Why Indie Beauty Is Dead—And What’s Replacing It with Nader Naeymi-Rad - Coffee N° 5 with Lara Schmoisman

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[00:00]
Lara Schmoisman
Foreign. This is Coffee Number Five. I'm your host, Lara Schmoisman. Hi guys. Welcome back to Coffee Number Five. Today I have real, a real trip and someone really hard to pin down because he's all over the world and. But it's such a big supporter of indie beauty in the brands that they're growing. And I will say probably started with the indie beauty and he will really explain that to us. But I think that now he's an industry supporter most than anything. So. Welcome, welcome, welcome, welcome. Nader, thank you so much for being here.
[00:43]
Nader
Hi Laura, how are you? I mean, you got a whole different Persona when the, when the camera goes live. I mean, the shyness is gone. Yeah, great.
[00:52]
Lara Schmoisman
Well, it happens. It's years of experience. Nader, tell us, how did you start? I mean you, everyone knows you in the industry, but I want, want to. Yes, they do. But I want them to know how this started as indie beauty. Now it became beauty independent. Then you have bite, you have deal maker. There is so much going on. I want to understand how this evolved.
[01:16]
Nader
Thank you for having me on. I honestly, I'm not used to being on the other side of the microphone, so it's odd answering questions versus asking the questions. But the truth is it was completely by accident entered this industry back in 2015 because a friend of mine at the time who was a very well regarded New York esthetician by the name of Gillian Wright, she had built a very successful aesthetic spa clinic. I was one of her clients. And in 2014 she had started her own brand called Gillian Rice Skincare. It was a indie brand. And one of the challenges she found was that there was nowhere for her to showcase her product to the right retailers and press media. Traditional trade shows were too big for her, MERs markets were irrelevant. So she had this idea for an indie beauty expo and she asked me to help her. So I said sure. And we ended UP doing a one day event in New York in August of 2015, which is almost exactly 10 years ago at this point. And to tell you how little faith I had in the project, we did it in August because it's the cheapest time to get space in New York and you know, like, you know, 20,000 bucks, you know, we'll see what happens to it. I wanted to really help my friend. And what happened was it was a huge success. We had anticipated 20 to 30 exhibitors. We ended up with 85 brands like Tata Harper exhibited, Yojio brands that are today, you know, have exited. And then instead of about 100 attendees. We had over 500 attendees. There was a big line going around the block to get into the event at Chelsea and we had no idea what we were doing. I'd never done a trade show. I'd never done a professional event. It was, I was printing badges at home and putting them into full, you know, plastic covers by hand. My dad was helping me. It was really a complete amateur hour, but we survived it and we made an impression. And what I realized at that time was that this industry was going through a once in a lifetime disruption where in terms of where innovation was happening, who was building the brands, how they were being sold, their value proposition, all of that was changing. And at the forefront of all this was the beauty entrepreneur. The person, typically a woman, who decided that she's had enough of whatever garbage she was buying before, or maybe that just wasn't what she wanted and so she was going to make it herself. And whether it was in skincare, hair care, every, every conceivable category, entrepreneurs were disrupting the market. And we decided to help them. We expanded Indie Beauty Expo to a two day event. We launched it in Los Angeles in 16, Dallas in 17, London in 18, and Berlin in 19. So by the end of 2019, we had five, five, two day events. We had over a thousand brands exhibit with us, and we became the center of the independent beauty movement. And through that journey, we met so many amazing people. For example, Hero Cosmetics launched at ibe. They met Target at ibe. You can literally go around asking folks that are now big brands. Many of them at some point either attended or exhibited IBM. And while we were doing that, I had nothing to read because I was new to the industry. So I looked around and everything that I saw was mostly focused in terms of trade publications focused on fashion. And when they covered beauty, they were covering Estee and Unilever. And yet I could see in front of me these amazing founders with incredible brands, such great stories that needed to be told. So in 2017, I approached Rachel Brown, who had just left women's wear. And I said, I'm thinking of starting a newsletter, maybe a publication focused on beauty entrepreneurs called Beauty Independent. And she said, I'm in. I never forget. It was March of 2017. It was a rainy day in New York when we spoke. And by August of that year, we had also launched Beauty Independent. So that's how Beauty Independent came to be really my start in the industry. And finally, as we were building all this, I realized there was no education for entrepreneurs. So we started a thought leadership Series called Beauty X Summits that we would do before Indie Beauty Expo. In New York it was Beauty X Capital. In Dallas it was Beauty X Retail in LA was Beauty X demand generation. And there we developed the 360 curriculum to educate beauty entrepreneurs on those topics. And all of these were the precursors to what we have today because you know, as all good things, it came to an end. Covid essentially destroyed that business. And the only thing left was Beauty independent.
[06:03]
Lara Schmoisman
And so since 2020, what happened with the shows? What happened was just Covid that stop it.
[06:09]
Nader
Complete, complete and utter devastation. It's it make good Netflix series because you can't make this stuff up. I mean if you look at the trade show or professional events industry, one of the reasons people have traditionally liked it is because it's continuously grows. The only time it didn't was during World War II and even then for those two years. But as soon as the war was over, people were back doing trade shows. And throughout the decades, Korean war, Vietnam, oil shock.com bubble didn't matter. The industry grew except when you have a pandemic where by law you cannot assemble. And so many trade shows unfortunately were in the same boat. Many were relying on government aid. We were just too small to be big enough to matter. We did apply for the standard loans and everything, but it was devastating for our business. We had already sold events for the 2020 calendar to our exhibitors and unfortunately because of force majeure, we couldn't do anything. I mean I can't the monies I'd already paid the money for, you know, venues and deposits. So you know, but I gotta be honest with you, the, the community was very, very supportive and forgiving. Focus on beauty independent start a webinar series our Beacon Awards and then back doing events. That's how I ended up in this industry. Unfortunately, co founder Gian had to leave during the pandemic. I mean our business shrank by 94% in one month. So it was really matter of we didn't know if there was gonna be a business. But you know, beauty independence, you prevail.
[07:49]
Lara Schmoisman
I mean today you have one of the most well attended events of in the industries. You have like Dealmaker that also it's new we do in the second or third year.
[08:05]
Nader
Well Laura, you know what they say, what doesn't kill you makes you bitter and jaded and also makes you better. So once we came out of COVID we went back. So Dealmaker is essentially a continuation and an improvement of our Beauty X Capital series. But geared More towards. And I think this is an important point that gets to the heart of your question about indie beauty. Indie beauty is a term I don't even use anymore. Back when we started, one of the first questions we would get asked is what does indie beauty even mean? And so we had to do contortions to define what does independent mean? How much ownership does a founder have to have? Today, none of that matters. What we're finding today is you have emerging brands, challenger brands, and no one, including the consumer, cares about their ownership structure. In fact, what's happened in beauty is that beauty entrepreneurship is fine and thriving because that's how new innovation is coming to market, is through entrepreneurs. However, the days of not knowing anything, making soap in your bathtub, hoping to accidentally meet a Sephora buyer and making it big, those days are long gone, if they even ever exist.
[09:17]
Lara Schmoisman
I'm so glad that you say that because I feel like there are a lot of people in this industry or that they have not yet in the industry that they think that it can happen. And the world changed so much.
[09:30]
Nader
It's professionalized. You're now dealing with a whole generation of entrepreneurs that have lived through this with the previous brand that they either did or worked with. They've learned and they're coming to the table much better connected, much better capitalized with a much better strategy. And so the good news is they're smarter, they're more experienced, they're more capable. The bad news is if you don't have the right experience and background, you're gonna get squished. Their market is very unforgiving. And I think one of the things I can talk about because I am all for the beauty entrepreneur is a sense of entitlement than some first time entrepreneurs have that somehow the world owes them something, that they need to bring this brand, they have to do this and then everybody has to give them low moqs. You know, retailers have to bend over backwards and support their brands with free marketing. People like you should do free consulting for them. Why? Why? The world doesn't owe you anything.
