and why it's so special.

It's so special because the quality is impeccable and the price is unbelievable. So how do we bring that story to life?

After sending them into the parking lot to shoot all of this amazing content, they not only had an increase in following an increase in sales, an increase in product sentiment. They had really re-engaged their community.

People who hadn't been seeing their posts for a long time. People who had not been engaging with their brand in a long time were commenting, were posting. Their UGC increased. The entire brand lifted because they really understood who they were and what their audience wanted to see.

And it was really important learning because they had actually stunted in growth in social, so they had a huge following and had just assumed that because they have a huge following now that they're good.

The reality was was that they had not engaged that audience in a very long time. And they're not connected with her to inspire her to want to talk about the brand in a valuable way. They threw up a meme and got maybe a hundred thousand comments or likes, but it was not moving the needle for them because they were not speaking to her in an authentic way.

So once we made these strategic moves and getting the content to speak to who the brand is—and not really worrying about what was going on with Fenty and all of these other incredible brands that I love and respect—once we stopped the knowledge of all of this brand guidelines coming into play, we were able to speak from an authentic point of view.

That's when we were able to see the increases.

In three months, they grew. After six months of no growth, they grew 300,000 in following which is a huge number, especially when they already have a significant following. Additionally, their engagement increased by 243% in three months and they also had their first viral post which got over a million views and over 3,000 comments and most importantly they increased in sales.

A brand that was declining for about a year in the double digits, we're now increasing up 10%, 20%, 30%.

So it's really impactful when you take these moments to connect with your consumer and when you start from the position of owning who you are as a brand and not worrying about everything else that's happening around you. You can really break through and disrupt in a more meaningful way and actually connecting with your audience.

 

I feel the future of all e-commerce will involve a bit more connectivity on social. I think brands have an opportunity to follow, like and make meaningful comments on their customers' photos. Even the ones that aren't about their brand.

More brands collecting Instagram handles is one of my predictions for the future of ecommerce. I think this information will become nearly as valuable as an email address in the future.

How to Use User Generated Content to Drive Product and Messaging Changes

Now let's have Donna dive into her process as she starts working with new brands on how to uncover the hidden nuggets of the business and brand connection. And in this clip you'll hear her mention Latin X; referring to the Latin community, especially really strong Latin community in America.

 

Donna:

The first thing that I do when I take on a new client is I pull a number of data points, their social listening and consumer data and trend data. But the very first thing I do before I do any of that is I look at the brand's UGC.

So I go straight to the source. I go straight to the customer who is currently sharing your brand, who is currently talking about your brand. What are they saying? Who are they?

And you find these are really amazing nuggets of opportunity when you spend a lot of time in both my team and I, and even though it's a very manual process, at times it's extremely impactful because you can really dive deep into understanding who she is beyond the number that sits on a piece of paper and your dashboard.

One very great example that I have of that is I took on a client earlier this year and when I started diving through the UGC, I noticed that there was a lot of Latin X consumers.

So I had asked about their distribution, if there was any particular reason, if they had done a campaign and they actually looked at me and said, 'No, they didn't really know why.' And the truth was when we dove deeper into that, because I had that little nugget of information, we then dove deeper into that and realize that this was a humongous market that they hadn't even tapped into yet.

We took that moment, what I call the lemons of your business, because my whole company is based on making lemonade: finding the lemons in your business, distorting it to make the most delicious lemonade possible. And the reason why I really go through this process is because once I can find this lemon, we can find an opportunity to go into a new path or to expand or diversify your audience or speak to her and her language.

So we have this really amazing opportunity with the Latin X community, which they had not even touched. So I looked at their influencer strategy and I said, 'Why don't we try this, for the next couple of campaigns let's take a portion of the budget and let's allocate it towards the Latin X community. So let's target it with the largest Latin X influencers. Take a good portion of that budget.'

Of course everyone was concerned, worried. Are we going to hit the right demographic? And what was really incredible about that was that they had really strong influencer performance, but they were seeing a lot of results in earned media value, they were not actually seeing a lot of results in conversion.

It was something that I wanted to test beyond just let's-see-what-happens. I really wanted to dive deep into it.

So I was able to go back to my roots with my boxy term days and reach out to my influencers and my contacts. And I was able to bring them a pool of Latin X influencers that they could reach out to and that we could send PR to and in some cases pay in some cases we had great relationships. We were able to get them at either a great price or to do it, just non-commission based only and we had unbelievable results.

We did this campaign and where they would normally get $1 million in EMV, they got $5 million in EMV. Additionally they had the Latin X influencers have the highest conversion rate of any of the influencers within their campaigns in the history of their campaigns. The Latin X bucket was performing the highest in generating the most sales.

