Beauty Pie Secures $100M Funding for Expansion

The Expanding Online Beauty Market and Beauty Pie's Funding

The global beauty industry generates approximately $500 billion in revenue each year. The onset of the COVID-19 pandemic significantly accelerated the shift towards online sales within this sector.

Beauty Pie Secures $100 Million in Series B Funding

A London-based beauty startup, Beauty Pie, has recently announced a substantial funding round. This investment aims to capitalize on the growing trend of online beauty purchases through a direct-to-consumer platform offering its own branded products.

A Unique Buyers’ Club Model

Beauty Pie positions itself as a buyers’ club focused on premium beauty and wellness items. Consumers in both the U.K. and the U.S. can purchase directly from the company.

However, joining the club—either monthly (£10/$15) or annually (£59/$59)—unlocks significant discounts on each item.

Expansion Plans and Infrastructure Investment

The $100 million in funding will be allocated to expanding into new product categories. It will also support the development of additional sales channels and infrastructure improvements.

These improvements include establishing new warehouses and implementing pop-up retail locations to enhance sourcing and sales of its “basics”-styled products.

These products are characterized by minimalist, unpretentious packaging, prioritizing the quality of the formulation itself.

Founder's Vision: Prioritizing Substance Over Marketing

Marcia Kilgore, the Canadian founder of Beauty Pie, emphasized a strategic focus on operational improvements rather than extensive marketing campaigns.

“I don’t believe in business models where you spend tons on marketing,” Kilgore stated. “So we want to focus the funding on opening new warehouses, moving into new territories and maybe some pop-ups. We are Sephora meets Costco.”

Investment Details and Valuation

This Series B funding round was co-led by Index Ventures and Insight Partners. Existing investors, including Balderton Capital, General Catalyst, and Latitude VC, also participated.

Since its founding in 2016, Beauty Pie has raised a total of $170 million. While the company has not publicly disclosed its valuation, current estimates suggest it is less than $1 billion, differing from earlier reports.

The Discretionary Nature of Beauty Purchases

Beauty products are often considered discretionary purchases, particularly within the luxury segment. Expensive brands are not essential items like food.

Affordable alternatives are always readily available for consumers who require a product but are price-sensitive.

The Impact of COVID-19 on Beauty Consumption

The COVID-19 pandemic significantly altered consumer spending habits. Restrictions on social activities led many to seek self-care and indulgence.

Simultaneously, store closures and reduced foot traffic drove a substantial increase in online beauty purchases, especially for premium products. The concept of “treating oneself” became a prominent sales driver.

McKinsey reports that online beauty and wellness sales surged to a 30% share of the market following the pandemic, a dramatic shift from the pre-COVID dominance of in-person commerce (85% of revenues).

Beauty Pie’s Private Label Strategy

Beauty Pie’s core strategy involves sourcing high-quality products from various manufacturers and selling them under its own private label.

This approach, similar to Amazon’s private-label initiatives and Prime membership model, allows Beauty Pie to offer competitive products while undercutting established high-end brands.

The company states that typical brand markups are ten times the cost of production.

A Tiered Pricing System for Maximized Margins

Beauty Pie employs a tiered pricing structure, offering different prices to members and non-members. This ensures profitability on all sales, even from those not subscribed to the buying club.

The brand’s minimalist product design emphasizes the quality of the ingredients over elaborate packaging, reflecting a focus on substance over aesthetics.

Navigating Early Pandemic Challenges

Despite initial disruptions caused by the pandemic, Beauty Pie has demonstrated resilience. The company temporarily reduced advertising spending to manage potential supply chain issues and prevent customer disappointment.

Production quickly resumed, and the company now offers a catalog of 300 to 400 different stock keeping units (SKUs).

Impressive Customer Retention and Growth

Kilgore reports that Beauty Pie’s customer retention rates surpass those of Spotify and Netflix, and are twenty times higher than other direct-to-consumer beauty companies.

Membership has more than doubled in the past year, with revenues increasing by over 100%. The company achieved profitability for the first time last year.

Investor Confidence and Future Outlook

Danny Rimer, a partner at Index Ventures, highlighted Beauty Pie’s exceptional subscriber growth and customer retention rates in a statement last December.

“At Index, we’ve never seen customer retention like this before.”

Leveraging Founder’s Experience and Data Science

Kilgore’s extensive experience as the founder of FitFlop, Soap and Glory, and other successful ventures is a key asset.

The company’s data science capabilities complement her intuition, providing valuable insights into market trends and consumer preferences.

Insight Partners’ Perspective

Rebecca Liu, principal at Insight Partners, praised Kilgore’s customer-centric approach and Beauty Pie’s innovative business model.

“Marcia has spent decades building businesses that genuinely treat customers the way she would want to be treated, and Beauty Pie is the epitome of that ethos. With its transformative value chain and membership model, [it] lets members have their pie and eat it too: the best products at the best prices.”