[10:28]
Lara Schmoisman
I was having this talk with someone yesterday. Bringing a brand to life is expensive.
[10:34]
Nader
Very.
[10:35]
Lara Schmoisman
It's not only. I mean you can only think about your product, the money that you have going to have to put in marketing, PR consultants, the right consultants, of course, and work with the right people. If you're new in the industry, you need to connect yourself with the right people. It's all about who you know and the experience that they bring to the table.
[10:58]
Nader
Exactly. It's A little bit like saying, you know what, I fly a lot and I'm sick and tired of these modern aircraft. They don't have enough seats where room and leg room and the bathrooms are small. So I'm going to make my own aircraft company and manufacture my own aircraft that are better suited and better for the environment and more sustainable. Okay, great. Now you need to go get, you're.
[11:20]
Lara Schmoisman
Going to fly, you're going to fly.
[11:22]
Nader
To the airplane and so you a, I don't know, part time accountants, then you're going to go at the bank and say, yeah, I want to start an aeronautics company. Like, well, great. Are you an aeronautics engineer? No. Are you a pilot? No. Are you like, what relevant experience you have? How much capital are you bringing? So in no other profession can you go and raise capital unless you have the ability to demonstrate relevant experience, knowledge, your own capital, some ip, something. But somehow in beauty, people naively believe that an idea and hope are enough to get you going. The truth is, even people who have made it and became successful and you hear about their exits and their journey and they show up on your podcast or they come to my webinar like, oh my God, you know, I was just a lowly so and so and you know, I saw my kids didn't have what the right thing for their eczema and I started my own brand and da, da, da, da, da. After about 15 minutes you realize, oh yeah, the wife or the husband was a cardiologist and they had, you know, passive income from a real estate empire their parents left for them and you know, yeah, that paid for the first five years of the brand while they were learning and losing money and so making mistakes. Yeah, and making a ton of mistakes. It's the way business is done. I always recommend to entrepreneurs that it's fine to be an entrepreneur. First of all, you have to accept that entrepreneurship is not a career as it was famously said. It is a lifestyle choice. If people ask you what do you want to be when you grow up and you say entrepreneur, that's, that's not a career, that's a lifestyle choice. Yeah. Because you have to absolutely have incredible comfort for discomfort and anxiety. But one thing you can do to make your life as an entrepreneur better is to get relevant experience and have somebody else pay for it. And so what I recommend to people is there is now what is different today than 10 years ago is there is now a viable community of emerging brands, founder led brands that are not two people and a dog, but actually a, you know, a Company with capital and sales and structure. Beekman 1802. True botanicals. These are great brands. They have professional management teams, but they're not corporate. And so working in these companies you get great experience, you learn directly from the people at the top. You see what it is to work in an emerging brand. And most importantly, you get a salary. You don't have to put your life at risk, take on a mortgage, get embarrassed because you've borrowed money from your friends and family. Learn, make your network, make your connections and then commit to something once you have the right experience and credibility. And so I think that's a big change in the market. As I like to say, amateur hour is over. It's now the professionals that do the.
[14:16]
Lara Schmoisman
I also say something that in first of all, people think that it's kind of easy to make your own brand. It's not difficult. If you have some money, you can go manufacture her products. It's easy to have products, but will it be unique in the market if you don't know the market? I see a lot of people so in love with their idea that they really don't know if there is a market for that product.
[14:40]
Nader
They're not doing the research, they're not doing the research. It's almost a self indulgent vanity project. You know, it's like those people who are like, oh my God, I want to have this beautiful store in the Hamptons where I sell a carefully curated collection of these artisanal products that I source from Italy and France. And great, you know, if your, you know, spouse or parents going to pay for that place and you have no customers nine months of the year and you don't make any money and you get a tax write off out of it. Great. It's a hobby. And I think there are some people who like the creative process and there's nothing wrong with that. They like going to a co man who's happy to take your money, give you a formulation. You work on the packaging, the branding. You spend oodles of time getting that perfect positioning statement, wasting God knows how much money getting the perfect image on your website, money on a photographer to get your photo taken. Under this misconception that any of this makes even an iota of difference, especially in today's market, because in reality all that stuff is like 0.5% of what matters. You peel open a modern, high flying, emerging beauty brand and it is a technology driven marketing machine. All right? Vacation isn't where it is just because they're cool and their stuff Smells good. Yes, that's important. But these guys sweat the details of everything with their brand. Things that would make most of us bored to death. You know, their tech stack, how they position the brand with different people, how they work with influencers. And I just want to pick on them. There's many others, but to be successful, there is so much more boring things that you need to be getting good at. And many of them are expensive and constantly changing. Which is why I think the real people who make a difference are the professional entrepreneurs who've done it before, who understand what it really takes. And oh, by the way, just to be clear, the other group of people who kind of naively bumble around in this field are ex corporate executives. You know, they're like, oh, Yes, I spent 25 years at L' Oreal and Estee and Cody. I was SVP of that, GM of that. You didn't really do anything. You made some very important decisions and you had people who executed for you. But that is not how it works for the small brand.
[17:04]
Lara Schmoisman
I just love you for saying that. That's. I've been saying that for a long time. Either you have the executives who they didn't execute it and just made important decisions like you said, or you have the person who've been working at l' Oreal or. And they did this little job because they have tons of people. They didn't see the big picture, and.
[17:26]
Nader
They were protected by decades of brand equity that was built long before they showed up. I mean, their job is not to screw up. They're playing not to lose. So if you're at l', Oreal, you're a publicly traded company. If you grow in mid single digits every year, you're good, right? You are good. So don't screw it up. The last thing they want is Negative growth. Negative EBITDA. They don't want to blow up. They don't want 30% annual growth rate. In fact, if you had 30% growth at L', Oreal, alarm bells would link. Somebody would show up and say, what the hell are you doing here? You know, so at l', Oreal, of course I'm making that up. But l', Oreal, which, by the way, I gotta tell you something. I love beauty entrepreneurs. That is my core market. They're the people I adore. But the longer I work in this industry, the more respect I have for l'. Oreal. Really and truly, they're a special organization. First of all.
[18:24]
Lara Schmoisman
Every time I meet people that they work at l', Oreal, they Have some. Or they work. They still feel some kind of respect, and they're proud that they were part of their journey.
[18:37]
Nader
Yeah. And then right after that, they complain about Frenchmen in blue suits taking all the great jobs and, you know, not giving them opportunity. And I'm, of course, being purposefully inflammatory here, you know, but l', Oreal, to their credit, has educated and trained an entire generation of very competent executives. You look at Walden Cast, Michel Brousset, ex l' Oreal executive. You know, you just go around the industry. They have one of the best track records of creating executives that can actually make the transition to emerging beauty. There is something about the l' Oreal machine that balances the corporate culture with some degree of entrepreneurial freedom. And it's not entirely entrepreneurial freedom, but somehow you're encouraged to think a bit more out of the box. And I think it's because they have a scientific background. That company was formed by scientists. And I think to this day, they like experimentation, they like trying new things. But to run a company of that size with so many brands across so many categories, I mean, they're in every category, every channel, every market. You look at their split of sales. It's like a perfect pie. They've perfectly balanced this thing. It takes a lot of work.
[19:45]
Lara Schmoisman
It's very difficult for everyone to work in the corporate world. But if you do it right, l'.
[19:53]
Nader
