The drugstore line has grown in popularity as inflation-weary consumers hunt for cheap, quality makeup
December 17, 2023 at 7:00 a.m. EST
“The fan base, the cult following that E.L.F. has is so strong,” she says.
The Oakland, Calif.- based company dominates a slice of the beauty industry rewarded for imitation: Dupes — short for duplicates — are makeup and skin care products that are near-replicas of higher-end lines but at a fraction of the price. Analysts say E.L.F.’s ability to capitalize on social media experimentation, supply-chain efficiency and multigenerational appeal have made it the beauty brand of the moment.
“We have a great deal of respect for all of our competitors; we think there’s incredible areas of inspiration,” said Tarang Amin, chief executive of E.L.F. Beauty, which saw its net sales surge 76 percent last quarter and its shares soar more than 160 percent in 2023.
Companies such as E.L.F., Essence and NYX have flourished as beauty influencers — particularly on TikTok and YouTube — raised their profiles, and as entrenched inflation made many consumers reassess their spending. At $6, Essence’s Hello, Good Stuff! Glow Serum Primer has become a popular alternative to a $35 offering by Glow Recipe. Maybelline makes a lip gloss routinely compared to Urban Decay’s $27 Vice Lip Bond for roughly half the price, and E.L.F. has an $8 dupe for Dior’s $40 Addict Lip Glow Oil.
Founded in 2004 by Scott-Vincent Borba and father and son Alan Shamah and Joey Shamah, E.L.F. (an acronym for eyes, lips, face) initially dumbfounded the industry with its strategy of selling mascara, eye shadow and lip gloss for $1 online. The brand soon found its way into drugstores, supermarkets, Target and Ulta. By the time equity investment firm TPG Growth acquired a majority stake in 2014, the company had reached $100 million in sales, Amin said. Last year, it had more than five times that in sales.
The $112 billion beauty industry, which includes skin care, cosmetics, perfume and hair care, has endured even as consumer spending overall has softened. It was one of the highest-performing categories over the five-day kickoff — Thanksgiving to Cyber Monday — to the holiday shopping season, according to Phil Rist, the executive vice president of strategy at Prosper Insights and Analytics. Mass market beauty sales jumped 8 percent year over year, while prestige brands swelled 14 percent, according to Circana.
“Beauty is a very emotional market, making it much more resilient to economic turmoil,” said Delphine Horvath, a cosmetics and fragrance marketing professor at Fashion Institute of Technology. “As inflation worries persist … consumers are looking for good value brands at affordable prices.”
Last summer, Amin was only minutes into a TikTok live stream with E.L.F. customers when they began peppering him with requests. The top plea: A cheaper version of Drunk Elephant’s viral bronzing drops, a serum that creates a sun-kissed glow underneath makeup and retails for $38.
“We don’t want to pay that much for it,” customers told him. Right after the live stream, he beelined to the head of E.L.F.’s innovation program and told the team to get to work.
Dupes are hardly new in retail. Fashion brands such as H&M and Uniqlo, and furniture companies such as Ikea and Wayfair have been replicating pricier, trendy lines for some time, noted Olivia Tong, an analyst with Raymond James Equity Research. But the interest in dupes — specifically in beauty — has surged as consumers look for ways to stretch their dollars, she said.
Google search data compiled by NielsenIQ over a 12-month period showed searches for “dupe + skin care” surged 123.5 percent year over year, while “dupe + makeup” increased 31 percent.
“It’s a look for value but also a desire for exploration,” Tong said. “With E.L.F. in particular … the cost of trying it is sometimes less than lunch.”
E.L.F. has been one of the most effective brands at capitalizing on the trend, Nogueira said. It has churned out dupes that rival offerings from such prestige lines as Charlotte Tilbury, Milk Makeup, Dior, Smashbox, Benefit, Laneige, Supergoop, Tarte and Anastasia Beverly Hills.
One of E.L.F.’s early hits was its Mineral Infused Face primer, which Amin said drew “inspiration” from Smashbox’s Photo Finish. They retail for $10 and $42, respectively.
He said E.L.F. developed its Halo Glow contour, blush and highlighter wands in response to Charlotte Tilbury’s Hollywood Contour offerings, which were “constantly out of stock.”
