This is Part V of The Kylie Kronicles, our ongoing series on Kylie’s blossoming beauty empire. Read Part I, Part II, Part III, Part IV ,Part VI , Part VII

At 8:20pm on May 10th, Kylie Jenner posted a photo of herself on Instagram overlayed with the words “Kylie Skin by Kylie Jenner.”

The caption, however, was much more interesting than the photo, specifically these three statements:

  1. “Skincare and makeup go hand in hand and Kylie Skin was something i dreamt up soon after Kylie Cosmetics.”
  2. “Building my makeup line from the ground up has taught me a lot and I’m so blessed with that knowledge to apply to my brand new company! Birthing a whole new team, manufacturing, fulfillment etc separate from my cosmetics line was challenging but here we are!”
  3. “I got the best of the best for you guys! Everything is cruelty free, vegan, gluten free, paraben and sulfate free and suitable for all skintypes.”

Kylie left a lot to digest in her announcement, so we’ll pick it apart piece by piece.

Kylie Cosmetics vs. Kylie Skin

As you read in Part I of The Kylie Kronicles, Kylie introduced her first product, The Kylie Lip Kit, in November 2015, whose 15,000 units sold out in under a minute. Upon rebranding as Kylie Cosmetics in February 2016, she released 500,000 units of the lip kit in new shades, which also sold out quickly. This cycle of product drops and sellouts continued and the brand grew rapidly; by the end of 2016, Kylie Cosmetics had over 50 SKUs and $307 million in revenue, according to Forbes. But as we unpacked in Part III, Forbes estimated (with no citation) a mere 7% increase in 2017 revenue to $330 million, despite Kylie Cosmetics’ 30 new SKUs.

The next turning point was during holiday 2018 when Kylie announced the brand was going into Ulta. Part IV analyzed Kylie Cosmetics’ move into wholesale, which evidenced that the brand was hitting the limits of online-only growth. The decision has appeared mutually beneficial: Ulta’s Q4 2018 earnings stated that Kylie Cosmetics had “very strong sell-through,” attracting younger customers to stores, while simultaneously helping Kylie Cosmetics sustain growth, albeit with lower margins.

Even after deviating from its online-only starting point, Kylie Cosmetics could have continued to be a cash flow machine—often the best outcome for many celebrity-driven brands—but that clearly wasn’t enough for its founder: Since 2017, Kylie and her momager Kris have been transparent about their interest in selling the brand, but their reported $3 billion asking price has not materialized.

The reasoning for this is simple: Behind the scenes, the vast majority of Kylie Cosmetics’ success is thanks to Seed Beauty, its vertically-integrated manufacturer. Because Seed Beauty owns all of its manufacturing, and Kylie owns all of her distribution (her personal social media channels), Kylie Cosmetics itself retains little value and there is nothing for an acquirer to buy. While Kylie bragged back in 2018 that the company has only seven employees, the expertise—and often the size—of one’s team is directly proportional to what it is worth. So far, from an equity—rather than cash flow—perspective, the market has spoken.

Enter Kylie Skin. While it’s logical that Kylie would dream up her skincare brand around the time she started working on her cosmetics brand as she stated in the announcement, the lack of liquidity for Kylie Cosmetics likely gave her skincare brand new urgency. This is why Kylie Skin is an entirely separate company and operation from Kylie Cosmetics—“a whole new team, manufacturing, fulfillment etc.”—and why she surprisingly made the point in the announcement. Furthermore, Seed Beauty is well-acquainted with skincare (it launched its second line, a skincare brand called Fourth Ray Beauty last August) so there was no reason for Kylie to go it alone other than to own these processes herself. While Kylie surely has the money to build out these two operations, throwing money at the problem often creates more problems, and success is not guaranteed.  

Kylie Skin also joins a growing number of brands that are launching spinoffs with dedicated product lines and social media channels. Glossier (with Glossier Play) and Everlane (with Tread by Everlane) established separate social channels for their sub-brands while still centralizing ecommerce and their general teams under one roof. Kylie, however, chose to separate her brands fully to show they are different entities. Since Kylie owns both brands, she can cross-promote them as she wishes—and she has, using Kylie Cosmetics’ email and social channels to market Kylie Skin. This aims to grow Skin’s audience—which has 1.4 million Instagram followers, compared to Kylie Cosmetics’ 20.7 million, as of the end of May 2018—and it will be important to watch how the growth rates on these channels compare over time to see if Skin can meet or surpass Cosmetics’ audience. The downside of this approach is that Kylie now has to promote across two different channels and websites in order to make Kylie Skin a worthy acquisition target.

The Entity and The Team

Digging into the Kylie Skin team is not easy given the Kardashian/Jenner family’s many interrelated businesses. But an exhaustive search on LinkedIn yields some important details. Kylie Skin and Kylie Cosmetics’ trademarks are registered to Kylie Jenner, Inc., her personal California entity that holds all of her IP. Kylie Cosmetics, LLC is the entity that operates Kylie Cosmetics, which is also based in California. Kylie Skin, Inc., however, is based in Delaware, which is generally where one incorporates companies that might have investors or a potential sale, especially since California-based LLCs are subject to greater restrictions compared to the more corporate-friendly Delaware. While it might have made more sense to structure it as a corporation rather than an LLC, this conversion could happen at a later date. Either way, this structure shows that Kylie (or at least her lawyer) is thinking differently about Kylie Skin.