Oreal is now, I'm sure it's frustrating place at times, and you want to kill yourself because it takes so long to make decisions. And there's, I'm sure, politics. But to their credit, they have created the best balance of having an environment where people can't burn the place down because they're doing dumb things like Anhua, but at the same time, maintaining a degree of realism, for lack of a better word, that allows them to take bets and risks and do things out of the box. Overall, I think, you know, going back to your original question about where is indie beauty? I think indie beauty is dead. That term, that concept, that notion, it had its time. It was the age of disruptors. It was good while it lasted. And then, like all things, it comes to an end. The market became oversaturated. There were too many, many brands. Nobody could make enough money. Ovid basically showed who was wearing, you know, their underwear, because suddenly the lights came on and like, well, hang on a second. You're making no profit. It's all this kind of growth that you're buying at very high prices through advertising. And so there was a big Comedown. And now people understand that you have to take your time building a brand. Taking 16 years to get to 80 million like Medicaid did is fine. You don't have to be a road that got to 100 million in four.
[21:11]
Lara Schmoisman
But this year happened two very interesting transactions. And I think that it makes a lot of these young brands, as I call them, very excited. And a lot of them are thinking immediately of exiting. What's your take on that? And I'm talking about Touchstone and Touchland and Rhode this year, that they were like unicorns. We didn't see this in the industry in a long, long time.
[21:41]
Nader
You open the surface of those brands. Rhode got to where it was because it was well capitalized with a celebrity that actually knew what she was doing. And the years she and her husband spent building their careers and her parents, her own career, you know, Basinger and Alec, all of that work was done before she even started the brand. Okay. So, you know, when you in the US you see these big water towers in cities where they hold water. And what they do is during the time when it's cheap, they pump water up. And then when people need water, they just use gravity to get the water down and into the city. But what you're effectively doing is you're pumping something up. So when you need it, gravity brings it down. What Bieber and celebrities do is they're pumping, pumping up awareness, market awareness into a vat, and then they're draining it when they need it to launch a product. Every brand needs to do that. For the average brand, you're doing it by advertising. You're paying somebody to pump equity up and awareness up for you. Touchland was also different because they had tried different things in the past. You look at many of these entrepreneurs, this is their second, third Hero Cosmetics is their third attempt. You know, K18, same thing. That was another one that looked like it was a bit of a unicorn. So behind all of these brands is a deeper story. And in many ways, Laura, the more important thing is it's a little bit like the entertainment industry. If you look at, you know, everybody wants to be an actor, win an Oscar, play against Brad Pitt or, you know, a famous Hollywood star. The truth of the matter is the vast majority of people who are in the acting business are waiting tables in Hollywood. They're not working actors. Even Brad Pitt, all of them did that unless they were born into the right family, like a Barrymore family or one of those families where they could get to the front of the line. And so Unless you're born into that celebrity family. Even then, like a Josh Brolin had to make his way through the right way. You have to start at the bottom. And so the vast 90% of the money is made by less than 10% of the actors. And so the same is true in beauty, in emerging beauty. It's not fair, it's not equally distributed and some brands are doing incredibly well. But if you're going to start a brand, you need to have the mentality that you're building something that you're going to leave for your kids, something that you're happy to own and make money from for the rest of your life. If you're doing it purely to get an exit, then no, you are competing with people like who just sold floor to tsg. The gentleman from.
[24:28]
Lara Schmoisman
And there is a reality. There is. I always make this difference between having a brand that is a long game or having a collection of products that you're trying to sell. Yeah, it's very different. And that's what l' Oreal is. L' Oreal today, they made themselves and they play the infinite game. Choose generation after generation.
[24:50]
Nader
L' Oreal, many brand. Many brand companies now recognize after the M and A boom in the past 10 years that when you see what's lasted in their portfolio are brands that had a heritage, that had a reason to exist long before the Internet came, came around buying brands because, oh, they figured out social or, oh, they'd figured out Sephora, well, one social channel is hot now. What happens when it cools? You know, Sephora's hot now, but I guarantee you in 20 years, it probably won't be. Maybe it will be, maybe it won't be. If history is any lesson, it probably won't. So I think. But l' Oreal is going to be around. But if I had to bet who's going to be here in 20 years? L', Oreal, they'll be around. And their management team thinks that way. They think very long term. And if you're building a brand that you hope l' Oreal will buy, you need to have that same mentality. And you know the famous saying, we pursue that which evades us. Many strategics like getting brands they can't get, the more harder you are to get. They're like, oh, we really want it because you're more of a coveted product. So. And listen, there is going to be a time not all brands are going to find a home with a strategic yet they're going to have enough sales that the founder and the management team can have a comfortable living in Europe. That would be perfectly acceptable. There are brands in Europe doing between 100 to 200 million dollars a year that are now owned by the grandchildren. They all have comfortable lives. They take nice vacations every year. They don't have debt, they donate to charity, they take good care of their employees and they have no intention of selling. They're just happy doing what they do.
[26:33]
Lara Schmoisman
This is a dream, honestly. It's a great life for you and the generations to come.
[26:38]
Nader
And there's nothing wrong with it. Yet somehow in America, or at least in the Anglo Saxon world, it's perceived that unless you can hire a banker to go sell your brand to either private equity or strategic, somehow you fail. No, you haven't failed. That's just one potential outcome. I mean, it's a great ad, don't get me wrong. Of all possible outcomes. I'd very much like that.
[26:59]
Lara Schmoisman
But yeah, I have another question for you because it was, there's this trend that it was in the last few years of young brands of it was all about the founder story. What are your thoughts on that? Because to me, it's about the consumer, always. It's not about the founder.
[27:16]
Nader
Well, yes and no. What's happened is consumers have gotten tired of impersonal corporate brands, which is why corporate brands always hired ambassadors, right? Like, you know, Charlize Theron to be the face of the brand, you know, because at some level, a purchase is a human interaction. I want to know who I'm buying this for. So even back then, it was that sales associate at the department store that I trusted it because she recommended this brand, or it was because some famous celebrity that I trusted recommended this brand. Most consumers don't like the burden of choice. The truth is Steve Jobs knew this better than anyone. People actually don't like choice. They like the idea of choice that it's there. But when it comes to making a decision, they really don't like decision making. And if you look at our election results, you get a pretty good idea that most people and their decision making is a little screwed up because most people don't vote. You know, they don't like the idea of having to pick. And so what the founder story does, it enables a human connection to be established between the brand and the consumer. And so I'm not buying a moisturizer. I like Tata Harper, I like Dr. Barbara Sturm. I like that founder, their philosophy, their ideas and what they stick to stand for. And thus I trust the brand. I'm able to establish trust with the brand. So I think the founder component is still important but it's a delicate balance between making the founder a important and value added part of the storytelling without making them the sole center of attention and ultimately a risk to the brand. The best brands outlive the founder. The best founders create a brand that they birthed into the world and the brand has a life outside of the founder. Many founders have difficulty with that. In one extreme they're basically self obsessed narcissists who are doing a brand because they can't stop talking about themselves and they forget that there's a consumer. On the other extreme, they're reluctant founders. They're shy introverts who really don't like the public eye and and they don't want to talk to anyone and they just want you to shut up and buy the product so their shopify can go cha ching. The truth is somewhere in between is where you need to be and especially depending on the target consumer you're going after. I think what's also changed is with the rise of the content creator and influencer community, even the best founders need amplification through that community. So I think the next generation of successful founders are the ones that can truly get themselves leveraged because content creators want to work with them, they want to talk about their brand. I think that's how you get true leverage again. I go back to some of the brands that I like. Brands like say for example Vacation, that's making a lot of noise right now. Nobody knows who the founder, I mean I know who the founders are. Do you know who the founders are? If you ask the average person who the founder is, they don't know. That's great because they don't care. You know, locked in Dakota don't care.