E.L.F. products are clean, vegan, cruelty free and manufactured in fair trade certified facilities. In some cases, Nogueira said she prefers the dupe to the original. That includes E.L.F.’s $14 version of Charlotte Tilbury’s $49 Flawless Filter.
Charlotte Tilbury didn’t respond to a request for comment.
Counterintuitively, prestige brands are generally unbothered by dupes, said Korinne Wolfmeyer, an analyst covering the beauty and wellness space at Piper Sandler. They see their core customer as a high-income shopper who isn’t necessarily seeking cheaper alternatives.
“A lot of these players have called out the dupes as a positive because they push innovation … and keep bringing newness to the market,” Wolfmeyer said. “It has played in their favor because they’re seeing good growth, too.”
It’s also pushing the legacy players to work harder for younger consumers. Boomers, Gen X and some millennials are “pretty sticky with their brands,” whereas Gen Z and Gen Alpha are less loyal, she continued.
In the early days, E.L.F. relied on customers to spread the word online. So building a robust social media presence was a seamless transition, Amin said.
“Our approach is very much that of a digitally native brand, where we’re constantly testing and learning and sensing what’s working or not,” he said.
E.L.F. was one of the first brands to join TikTok and BeReal, and it recently announced an interactive experience on Roblox. It’s also on Twitch, the live-streaming gaming platform, and has partnered with a popular female gamer.
The brand has “been really mastering disruptive marketing,” said Horvath of FIT, noting its advertising campaigns with actress Jennifer Coolidge and product partnerships with brands such as Chipotle, Dunkin’ Donuts and American Eagle “that create buzz, boost engagement and brand awareness.”
But their marketing moves have not been without some mishaps: In 2019, E.L.F. worked with marketing firm Movers+Shakers to commission a song for a TikTok campaign. The song, “Eyes. Lips. Face. (e.l.f.),” by iLL Wayno, featuring Holla FyeSixWun, went viral. But that partnership has come under scrutiny. Last month, investor Spruce Point Capital Management shorted E.L.F.’s stock amid revelations that the marketing firm’s co-founders were members of NXIVM, a self-help group turned cult run by Keith Raniere. E.L.F. had no comment.
Movers+Shakers co-founders Geoffrey Goldberg and Evan Horowitz have denied having knowledge of the cult’s abuse and said they left the group after learning about it. Rolling Stone has reported, however, that they are still connected with NXIVM members aligned with Raniere, who in 2020 was sentenced to 120 years in prison for sex trafficking.
Unlike many legacy brands that follow a vertical innovation process — where steps like marketing, research and development and product testing occur sequentially — E.L.F. does it concurrently. This allows it to create new products and jump on trends faster than much of its competition. So consumers “have a little bit of that desirability, which comes with newness, but at an accessible price point,” said Manola Soler, senior director in Alvarez & Marsal’s consumer and retail group.
While most beauty brands manufacture products in various parts of Europe, Asia and North America, E.L.F. makes its products exclusively in China, where labor and manufacturing costs are lower, and contracts out its production to third-party suppliers. And because E.L.F. can deliver high-volume units at these facilities, the company can dictate manufacturing processes and embed its own quality control employees at the facilities, Amin said.
“We’re set up completely different than a lot of our peers, and we’ve been working on this for 20 years, so it’s a pretty thorough advantage,” he added.
Investing in a social media presence has paid off — the organic popularity of the brand online has saved it money on advertising, said Tong of Raymond James.
E.L.F. Beauty — which includes its namesake cosmetics and skin care lines, the plant-based makeup brand Well People and Alicia Keys’s beauty line Keys Soulcare — raised its outlook in November after beating Wall Street estimates, projecting $896 million to $906 million in net sales for fiscal 2024, compared with the $578.8 million recorded a year earlier.
International sales grew 157 percent in the most recent quarter, Amin said, largely thanks to expansions in Canada and the United Kingdom. In August, E.L.F. announced it was acquiring skin-care brand Naturium for $355 million.
But key to its success is price — the average cosmetics product costs about $6, Amin said. It has had notable prices increases only twice — once in 2019 and then again in March 2022. The brand made the unusual step of announcing on social media that it was increasing prices by $1 for two-thirds of the products, leaving the lowest-priced products unchanged.
Consumers supported the decision, and the move built trust, Soler said: “They did a good job of communicating it in a way that felt transparent. That has played in their favor.”