So there was a huge opportunity in sales left that they were missing because they didn't even know the audience they were speaking to and they didn't really know how to get to the bottom of 'How do I market to this individual? How do I speak to her in a language that makes sense to her?' And when I say language, I don't mean like literal language, although in this case in particular we did speak to her in her language because we targeted Spanish speaking influencers.

It's pretty amazing to see how speaking to her in her language literally made a humongous business difference. But also understanding, taking those moments to really look at your user generated content to see beyond the numbers and see who is talking about your brand.

And when you go back and you look at how you're communicating with her and your various touch points, you can obviously speak to her and your brand voice. But how are you speaking to her love language? And how are you speaking her consumer language?

Are you identifying with her? Are you connecting with her in a way that resonates with her? If you find out that 30% of your consumers are moms and you're not talking about being a mom ever, then that's a huge missed opportunity.

There's opportunities to really connect with your customer on a deeper level, which is really what's driving a lot of brand loyalty these days. And especially if you're in this industry, transparency and connection is all key to being authentic because they can smell it sort of a mile away if they don't connect with it or if it's not being authentically spoken to in a way that resonates with her.

 

So what are your takeaways from this?

Well, I think the first thing is to go through the numbers. Maybe if you're a CMO or a head of marketing or a CEO and you haven't looked closely at the user generated content being created from your customers, go back and just naturally analyze who's posting about you.

Not the big influencers, the small micro influencers, the regular people. What are they posting about you? What are they saying about you? And see if you can't uncover a nugget like that.

Now, of course, Donna has a really robust process. I've seen it in action. She analyzes your competitors. She has really detailed analysis that her team does on your social feed and other social feeds to understand those competitors, but I think there's something that you can do yourself to get a potential nugget that could change the direction of your business.

Another important takeaway from here that I really hope your taking to heart is the ability to take risks and take risks with your brand. You need to move beyond the brand guidelines to find opportunities that you haven't yet touched.

If your brand is stagnant, now is the best time to test new waters. It still needs to align with your brand and your core values in a deep, connected way. But if you look and uncover a certain nugget or find a certain opportunity, do not let a team of naysayers stand in your way from executing on a unique and compelling campaign.

The opportunities are there. Are you brave enough to take the risks?

How Google Trends Data Combined with Machine Learning Can Predict The Future of Beauty

And to better relate to our audience and tell a better story, I want to bring in Yarden Horwitz.

She talks about how she is using her proprietary software to analyze the words customers use and the rise and fall of product categories and how to invest in being relevant with less risks.

She's found a way to tap into Google trends data that is really going to blow your mind when you hear this. She used to work for Google trends, analyzing the CPG beauty and fashion industries and many other industries and she's really the right person to talk to about the future of beauty because she actually has the data to make the predictions.

Here's how you can use her tools, Spate. To find your next product launch, tweak the copy on your next Instagram post or ad and generally be liked better by your audience.

 

Yarden Horwitz (Spate):

Even though we left Duo, we're still tapping into Google search data. We're looking at over 10 billion signals in the beauty category.

I think even though Google search is really our bread and butter and that's our background, the reason for why we're so impressed by Google data, every site, every time it's, it still gets us is because Google data really shows intent. It's what people are searching.

I know social media data is really powerful and there's so much to learn from social media data. But what we find with social media and with focus groups is people are very quick to say one thing and then do something else.

And Google search is almost subconscious. You don't even realize sometimes what you're searching. It's really getting into what's top of mind for you within that moment.

People tell their deepest, darkest secrets at Google search. I mean it's all anonymous, but it's really interesting and powerful. And the more honest you are with Google search, the better search the search results will be. So you're incentivized to be as honest with Google and as specific as possible.

You can see people are even searching for stuff that they might not be saying in social on social media and telling the world, but stuff that they're searching and interested in. And it really just gives you an understanding of what top of mind for consumers.

Beyond that, what's also really interesting about search data is it actually happens before the sale. And so we were quoted in this article. WWD did a whole article on US makeup sales declining and this was April last year. And we had been talking to WWD before that.

So I think it was end of 2018 letting them know that search was actually showing that makeup sales were already declining; make up intent or make up interest was declining. And so you can see where consumer behavior is heading just by looking at what they're searching for and how that will impact the sales. So it's been really fascinating just to see what is top-of-mind through consumer search data.

Understanding The Difference Between Trends

Yarden goes on to describe the exact trends in beauty that she can see from a category standpoint and also seeing which indie brands are on the riser of faltering off all with Google's data and her tool Spate.