[30:24]
Lara Schmoisman
I think also you need to know like you say Barbara Stern, she was is a doctor. He had some back in that. If you're just an entrepreneur because this is a business to you and you don't have a founder story, but you are really a good business person and you did your research and you hired the right people. I don't know if it's interesting to have a founder story.
[30:49]
Nader
I think you make it's on a case by case basis. I think not having a founder story. People like founder led brand. It's just the truth. I like founder led brands. I want to know who's behind this thing. Right. It's very difficult to get excited for a brand when the people running it are some faceless executives sitting in a conference room who are just doing this because they're getting paid a salary. Right. It just feels impersonal. So if I'm putting something on my side skin or inside my, I'm not buying toilet paper that I'll buy from, you know, Procter and Gamble and their wonderful executives out in Cincinnati. But if it's something more intimate, more personal to me, I'd like to know somebody's behind it that I actually respect and who cares about me and what happens with me when I use a product. But it can't all be about you as a founder. I think what founders need to understand that they are one tool in the toolbox of brand building. They have a use, they have a purpose. And at some point in time, you dial them back. You may even not talk about them anymore. You know, the brand always exists above you. You are never above the brand. You are building the brand. You serve the brand. That's something that people at l', Oreal, they're drilled into them from the minute they walk into the office. Like you, my friend, will come and go, but Lancome will be long after here, long after you're done. And so people need to treat their brand and their legacy the same way. You are building the brand, you are serving the brand.
[32:14]
Lara Schmoisman
So Nader, what do you think is going to happen with the young brands industry? Yeah, young and middle side brands.
[32:22]
Nader
It's the survival of the fittest. We're in the age of champions. This is what I've said over and over again. We had the age of empires, which lasted from, you know, sometime after the World War II until roughly the late 90s, early 2000s. Then we had the age of disruptors, which is when all the indie brands came to the market. And that lasted until about the pandemic. And now we're at the age of champions. It's still going to be entrepreneur driven brands. But beauty, entrepreneurship is professionalized and the success rate is still going to be low. Most brands will not make it. Many will end up being zombie brands just out there selling what they have and trying to eke out a living. But that's true in many industries. If you look at technology, for example, not every app company becomes WhatsApp, not every SaaS company becomes Snowflake. And I think in beauty you're going to see the same thing. A lot of brands are just going to be out there, but the ones that know how to do this, they are going to disproportionately capture market share and win. And a big part of it's going to be adaptation. What worked for you six years ago isn't going to work for you today. If you talk to beauty entrepreneurs that have done this, like Wendy Somnier who launched Urban Decay and now she does Callirae, she'll tell you it's a very different ballgame now than it was before.
[33:41]
Lara Schmoisman
I was talking to someone today, actually, that they were asking me, okay, would you tell me how you work and what you're doing? I say no, because what I'm doing is 30 years of compiled experience. I cannot even tell you what I am doing because I keep learning and adapting as things are coming new in the industry and I need to keep switching the gears as I learn.
[34:04]
Nader
It is frightening, honestly. I think one of the truly frightening things that I, you know, in those moments of introspection when I sit down, what really frightens me is if you are not constantly learning, you will be redundant very quickly. And the only reason I'm able to do that is because of the nature of my job as a public publisher. I'm constantly having to talk to people, ask questions and learn every deal maker. I have to force myself to sit down and think about relevant topics, assemble, interview a group of experts. So I have to stay on top of stuff. But that's my job as a publisher. If I was a brand founder, I'm spending my day dealing with inventory and figuring out, you know, what creators doing what to gift them, and I'm in the weeds. I don't have time to go talk to experts and do do stuff like that. So it's scary how quickly the land mass can shift under you. And before you know it, you're fighting a very different kind of battle. And suddenly all the things you thought were important aren't as important. Like look at retail. You know, 10 years ago it was all about, oh, you know, we got to go into retail. I want to be in as many. Now it's like, no, there's only a handful of retailers that matter. And until you get your own DTC act together and to a certain size, retailers won't even look at you. So you need to do both.
[35:26]
Lara Schmoisman
And the amount of money you need to put to go to retail, people don't understand that. And if you're not ready, you're setting yourself for failure.
[35:34]
Nader
Absolutely. I mean, it's completely true. I mean, retailers are like old school modeling agencies, you know, where you have to pay a lot of money to have your own photography taken, go to a lot of shoots, and only a few models ever make it to Vogue and actually make a living being a model. The vast rest of them are making most of their money doing cheap catalogs. So a lot of brands aren't making money at say, a department store or even Sephora. They're making their money on DTC or through indie boutiques where they're selling through Fair. So it's just. But you know, you need to do both. You need to be dtc, you need to be retail. If Sephora is available to you, you got to look at that opportunity. But you can't always rely on that.
[36:15]
Lara Schmoisman
No. And also, I seen so many founders actually not realizing that they're. I mean, keep. Keep your day job, hire the right people to run your business, to do your Instagram, to your TikTok. And don't try to learn how to do TikTok or Instagram because it's going to take you a lot of time and you're not going to do it right. And as a founder, you need to be thinking about other things and running a business.
[36:41]
Nader
You know, I'll give you my perspective on this. I'll give you an analogy. If you look at the most famous directors, filmmakers, all of them had a superpower in one area of filmmaking. So you look at Quentin Tarantino, he was really a scriptwriter. He's an incredible script. He writes all his own scripts. You look at someone like a James Cameron. He was a stage design and CGI X long before he directed movies. He was building stages for people like Spielberg and others. Others were actors. Clint Eastwood was an actor. He understands acting and actors and casting. That's his superpower. So all of these famous directors, before they became a director, Stanley Kubrick, photography. Stanley was a photographer long before he did anything else. That's why all his movies have very unique light and cinematic sense. Same thing as brand founders. If you're a brand founder, you need to look at the value chain of brand building. And there needs to be at least one meaningful area where you have a superpower. It could be in chemistry, where you have incredible knowledge of formulations and ingredients. It could be manufacturing, where you know how to source things and make things at a fraction of the price than the competition. It could be in E commerce and performance marketing. It could be because you're an amazing influencer and you know exactly how to leverage TikTok. But you have a reason to exist in this value chain. You've learned it, you're the best at it, and even then you have to find people to do the rest for you. But unless there's one of these areas that you know how to do well. You shouldn't approach this problem and to approach it because of quote, unquote passion or an unmet need and hoping to learn this skill. I mean, you're literally putting your head into a buzzsaw and hoping that it'll end well. Trust me, the buzzsaw will win. You are not going to win. Plus, you're competing with hundreds of other founders who are smarter, better capitalized. You know, don't have as many kids and a husband or a wife that you do. They're freer to spend their time all day figuring out the Instagram algorithm. So you really have to have something that you're bringing to the table that gives you an advantage in that value chain. Otherwise, trust me, take your money, put it in a 401k account, buy a ETF and just leave it alone. Do not invest it in a brand. Or if you're going to invest in brands, give it to a proper vc. Call my friend Rich Gersten or Brian Thorne and just write them a check. Become one of their LPs.
[39:10]
Lara Schmoisman
That's great advice. Well, Nader, thank you so much for being here. All your insights and being so direct and frank. I really love that.
[39:19]
Nader
Great. You're going to edit all the bad stuff, right? No, especially the nudity you were promised.
[39:26]
Lara Schmoisman
Thank you so much.
[39:27]
Nader
I reshaped today. I don't want to embarrass myself. All right, thanks so much, Laura. Take care, love. Bye.
[39:31]
Lara Schmoisman
Bye, you guys. I will see you next week with coffee number five.
[39:35]
Nader
Bye.
[39:36]
Lara Schmoisman
Find everything you need at larashmoisman.com or in the episode notes right below. Don't forget to subscribe. Was so good to have you here today. See you next time. Catch you on the flip side. Ciao, ciao.

