Kylie Jenner’s cosmetics empire recently graced the cover of Forbes magazine, America’s most prolific business monthly.
While much controversy was raised over the claims that her wealth was “self-made” (which it wasn’t), the bigger question was how this actually happened, and the numbers behind it.
Jenner’s “Kylie Cosmetics” business has grossed approximately $660 million in sales during its three-year lifespan, with $330 million in 2017 alone.
While the business is private and therefore its numbers are not publicly available, even if these estimates were 50% off, the numbers 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 taking advantage of her 110 million Instagram followers.
This article examines how it was done.
Social Measures
The core of Jenner’s success has been her 110 million followers on Instagram.
The company does not advertise off the shelf, has no stores or distributors, and generally only sells its products directly to its community.
While this sounds like a salesperson’s wet dream, the biggest element was Jenner’s lips.
In 2017, precisely 2 years after registering the trademark of his brand, tabloids around the world began publishing reports on the size of his trademarks; with the help of fillers, he had managed to nearly quadruple his size.
The point here is not so much how she looks, but how she capitalized on the interest… she inadvertently discovered one of the biggest “trends” in the modern West: lustful women with full, youthful lips.
To this end, investing $250,000 of her modeling money in 15,000 lip kits, she created a page to sell them online. Almost instantly, they sold out.
While this was a big step, the next process was Jenner’s omnipotent mom, Kris Kardashian, jumping into Shopify in February 2016 to make the business a full-fledged e-commerce operation.
A few months later, the company began selling six lip kit shades, all of which sold out very soon after launch.
Exponential growth
While the store did well right away, it was its sustained growth that spurred continued interest.
Instead of being a little blip, where girls go and buy the latest product because it’s all the rage, the business kept generating buyers at an alarming rate.
This could be handled thanks to the way it had been set up. It is a “dropship” operation par excellence; All product development and sourcing was outsourced to a company called Spatz cosmetics, which is estimated to have made ~$180 million off the venture.
This figure represents the COGS (Cost of Goods Sold) of the business; 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 usually wrong. This is not me being disrespectful; they just aren’t experienced/sensible enough to consider the facts of the hype.
Jenner’s “business” isn’t a real business. It is a marketing company that trades in attention.
Like all things “Kardashian,” that attention comes from multiple sources, but it’s ALL directed at the family. The matriarch (Kris) then turns this attention into money.
Unfortunately, many people have confused Jenner’s attention with the value of her business. They are mutually exclusive and, in the investment world, it has led to the “price” of the Jenner pull being “overrated” (people think it’s worth more than it really is).
As mentioned, she doesn’t have a “business” because all product creation is outsourced. She has a website that sells outsourced lip gloss etc.
This means that if you are really looking at what is In fact going on, you have to be able to consider what the business really is and, ultimately, whether it can be sustained (not).
Worth
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 while I’m no sage on the subject, I’ve worked long enough to know which companies will sink and which will swim.
In Jenner’s case, I see a flash in the pan.
He has very little, if any, competitive advantage and is mostly based on a personality that is fake.
It is my opinion that most purchases today (and yes, they are HUGE in volume) are mostly impulse purchases.
Curious teens, and even twenty-five-year-old women, are buying the products because of the promise of richer, fuller pouts. But without expensive filler injections, this is just a dream.
My own estimate is that Jenner is probably worth ~$20 million. Her “business” of hers is worth about 1/5 of her profits (which is probably closer to $100 million than $800 income reported by Forbes), and therefore the whole thing reeks of a marketing gimmick.
On top of this, the actual metrics for the various products Jenner sells seem to point to a slower growth curve: just 7% in 2017 after a meteoric rise in the first year.
This is not to cast a shadow on your success. But labeling it a “self-made” success story is incorrect, as well as inflating sales figures. With at least 50% of the proceeds going to Spatz (who also work for L’Oreal), they are the real winners all around in my opinion.