Worrywarts complain that inflation, supply chain issues and consumer sentiment put a damper on beauty businesses. But Chris Hobson, chief executive officer, Rare Beauty Brands, says it’s never been a better time to be an independent beauty company. Why?

“We have a strong business model, good unit economics and a diversified revenue stream—it’s not just D2C or Amazon anymore,” he explained.

Rare Beauty has been growing for more than 30 years. For the past five years its Patchology brand has been leading the way. In fact, the premium skincare brand has expanded distribution to include a range of retailers including Nordstrom’s, Ulta Beauty and Bluemercury. Outside the US, Patchology can be found in Sephora throughout the EU, as well as in Mecca in Australia and Space NK in the United Kingdom.

“We have great prestige accounts,” noted Hobson. “They’re all healthy and growing.”

Lessons Learned

These international markets also served as a classroom during the covid-19 pandemic. Hobson recalled that Asia was the first market impacted by the pandemic. But the Rare Beauty staff learned from that experience to make smart decisions around inventory and managing working capital to survive and thrive.

“Brands may have been trucking along with good unit economics as a DTC may have been overly reliant on one distribution channel.

Hobson calls Patchology the gateway to luxury—a premium brand without being a Chanel.

“As the entry point to luxury, we offer good value at the right price points. During the pandemic, we didn’t raise prices; we didn’t want to be opportunistic. That was authentic to our brand.”

That authenticity resonated with the Rare Beauty’s customer—the urban Millennial who engages in skincare. The company’s appeal extends into Gen X and Gen Z, too, according to Hobson. To reach them all, Rare Beauty is engaging with retail partners while supporting the business with influencers and social media. At the same time, Rare Beauty is developing new technology for Patchology that will debut in the Fall.

To create the next big thing in beauty, Patchology turns to its Patch Batch, a group of a few hundred loyal customers who act as a sounding board for new product development. But Rare Beauty executives don’t rely solely on customer advice.

New Product Innovations

“Sometimes innovation is customer-led and sometimes it is technology-led,” noted Hobson. “As Henry Ford noted, “if I asked customers what they wanted, they would have said a faster horse.’”

Instead, the Rare Beauty team is determined to deliver something to the consumer so that she says, “Wow! I didn’t know I wanted this!”

Rare Beauty is clearly focused on Patchology’s potential, but there are other opportunities within the portfolio. For example, Dr. Dana Stern MD is a New York City-based dermatologist who specializes in nail care. In fact, she is the only board-certified dermatologist in the US who devotes her entire practice to the diagnosis and treatment of the nail.

More Opportunities

“She was frustrated with the standard of nail care in the category. Patients couldn’t find solutions to their problems” recalled Hobson, who likened Stern’s entry into the nailcare business to the entry into skincare decades before by pioneers like Dr. Nicholas Perricone MD and Dr. Fredric Brandt MD. Rare Beauty acquired Dr. Dana a couple of years ago. The line was rebranded and is available in key retailers and DTC.

The Dr. Dana Nail Renewal System is said to instantly revitalize, dry brittle nails. The three-step process includes coating nails with a glycolic prep, sweeping the nail surface with a priming wand and applying a hydrating gel/oil formula. Consumers like the results. After just one application, according to the brand, 100% of surveyed consumers agreed their nails appeared healthier; 93% agreed their nails appeared brighter and less discolored; and 90% agreed their nails appeared to have less ridges. The Dr. Dana lineup also includes non-acetone nail polish remover, cuticle oil and more.

“We are really excited about the brand,” added Hobson. “it’s one of our fastest-growing brands.”

Another brand that gets the Rare Beauty team excited is Dot Dot Dash, a line of premium skincare products aimed at Gen Z. To reach these consumers, Dot Dot Dash debuted on TikTok and Amazon; there is no website.

“Dot Dot Dash consumers prefer to shop on Amazon because they are using their mom’s Amazon Prime accounts,” explained Hobson. “We lose some margin, but we gain new customers.”

These TikTok-savvy Gen Z customers know all about product ingredients, according to Hobson.

“When they go into the store, they know more about the products than sales associates,” he insisted.

Anchored by Patchology and with growing businesses like Dr. Dana and Dot Dot Dash, Rare Beauty’s sales rose more than 20% last year and Hobson expects to replicate sales gains and increase margins.

“The key is to have a strong business model, good unit economics and a diversified revenue stream,” he concluded. “This is the best of times to be an indie beauty company.”

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