Summary5 min read

Podcast Summary: Coffee N° 5 with Lara Schmoisman

Episode Title: Why Indie Beauty Is Dead—And What’s Replacing It with Nader Naeymi-Rad
Release Date: August 5, 2025
Host: Lara Schmoisman
Guest: Nader Naeymi-Rad

Introduction

In this insightful episode of Coffee N° 5, host Lara Schmoisman welcomes Nader Naeymi-Rad, a prominent figure in the beauty industry known for his extensive work with indie beauty brands. The conversation delves into the evolution of the indie beauty movement, its current demise, and the emergence of a new landscape in the beauty sector.

The Rise and Evolution of Indie Beauty

Nader's Journey into Indie Beauty
Nader recounts his accidental entry into the beauty industry back in 2015, sparked by assisting his friend Gillian Wright in launching the first Indie Beauty Expo in New York City.

“We did it in August because it's the cheapest time to get space in New York... It was a huge success.” ([01:15])

Growth of Indie Beauty Expo
Starting with modest expectations, Indie Beauty Expo quickly expanded, hosting multiple events across major cities like Los Angeles, Dallas, London, and Berlin by 2019. This expansion positioned Indie Beauty Expo as a central hub for independent beauty brands, fostering a community of innovation and entrepreneurship.

“By the end of 2019, we had five, five, two day events. We had over a thousand brands exhibit with us, and we became the center of the independent beauty movement.” ([04:30])

The Impact of COVID-19 on Indie Beauty

Pandemic Devastation
The COVID-19 pandemic dealt a severe blow to Nader’s ventures, leading to the cessation of events and a drastic reduction in business operations.

“Our business shrank by 94% in one month. So it was really a matter of we didn't know if there was gonna be a business.” ([06:08])

Shift to Digital and Resilience
Despite the setbacks, the community remained supportive. Nader pivoted to focus on Beauty Independent and initiated webinar series and awards to maintain engagement within the industry.

“Beauty independent, you prevail.” ([06:50])

Transition from Indie Beauty to Professionalization

End of Indie Beauty Era
Nader asserts that the indie beauty era has concluded, giving way to a more professional and competitive environment.

“Indie beauty is dead. That term, that concept, that notion, it had its time.” ([18:30])

Emergence of Challenger Brands
He explains the transition to a landscape dominated by emerging and challenger brands that prioritize professionalization over the DIY spirit of indie beauty.

“It's now the professionals that do the [beauty entrepreneurship].” ([09:17])

Challenges of the Modern Beauty Market
Nader emphasizes that the modern beauty market demands more than just a good product; it requires strategic marketing, robust infrastructure, and significant capital investment.

“They have to have that same mentality [long-term thinking]... If you're building a brand that you hope L'Oréal will buy, you need to have that same mentality.” ([24:50])

The Role of Founder Stories vs. Consumer-Centric Branding

Balancing Founder Stories
The discussion shifts to the importance of founder stories in branding. Nader highlights that while founder stories can create a human connection, they should not overshadow the brand's identity.

“The best brands outlive the founder. The best founders create a brand that they birthed into the world and the brand has a life outside of the founder.” ([28:30])

Consumer-Centric Approach
Lara concurs, emphasizing that successful brands prioritize consumer needs over founder narratives, ensuring the brand remains relevant and personable.

“It's about the consumer, always. It's not about the founder.” ([30:23])

Future of Young and Mid-Sized Beauty Brands

Survival of the Fittest
Nader predicts a highly competitive future for young and mid-sized beauty brands, characterized by the "survival of the fittest."

“It's the survival of the fittest. We're in the age of champions.” ([32:22])

Professionalization and Adaptation
He asserts that only brands that continuously adapt and professionalize will thrive, likening the current landscape to the technology sector where only a few emerge as leaders.

“Most brands will not make it. Many will end up being zombie brands just out there selling what they have and trying to eke out a living.” ([33:41])

Strategic Growth over Quick Exits
Nader advises against pursuing brands solely for quick exits, advocating instead for long-term brand building that ensures sustainability and legacy.

“If you're doing it purely to get an exit, then no, you are competing with people like who just sold floor to TSG.” ([24:27])

Practical Advice for Aspiring Beauty Entrepreneurs

Specialization and Delegation
Nader emphasizes the importance of founders specializing in one area of the business and delegating other tasks to experts.

“You have to have something that you're bringing to the table that gives you an advantage in that value chain.” ([38:30])

Building a Professional Team
He advises aspiring entrepreneurs to hire professionals for roles like marketing and social media to avoid spreading themselves too thin.

“You need to hire the right people to run your business, to do your Instagram, to your TikTok.” ([36:14])

Continuous Learning and Adaptation
Nader stresses the necessity of constant learning to stay relevant in the ever-evolving beauty industry.

“If you are not constantly learning, you will be redundant very quickly.” ([34:04])

Conclusion

The episode concludes with Lara expressing gratitude for Nader’s candid and insightful perspectives. Nader reiterates the importance of professionalism, strategic planning, and adaptability in building a successful beauty brand in today’s competitive market.

“Don't invest [in a brand]... Just leave it alone. Or if you're going to invest in brands, give it to a proper VC.” ([39:10])

Final Thoughts
Nader’s frank assessment serves as a reality check for aspiring beauty entrepreneurs, highlighting the shift from the indie movement to a more structured, competitive industry landscape. His advice underscores the necessity of professionalism, strategic growth, and continuous adaptation to thrive in the modern beauty market.

Key Takeaways:

The indie beauty movement has evolved into a more professional and competitive landscape.
COVID-19 significantly impacted indie beauty events, leading to a shift towards digital engagement and professionalization.
Founder stories are important but should balance with consumer-centric branding.
The future of beauty brands lies in survival of the fittest, requiring continuous learning and strategic adaptation.
Aspiring entrepreneurs should specialize in their strengths and delegate other tasks to professionals.

Resources:

Lara Schmoisman's Website
Episode Notes: Available here (link to podcast episode notes)

Subscribe to Coffee N° 5 on your favorite podcast platform to stay updated with the latest insights in the beauty industry.