 

Yarden:

We take all those signals and we've run machine learning on top of it to understand and to find these different clusters. And so these clusters are how we spot trends. So we have sustained risers, seasonal risers, rising stars, and then we have all the decliners.

What we're looking for here is to understand basically the implications of a trend. So we're spotting these keywords that are coming up and taking off. But beyond that we're figuring out who should be tapping into what type of keywords.

So for example, sustained risers are trends that are slow and steady and they're more likely of a safe bet.

Whereas something like a rising star is taking off. And it could be like being next biggest fad, but it could also just be a fad and it could turn into a falling star. So it's a bit riskier. So it's not good for product development. It's not good for brands that aren't really willing to take those risks.

And seasonal risers are also similar to sustain risers that are steady, um, safer bets, but they happen at a specific time every year. And so it's more of a time focus there.

 

Yarden is saying that you can literally bet your product lines, but the success of new product launches on her data, on Google trends data, if you analyze it properly, this will tell you what new product lines to come out with, what new categories are hot and which ones are likely to spike up and drop off.

So phenomenal information. I don't think anybody's really using Google trends data to make those kinds of decisions in their business. So I can only imagine how powerful this could be to you.

Now I want to let Yarden sum up the types of information you can glean using her tool and you can make the decision on whether it's worth your time or not.

 

Yarden:

Yes, that's using data for innovation. Knowing your category, understanding where the growth is coming from, where the decline is, which brands are owning wet, which brands you've got to pay attention to. And then seeing product innovation.

So from a product innovation standpoint, focusing on things that are very early stages but have confident growth rates so they'll stick around for the next while. From a marketing standpoint, finding areas that are already high in volume so you don't have to do too much education, you can just kind of ride away and bring in that language and positioning to your marketing.

So yes, our platform is www.spate.nyc. We also have a newsletter that has a lot of great content on a weekly basis as well as an Instagram, so you can follow us there.

Final Thoughts

I think it's time to start looking at trend data before making decisions. And this isn't just in beauty, it's not just in fashion. This is in any industry.

Odds are you're not using the data that third party tools like Spate have been able to collect. And you're not using the power of that information to make your decisions and that's costing you potentially millions of dollars.

Now you've got a lot of homework to do. You need to start collecting more data on your customers, perhaps their Instagram handle, perhaps something else. You need to look at your own user generated content and look for hidden gems and strategies that might arise from establishing a new demographic, changing your influencer strategy, changing your content strategy, whatever the case may be, and you need to start looking at the trends.

You need to start understanding the words people are using, how certain words are on the rise, certain trends are growing, certain trends are falling, certain indie brands are rising and how you might want to take advantage of the changing market.

One final thing I'd like to discuss is the lifetime value of that brand relationship in beauty.

If you can be an influencer and a brand, if you can be that trusted voice and friend, but also sell products to your loyal following, then you will keep that customer for life. And since most products and beauty are consumed and need to be renewed regularly, you're talking about a very high lifetime value, which ultimately means you can spend a lot to acquire another loyal customer, which means you win.

I believe the adage goes, the one that can spend the most to acquire a customer wins. So if you can actually pull this off, whether this is in beauty or any other industry, if you're listening, if you can build that trust and carve out a unique experience that no one else can duplicate, you will win.

I know it's not an easy thing as just saying it, but if you work on it every day, stay creative and true to yourself and your brand, you might just get there. Good luck.

If you enjoyed this episode, I would truly appreciate you take an extra minute to review us wherever you listen. And hey, this show isn't a secret. Tell a friend, tell a colleague. Please help spread the love to get the full show notes. Visit ecomtech.link/podcast.

To sign up for the virtual summit and get all of the sessions on the future of ecommerce for beauty and skincare. Go to beauty.ecommercetech.io and you will hear the full sessions where I pulled those clips from as well.

I'm Derric Haynie, your host. Thanks for listening and I will see you next time.

How to Get Involved

And if you’d like to get involved in the show, if you’re a brand or you believe you have a unique vantage point on the future of Ecommerce, email me, I’m derric@ecommercetech.io, or you can go to ecomtech.link/podcast.

I truly value your advice and feedback. Listen, enjoy, review, and let’s have the most in-depth and public conversation we can about the future of Ecommerce.

 

Thank you to our intro soundbyte contributors:

Sharon Goldstein - Limespot

Robert Rand - JetRails

Kurt Elster - Ethercycle and The Unofficial Shopify Podcast

Jason Anderson - Andzen

Ben Parr - Octane AI

Ty Givens - The Workforce Pro

Phil Roireau - Gorgias

Jill Liliedahl - Inventory Planner