The Truth About Kylie Jenner’s $ 800 Million Cosmetics Empire
Kylie Jenner’s cosmetics empire recently made the cover of Forbes magazine, America’s most prolific business month.
While a lot of controversy was generated over claims that her wealth was “made by herself” (which it wasn’t), the bigger question was how this actually happened, and the numbers behind it.
Jenner’s “Kylie Cosmetics” business has grossed an estimated $ 660 million in sales over its 3-year lifespan, with $ 330 million in 2017 alone.
While the company is private and therefore its figures are not publicly available, even if these estimates were 50% off, the figures would be staggering.
Also, the “company” only has 7 full-time employees. Everything from packaging to PR is outsourced, and the only way Jenner gets clients is by leveraging her 110 million followers on Instagram.
This article examines how it was done.
The core of Jenner’s success has been 110 million followers on Instagram.
The company does not advertise off the platform, has no stores or distributors, and generally only sells its products directly to its community.
While this sounds like a marketer’s wet dream, the most important element was Jenner’s lips.
In 2017, precisely 2 years after registering your brand’s trademark, tabloids around the world began publishing reports on their size; With the help of fillers, it had managed to almost quadruple in size.
The point here is not so much her appearance, but how she capitalized on the interest … without realizing it, she had discovered one of the biggest “trends” of the modern West: women lusting for full, youthful lips.
To this end, she invested $ 250,000 of her modeling money in 15,000 lip kits and created a page to sell them online. Almost instantly, they were exhausted.
While this was a big step, the next process was Jenner’s omnipotent mother, Kris Kardashian, who brought Shopify in February 2016 to make the business a full-fledged ecommerce operation.
A few months later, the company began selling six lip kit shades, all of which were sold out shortly after launch.
While the store did well immediately, what spurred continued interest was its sustained growth.
Rather than being a small problem, where girls go and buy the latest product because it is in, the business continued to produce buyers at an alarming rate.
This could be handled thanks to the way it had been set up. It is a quintessential “dropship” operation; All product development and sourcing was outsourced to a company called Spatz cosmetics, which is estimated to have made ~ $ 180 million from the company.
This figure represents the COGS (Cost of Goods Sold) of the company; a little-known number that will help us determine the true value of what has been developed.
You see, when it comes to money, 99.9% of people are generally wrong. I am not disrespectful; they just don’t have the experience or the good sense to consider the facts of the hype.
Jenner’s “business” is not a real business. It is a marketing company that trades with attention.
Like all “Kardashian” things, that attention comes from multiple sources, but it is ALL directed toward the family. The matriarch (Kris) then turns this attention into money.
Unfortunately, many people have combined Jenner’s attention with the value of her business. They are mutually exclusive and, in the investment world, have led to the “price” of Jenner’s attraction being “overpriced” (people believe it is worth more than it is actually worth).
As mentioned, she does not have a “business” because all product creation is outsourced. He has a website that sells outsourced lip gloss, etc.
This means that if you are really looking at what Really Moving on, you should be able to consider what the business really is, and ultimately whether it can be sustained (not).
When it comes to company valuations, the most important thing to consider is that almost everyone in the world is wrong about which ones will win in the long run.
And although I am not a wise man on the subject, I have lived long enough to know which companies will sink and swim.
In Jenner’s case, I see a flash in the pan.
It has very little, if any, competitive advantage, and it relies heavily on a fake person.
In my opinion, most of the current purchases (and yes, they are HUGE in volume) are predominantly impulse purchases.
Inquisitive teens, and even women in their twenties, are buying the products because of the promise of a richer, fuller pout. But without the expensive filler injections, this is just a dream.
My own estimate is that Jenner is probably worth ~ $ 20 million. Your “business” is worth about 1/5 of your earnings (which is probably closer to $ 100 million than $ 800 Return reported by Forbes), and thus the whole thing reeks of a marketing gimmick.
On top of this, actual metrics for the various products Jenner sells appear to indicate a slowing growth curve, down just 7% in 2017 after a meteoric first-year surge.
It is not about overshadowing your success. But labeling it a “self-made” success story is wrong, as well as inflating the numbers in sales. With at least 50% of the proceeds going to Spatz (who also works for L’Oreal), it is my opinion that they are the real winners of it all.