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Transcript49 lines

[00:00]
Lara Schmoisman
Foreign. This is Coffee Number Five. I'm your host, Lara Schmoisman. Hi guys. Welcome back to Coffee Number Five. Today I have real, a real trip and someone really hard to pin down because he's all over the world and. But it's such a big supporter of indie beauty in the brands that they're growing. And I will say probably started with the indie beauty and he will really explain that to us. But I think that now he's an industry supporter most than anything. So. Welcome, welcome, welcome, welcome. Nader, thank you so much for being here.
[00:43]
Nader
Hi Laura, how are you? I mean, you got a whole different Persona when the, when the camera goes live. I mean, the shyness is gone. Yeah, great.
[00:52]
Lara Schmoisman
Well, it happens. It's years of experience. Nader, tell us, how did you start? I mean you, everyone knows you in the industry, but I want, want to. Yes, they do. But I want them to know how this started as indie beauty. Now it became beauty independent. Then you have bite, you have deal maker. There is so much going on. I want to understand how this evolved.
[01:16]
Nader
Thank you for having me on. I honestly, I'm not used to being on the other side of the microphone, so it's odd answering questions versus asking the questions. But the truth is it was completely by accident entered this industry back in 2015 because a friend of mine at the time who was a very well regarded New York esthetician by the name of Gillian Wright, she had built a very successful aesthetic spa clinic. I was one of her clients. And in 2014 she had started her own brand called Gillian Rice Skincare. It was a indie brand. And one of the challenges she found was that there was nowhere for her to showcase her product to the right retailers and press media. Traditional trade shows were too big for her, MERs markets were irrelevant. So she had this idea for an indie beauty expo and she asked me to help her. So I said sure. And we ended UP doing a one day event in New York in August of 2015, which is almost exactly 10 years ago at this point. And to tell you how little faith I had in the project, we did it in August because it's the cheapest time to get space in New York and you know, like, you know, 20,000 bucks, you know, we'll see what happens to it. I wanted to really help my friend. And what happened was it was a huge success. We had anticipated 20 to 30 exhibitors. We ended up with 85 brands like Tata Harper exhibited, Yojio brands that are today, you know, have exited. And then instead of about 100 attendees. We had over 500 attendees. There was a big line going around the block to get into the event at Chelsea and we had no idea what we were doing. I'd never done a trade show. I'd never done a professional event. It was, I was printing badges at home and putting them into full, you know, plastic covers by hand. My dad was helping me. It was really a complete amateur hour, but we survived it and we made an impression. And what I realized at that time was that this industry was going through a once in a lifetime disruption where in terms of where innovation was happening, who was building the brands, how they were being sold, their value proposition, all of that was changing. And at the forefront of all this was the beauty entrepreneur. The person, typically a woman, who decided that she's had enough of whatever garbage she was buying before, or maybe that just wasn't what she wanted and so she was going to make it herself. And whether it was in skincare, hair care, every, every conceivable category, entrepreneurs were disrupting the market. And we decided to help them. We expanded Indie Beauty Expo to a two day event. We launched it in Los Angeles in 16, Dallas in 17, London in 18, and Berlin in 19. So by the end of 2019, we had five, five, two day events. We had over a thousand brands exhibit with us, and we became the center of the independent beauty movement. And through that journey, we met so many amazing people. For example, Hero Cosmetics launched at ibe. They met Target at ibe. You can literally go around asking folks that are now big brands. Many of them at some point either attended or exhibited IBM. And while we were doing that, I had nothing to read because I was new to the industry. So I looked around and everything that I saw was mostly focused in terms of trade publications focused on fashion. And when they covered beauty, they were covering Estee and Unilever. And yet I could see in front of me these amazing founders with incredible brands, such great stories that needed to be told. So in 2017, I approached Rachel Brown, who had just left women's wear. And I said, I'm thinking of starting a newsletter, maybe a publication focused on beauty entrepreneurs called Beauty Independent. And she said, I'm in. I never forget. It was March of 2017. It was a rainy day in New York when we spoke. And by August of that year, we had also launched Beauty Independent. So that's how Beauty Independent came to be really my start in the industry. And finally, as we were building all this, I realized there was no education for entrepreneurs. So we started a thought leadership Series called Beauty X Summits that we would do before Indie Beauty Expo. In New York it was Beauty X Capital. In Dallas it was Beauty X Retail in LA was Beauty X demand generation. And there we developed the 360 curriculum to educate beauty entrepreneurs on those topics. And all of these were the precursors to what we have today because you know, as all good things, it came to an end. Covid essentially destroyed that business. And the only thing left was Beauty independent.
[06:03]
Lara Schmoisman
And so since 2020, what happened with the shows? What happened was just Covid that stop it.
[06:09]
Nader
Complete, complete and utter devastation. It's it make good Netflix series because you can't make this stuff up. I mean if you look at the trade show or professional events industry, one of the reasons people have traditionally liked it is because it's continuously grows. The only time it didn't was during World War II and even then for those two years. But as soon as the war was over, people were back doing trade shows. And throughout the decades, Korean war, Vietnam, oil shock.com bubble didn't matter. The industry grew except when you have a pandemic where by law you cannot assemble. And so many trade shows unfortunately were in the same boat. Many were relying on government aid. We were just too small to be big enough to matter. We did apply for the standard loans and everything, but it was devastating for our business. We had already sold events for the 2020 calendar to our exhibitors and unfortunately because of force majeure, we couldn't do anything. I mean I can't the monies I'd already paid the money for, you know, venues and deposits. So you know, but I gotta be honest with you, the, the community was very, very supportive and forgiving. Focus on beauty independent start a webinar series our Beacon Awards and then back doing events. That's how I ended up in this industry. Unfortunately, co founder Gian had to leave during the pandemic. I mean our business shrank by 94% in one month. So it was really matter of we didn't know if there was gonna be a business. But you know, beauty independence, you prevail.
[07:49]
Lara Schmoisman
I mean today you have one of the most well attended events of in the industries. You have like Dealmaker that also it's new we do in the second or third year.
[08:05]
Nader
Well Laura, you know what they say, what doesn't kill you makes you bitter and jaded and also makes you better. So once we came out of COVID we went back. So Dealmaker is essentially a continuation and an improvement of our Beauty X Capital series. But geared More towards. And I think this is an important point that gets to the heart of your question about indie beauty. Indie beauty is a term I don't even use anymore. Back when we started, one of the first questions we would get asked is what does indie beauty even mean? And so we had to do contortions to define what does independent mean? How much ownership does a founder have to have? Today, none of that matters. What we're finding today is you have emerging brands, challenger brands, and no one, including the consumer, cares about their ownership structure. In fact, what's happened in beauty is that beauty entrepreneurship is fine and thriving because that's how new innovation is coming to market, is through entrepreneurs. However, the days of not knowing anything, making soap in your bathtub, hoping to accidentally meet a Sephora buyer and making it big, those days are long gone, if they even ever exist.
[09:17]
Lara Schmoisman
I'm so glad that you say that because I feel like there are a lot of people in this industry or that they have not yet in the industry that they think that it can happen. And the world changed so much.
[09:30]
Nader
It's professionalized. You're now dealing with a whole generation of entrepreneurs that have lived through this with the previous brand that they either did or worked with. They've learned and they're coming to the table much better connected, much better capitalized with a much better strategy. And so the good news is they're smarter, they're more experienced, they're more capable. The bad news is if you don't have the right experience and background, you're gonna get squished. Their market is very unforgiving. And I think one of the things I can talk about because I am all for the beauty entrepreneur is a sense of entitlement than some first time entrepreneurs have that somehow the world owes them something, that they need to bring this brand, they have to do this and then everybody has to give them low moqs. You know, retailers have to bend over backwards and support their brands with free marketing. People like you should do free consulting for them. Why? Why? The world doesn't owe you anything.
[10:28]
Lara Schmoisman
I was having this talk with someone yesterday. Bringing a brand to life is expensive.
[10:34]
Nader
Very.
[10:35]
Lara Schmoisman
It's not only. I mean you can only think about your product, the money that you have going to have to put in marketing, PR consultants, the right consultants, of course, and work with the right people. If you're new in the industry, you need to connect yourself with the right people. It's all about who you know and the experience that they bring to the table.
[10:58]
Nader
Exactly. It's A little bit like saying, you know what, I fly a lot and I'm sick and tired of these modern aircraft. They don't have enough seats where room and leg room and the bathrooms are small. So I'm going to make my own aircraft company and manufacture my own aircraft that are better suited and better for the environment and more sustainable. Okay, great. Now you need to go get, you're.
[11:20]
Lara Schmoisman
Going to fly, you're going to fly.
[11:22]
Nader