When it comes to the Kylie Skin team, the same product development leader is working on both Kylie Cosmetics and Kylie Skin, according to her LinkedIn, which means she works for Kylie. Whalerock Industries, which worked with the Kardashians on their since-closed apps, has been managing the content strategy and execution for both KKW Beauty, Kim’s brand, and Kylie Cosmetics, and it is likely also working with Kylie Skin. Kardashian Jenner Communications, the family’s in-house communications shop, is also involved, as one would expect. Taken together, these details confirm that none of Seed Beauty’s team is working on Kylie Skin.

The Lead Up and The Launch   

On May 22nd, Kylie Skin launched a national billboard campaign in more than 1,100 cities, including high-traffic areas such as Times Square and Las Vegas Boulevard. The campaign—thought to be the largest single programmatic billboard campaign ever—covered more than 4,300 roadside digital billboards and 1,500 digital video screens in more than 200 shopping malls. It’s not clear whether Kylie paid for it—the messaging around the announcement makes it seem like the companies behind the campaign did it for their own publicity, not just revenue—but the short timespan of the campaign (only a day) likely limited the cost to millions of dollars versus tens of millions.

Even so, this is a distinctly different marketing strategy from that of Kylie Cosmetics, which did almost no paid advertising, aside from Kylie’s default billboard in West Hollywood, Los Angeles that she has occupied for the last year. The size of Kylie Skin’s out-of-home campaign—even with its brevity—speaks to the changed marketing landscape Kylie Skin is now operating in compared to Kylie Cosmetics’ launch three years ago. According to the Q2 2019 Megaphone Report, Kylie Cosmetics also ran six Facebook & Instagram ads, up from three in Q1 2019, while Kylie Skin ran zero, pointing to the necessity of digital marketing for the initial brand as it grows.

Later the same day, Kylie Skin went live to the world at 12pm EST. The site almost immediately crashed and products began selling out, starting with the $125 set (in six minutes), followed by individual products by the end of the day, according to Kylie (as of this writing, only the makeup wipes are in stock). Multiple customers reported disappearing products between the time that they added them to their carts and began checking out. The speed of the sellouts incited anger among many shoppers, but for Kylie, it is all part of a larger game; she could have ordered more inventory for day one, but likely decided the hype was worth it. A few days later, she announced that the kits would be restocked on June 5th, followed by individual products on June 10th.

For the lucky early birds, the initial batch of orders shipped the day after launch—select West Coast buyers received the packages a day later while shipments arrived to the East Coast after two days. In what appears to be a conscious choice, the brand likely upgraded the shipping for a select group of shoppers so unboxings would start sooner as Kylie Skin maximized the hype.

Scarcity and Discounts

Like Kylie Cosmetics, Kylie Skin is focusing on hype early on. But Kylie Cosmetics soon shifted away from the approach, partly out of necessity, which calls into question how Kylie Skin will address this same issue. The benefit of rapidly releasing products is that brands can keep inventory rather limited, selling out the initial drop and then restocking based on demand as needed. But as a brand makes more products, it necessarily holds more inventory in order to drive growth. Some brands taking this approach will succeed and some will fail, even at Kylie’s scale. Notably, as Kylie Cosmetics ramped up its product assortment in order to fuel further growth, it also ramped up its discounting, cutting into the scarcity-driven image it cultivated early on.

In 2018, six out of ten promotions did not exist in the previous year, and so far in 2019, nine out of nine promotions are new in only the first five months. The significant increase in discounts speaks to the normalization of Kylie Cosmetics products in the market and the brand’s increasing desperation to sell them, proving that the scarcity effect of Kylie Cosmetics’ launches wore off rather quickly. Now that Kylie Skin is starting off with the same pseudo-scarcity model, it will likely repeat these moves, which raises the question of why do it in the first place.

The other element at play here is the difference between cosmetics and skincare brands. Cosmetics have high turnover while skincare is generally a core product and a replenishment-focused business. This means that Kylie Skin can focus on fewer SKUs and instead pour its energy into establishing repeat sales, which requires inventory. If the brand doesn’t have the inventory for customers to buy the products the second and third time, it will be much harder for them to make Kylie Skin part of their daily routine, which will jeopardize the brand’s entire business model. Therefore, the scarcity model makes more sense for a cosmetics brand than it does for skincare, and it will be worth watching (and questioning) what the point of these antics are over time for Kylie Skin.

Going forward

There is plenty still unknown about Kylie Skin that will require further follow up. Recently Kylie also filed trademarks for Kylie Hair and Kylie Baby, further potential extensions of her empire. But for Kylie Skin, initial reviews have been mixed (and some have been fake), although anyone familiar with skincare knows that it’s only possible to tell the effects of a product after weeks or months. While Seed Beauty is known for making solid beauty products, consumers expect a higher quality from skincare, which will test Kylie’s claim that the products are “the best.”  

While Kylie Cosmetics has been a resounding success for its founder, the performance of her skincare brand matters more and will prove whether she is able to build a durable business on her own—or if she is simply riding a wave someone else helped create.