To the airplane and so you a, I don't know, part time accountants, then you're going to go at the bank and say, yeah, I want to start an aeronautics company. Like, well, great. Are you an aeronautics engineer? No. Are you a pilot? No. Are you like, what relevant experience you have? How much capital are you bringing? So in no other profession can you go and raise capital unless you have the ability to demonstrate relevant experience, knowledge, your own capital, some ip, something. But somehow in beauty, people naively believe that an idea and hope are enough to get you going. The truth is, even people who have made it and became successful and you hear about their exits and their journey and they show up on your podcast or they come to my webinar like, oh my God, you know, I was just a lowly so and so and you know, I saw my kids didn't have what the right thing for their eczema and I started my own brand and da, da, da, da, da. After about 15 minutes you realize, oh yeah, the wife or the husband was a cardiologist and they had, you know, passive income from a real estate empire their parents left for them and you know, yeah, that paid for the first five years of the brand while they were learning and losing money and so making mistakes. Yeah, and making a ton of mistakes. It's the way business is done. I always recommend to entrepreneurs that it's fine to be an entrepreneur. First of all, you have to accept that entrepreneurship is not a career as it was famously said. It is a lifestyle choice. If people ask you what do you want to be when you grow up and you say entrepreneur, that's, that's not a career, that's a lifestyle choice. Yeah. Because you have to absolutely have incredible comfort for discomfort and anxiety. But one thing you can do to make your life as an entrepreneur better is to get relevant experience and have somebody else pay for it. And so what I recommend to people is there is now what is different today than 10 years ago is there is now a viable community of emerging brands, founder led brands that are not two people and a dog, but actually a, you know, a Company with capital and sales and structure. Beekman 1802. True botanicals. These are great brands. They have professional management teams, but they're not corporate. And so working in these companies you get great experience, you learn directly from the people at the top. You see what it is to work in an emerging brand. And most importantly, you get a salary. You don't have to put your life at risk, take on a mortgage, get embarrassed because you've borrowed money from your friends and family. Learn, make your network, make your connections and then commit to something once you have the right experience and credibility. And so I think that's a big change in the market. As I like to say, amateur hour is over. It's now the professionals that do the.
[14:16]
Lara Schmoisman
I also say something that in first of all, people think that it's kind of easy to make your own brand. It's not difficult. If you have some money, you can go manufacture her products. It's easy to have products, but will it be unique in the market if you don't know the market? I see a lot of people so in love with their idea that they really don't know if there is a market for that product.
[14:40]
Nader
They're not doing the research, they're not doing the research. It's almost a self indulgent vanity project. You know, it's like those people who are like, oh my God, I want to have this beautiful store in the Hamptons where I sell a carefully curated collection of these artisanal products that I source from Italy and France. And great, you know, if your, you know, spouse or parents going to pay for that place and you have no customers nine months of the year and you don't make any money and you get a tax write off out of it. Great. It's a hobby. And I think there are some people who like the creative process and there's nothing wrong with that. They like going to a co man who's happy to take your money, give you a formulation. You work on the packaging, the branding. You spend oodles of time getting that perfect positioning statement, wasting God knows how much money getting the perfect image on your website, money on a photographer to get your photo taken. Under this misconception that any of this makes even an iota of difference, especially in today's market, because in reality all that stuff is like 0.5% of what matters. You peel open a modern, high flying, emerging beauty brand and it is a technology driven marketing machine. All right? Vacation isn't where it is just because they're cool and their stuff Smells good. Yes, that's important. But these guys sweat the details of everything with their brand. Things that would make most of us bored to death. You know, their tech stack, how they position the brand with different people, how they work with influencers. And I just want to pick on them. There's many others, but to be successful, there is so much more boring things that you need to be getting good at. And many of them are expensive and constantly changing. Which is why I think the real people who make a difference are the professional entrepreneurs who've done it before, who understand what it really takes. And oh, by the way, just to be clear, the other group of people who kind of naively bumble around in this field are ex corporate executives. You know, they're like, oh, Yes, I spent 25 years at L' Oreal and Estee and Cody. I was SVP of that, GM of that. You didn't really do anything. You made some very important decisions and you had people who executed for you. But that is not how it works for the small brand.
[17:04]
Lara Schmoisman
I just love you for saying that. That's. I've been saying that for a long time. Either you have the executives who they didn't execute it and just made important decisions like you said, or you have the person who've been working at l' Oreal or. And they did this little job because they have tons of people. They didn't see the big picture, and.
[17:26]
Nader
They were protected by decades of brand equity that was built long before they showed up. I mean, their job is not to screw up. They're playing not to lose. So if you're at l', Oreal, you're a publicly traded company. If you grow in mid single digits every year, you're good, right? You are good. So don't screw it up. The last thing they want is Negative growth. Negative EBITDA. They don't want to blow up. They don't want 30% annual growth rate. In fact, if you had 30% growth at L', Oreal, alarm bells would link. Somebody would show up and say, what the hell are you doing here? You know, so at l', Oreal, of course I'm making that up. But l', Oreal, which, by the way, I gotta tell you something. I love beauty entrepreneurs. That is my core market. They're the people I adore. But the longer I work in this industry, the more respect I have for l'. Oreal. Really and truly, they're a special organization. First of all.
[18:24]
Lara Schmoisman
Every time I meet people that they work at l', Oreal, they Have some. Or they work. They still feel some kind of respect, and they're proud that they were part of their journey.
[18:37]
Nader
Yeah. And then right after that, they complain about Frenchmen in blue suits taking all the great jobs and, you know, not giving them opportunity. And I'm, of course, being purposefully inflammatory here, you know, but l', Oreal, to their credit, has educated and trained an entire generation of very competent executives. You look at Walden Cast, Michel Brousset, ex l' Oreal executive. You know, you just go around the industry. They have one of the best track records of creating executives that can actually make the transition to emerging beauty. There is something about the l' Oreal machine that balances the corporate culture with some degree of entrepreneurial freedom. And it's not entirely entrepreneurial freedom, but somehow you're encouraged to think a bit more out of the box. And I think it's because they have a scientific background. That company was formed by scientists. And I think to this day, they like experimentation, they like trying new things. But to run a company of that size with so many brands across so many categories, I mean, they're in every category, every channel, every market. You look at their split of sales. It's like a perfect pie. They've perfectly balanced this thing. It takes a lot of work.
[19:45]
Lara Schmoisman
It's very difficult for everyone to work in the corporate world. But if you do it right, l'.
[19:53]
Nader
Oreal is now, I'm sure it's frustrating place at times, and you want to kill yourself because it takes so long to make decisions. And there's, I'm sure, politics. But to their credit, they have created the best balance of having an environment where people can't burn the place down because they're doing dumb things like Anhua, but at the same time, maintaining a degree of realism, for lack of a better word, that allows them to take bets and risks and do things out of the box. Overall, I think, you know, going back to your original question about where is indie beauty? I think indie beauty is dead. That term, that concept, that notion, it had its time. It was the age of disruptors. It was good while it lasted. And then, like all things, it comes to an end. The market became oversaturated. There were too many, many brands. Nobody could make enough money. Ovid basically showed who was wearing, you know, their underwear, because suddenly the lights came on and like, well, hang on a second. You're making no profit. It's all this kind of growth that you're buying at very high prices through advertising. And so there was a big Comedown. And now people understand that you have to take your time building a brand. Taking 16 years to get to 80 million like Medicaid did is fine. You don't have to be a road that got to 100 million in four.
[21:11]
Lara Schmoisman
But this year happened two very interesting transactions. And I think that it makes a lot of these young brands, as I call them, very excited. And a lot of them are thinking immediately of exiting. What's your take on that? And I'm talking about Touchstone and Touchland and Rhode this year, that they were like unicorns. We didn't see this in the industry in a long, long time.
[21:41]
Nader
You open the surface of those brands. Rhode got to where it was because it was well capitalized with a celebrity that actually knew what she was doing. And the years she and her husband spent building their careers and her parents, her own career, you know, Basinger and Alec, all of that work was done before she even started the brand. Okay. So, you know, when you in the US you see these big water towers in cities where they hold water. And what they do is during the time when it's cheap, they pump water up. And then when people need water, they just use gravity to get the water down and into the city. But what you're effectively doing is you're pumping something up. So when you need it, gravity brings it down. What Bieber and celebrities do is they're pumping, pumping up awareness, market awareness into a vat, and then they're draining it when they need it to launch a product. Every brand needs to do that. For the average brand, you're doing it by advertising. You're paying somebody to pump equity up and awareness up for you. Touchland was also different because they had tried different things in the past. You look at many of these entrepreneurs, this is their second, third Hero Cosmetics is their third attempt. You know, K18, same thing. That was another one that looked like it was a bit of a unicorn. So behind all of these brands is a deeper story. And in many ways, Laura, the more important thing is it's a little bit like the entertainment industry. If you look at, you know, everybody wants to be an actor, win an Oscar, play against Brad Pitt or, you know, a famous Hollywood star. The truth of the matter is the vast majority of people who are in the acting business are waiting tables in Hollywood. They're not working actors. Even Brad Pitt, all of them did that unless they were born into the right family, like a Barrymore family or one of those families where they could get to the front of the line. And so Unless you're born into that celebrity family. Even then, like a Josh Brolin had to make his way through the right way. You have to start at the bottom. And so the vast 90% of the money is made by less than 10% of the actors. And so the same is true in beauty, in emerging beauty. It's not fair, it's not equally distributed and some brands are doing incredibly well. But if you're going to start a brand, you need to have the mentality that you're building something that you're going to leave for your kids, something that you're happy to own and make money from for the rest of your life. If you're doing it purely to get an exit, then no, you are competing with people like who just sold floor to tsg. The gentleman from.
[24:28]
Lara Schmoisman
And there is a reality. There is. I always make this difference between having a brand that is a long game or having a collection of products that you're trying to sell. Yeah, it's very different. And that's what l' Oreal is. L' Oreal today, they made themselves and they play the infinite game. Choose generation after generation.
[24:50]
Nader
L' Oreal, many brand. Many brand companies now recognize after the M and A boom in the past 10 years that when you see what's lasted in their portfolio are brands that had a heritage, that had a reason to exist long before the Internet came, came around buying brands because, oh, they figured out social or, oh, they'd figured out Sephora, well, one social channel is hot now. What happens when it cools? You know, Sephora's hot now, but I guarantee you in 20 years, it probably won't be. Maybe it will be, maybe it won't be. If history is any lesson, it probably won't. So I think. But l' Oreal is going to be around. But if I had to bet who's going to be here in 20 years? L', Oreal, they'll be around. And their management team thinks that way. They think very long term. And if you're building a brand that you hope l' Oreal will buy, you need to have that same mentality. And you know the famous saying, we pursue that which evades us. Many strategics like getting brands they can't get, the more harder you are to get. They're like, oh, we really want it because you're more of a coveted product. So. And listen, there is going to be a time not all brands are going to find a home with a strategic yet they're going to have enough sales that the founder and the management team can have a comfortable living in Europe. That would be perfectly acceptable. There are brands in Europe doing between 100 to 200 million dollars a year that are now owned by the grandchildren. They all have comfortable lives. They take nice vacations every year. They don't have debt, they donate to charity, they take good care of their employees and they have no intention of selling. They're just happy doing what they do.
[26:33]
Lara Schmoisman
This is a dream, honestly. It's a great life for you and the generations to come.
[26:38]
Nader
And there's nothing wrong with it. Yet somehow in America, or at least in the Anglo Saxon world, it's perceived that unless you can hire a banker to go sell your brand to either private equity or strategic, somehow you fail. No, you haven't failed. That's just one potential outcome. I mean, it's a great ad, don't get me wrong. Of all possible outcomes. I'd very much like that.
[26:59]
Lara Schmoisman
But yeah, I have another question for you because it was, there's this trend that it was in the last few years of young brands of it was all about the founder story. What are your thoughts on that? Because to me, it's about the consumer, always. It's not about the founder.
[27:16]
Nader
Well, yes and no. What's happened is consumers have gotten tired of impersonal corporate brands, which is why corporate brands always hired ambassadors, right? Like, you know, Charlize Theron to be the face of the brand, you know, because at some level, a purchase is a human interaction. I want to know who I'm buying this for. So even back then, it was that sales associate at the department store that I trusted it because she recommended this brand, or it was because some famous celebrity that I trusted recommended this brand. Most consumers don't like the burden of choice. The truth is Steve Jobs knew this better than anyone. People actually don't like choice. They like the idea of choice that it's there. But when it comes to making a decision, they really don't like decision making. And if you look at our election results, you get a pretty good idea that most people and their decision making is a little screwed up because most people don't vote. You know, they don't like the idea of having to pick. And so what the founder story does, it enables a human connection to be established between the brand and the consumer. And so I'm not buying a moisturizer. I like Tata Harper, I like Dr. Barbara Sturm. I like that founder, their philosophy, their ideas and what they stick to stand for. And thus I trust the brand. I'm able to establish trust with the brand. So I think the founder component is still important but it's a delicate balance between making the founder a important and value added part of the storytelling without making them the sole center of attention and ultimately a risk to the brand. The best brands outlive the founder. The best founders create a brand that they birthed into the world and the brand has a life outside of the founder. Many founders have difficulty with that. In one extreme they're basically self obsessed narcissists who are doing a brand because they can't stop talking about themselves and they forget that there's a consumer. On the other extreme, they're reluctant founders. They're shy introverts who really don't like the public eye and and they don't want to talk to anyone and they just want you to shut up and buy the product so their shopify can go cha ching. The truth is somewhere in between is where you need to be and especially depending on the target consumer you're going after. I think what's also changed is with the rise of the content creator and influencer community, even the best founders need amplification through that community. So I think the next generation of successful founders are the ones that can truly get themselves leveraged because content creators want to work with them, they want to talk about their brand. I think that's how you get true leverage again. I go back to some of the brands that I like. Brands like say for example Vacation, that's making a lot of noise right now. Nobody knows who the founder, I mean I know who the founders are. Do you know who the founders are? If you ask the average person who the founder is, they don't know. That's great because they don't care. You know, locked in Dakota don't care.
[30:24]
Lara Schmoisman
I think also you need to know like you say Barbara Stern, she was is a doctor. He had some back in that. If you're just an entrepreneur because this is a business to you and you don't have a founder story, but you are really a good business person and you did your research and you hired the right people. I don't know if it's interesting to have a founder story.
[30:49]
Nader
I think you make it's on a case by case basis. I think not having a founder story. People like founder led brand. It's just the truth. I like founder led brands. I want to know who's behind this thing. Right. It's very difficult to get excited for a brand when the people running it are some faceless executives sitting in a conference room who are just doing this because they're getting paid a salary. Right. It just feels impersonal. So if I'm putting something on my side skin or inside my, I'm not buying toilet paper that I'll buy from, you know, Procter and Gamble and their wonderful executives out in Cincinnati. But if it's something more intimate, more personal to me, I'd like to know somebody's behind it that I actually respect and who cares about me and what happens with me when I use a product. But it can't all be about you as a founder. I think what founders need to understand that they are one tool in the toolbox of brand building. They have a use, they have a purpose. And at some point in time, you dial them back. You may even not talk about them anymore. You know, the brand always exists above you. You are never above the brand. You are building the brand. You serve the brand. That's something that people at l', Oreal, they're drilled into them from the minute they walk into the office. Like you, my friend, will come and go, but Lancome will be long after here, long after you're done. And so people need to treat their brand and their legacy the same way. You are building the brand, you are serving the brand.
[32:14]
Lara Schmoisman
So Nader, what do you think is going to happen with the young brands industry? Yeah, young and middle side brands.
[32:22]
Nader
It's the survival of the fittest. We're in the age of champions. This is what I've said over and over again. We had the age of empires, which lasted from, you know, sometime after the World War II until roughly the late 90s, early 2000s. Then we had the age of disruptors, which is when all the indie brands came to the market. And that lasted until about the pandemic. And now we're at the age of champions. It's still going to be entrepreneur driven brands. But beauty, entrepreneurship is professionalized and the success rate is still going to be low. Most brands will not make it. Many will end up being zombie brands just out there selling what they have and trying to eke out a living. But that's true in many industries. If you look at technology, for example, not every app company becomes WhatsApp, not every SaaS company becomes Snowflake. And I think in beauty you're going to see the same thing. A lot of brands are just going to be out there, but the ones that know how to do this, they are going to disproportionately capture market share and win. And a big part of it's going to be adaptation. What worked for you six years ago isn't going to work for you today. If you talk to beauty entrepreneurs that have done this, like Wendy Somnier who launched Urban Decay and now she does Callirae, she'll tell you it's a very different ballgame now than it was before.
[33:41]
Lara Schmoisman
I was talking to someone today, actually, that they were asking me, okay, would you tell me how you work and what you're doing? I say no, because what I'm doing is 30 years of compiled experience. I cannot even tell you what I am doing because I keep learning and adapting as things are coming new in the industry and I need to keep switching the gears as I learn.
[34:04]
Nader
It is frightening, honestly. I think one of the truly frightening things that I, you know, in those moments of introspection when I sit down, what really frightens me is if you are not constantly learning, you will be redundant very quickly. And the only reason I'm able to do that is because of the nature of my job as a public publisher. I'm constantly having to talk to people, ask questions and learn every deal maker. I have to force myself to sit down and think about relevant topics, assemble, interview a group of experts. So I have to stay on top of stuff. But that's my job as a publisher. If I was a brand founder, I'm spending my day dealing with inventory and figuring out, you know, what creators doing what to gift them, and I'm in the weeds. I don't have time to go talk to experts and do do stuff like that. So it's scary how quickly the land mass can shift under you. And before you know it, you're fighting a very different kind of battle. And suddenly all the things you thought were important aren't as important. Like look at retail. You know, 10 years ago it was all about, oh, you know, we got to go into retail. I want to be in as many. Now it's like, no, there's only a handful of retailers that matter. And until you get your own DTC act together and to a certain size, retailers won't even look at you. So you need to do both.
[35:26]
Lara Schmoisman
And the amount of money you need to put to go to retail, people don't understand that. And if you're not ready, you're setting yourself for failure.
[35:34]
Nader
Absolutely. I mean, it's completely true. I mean, retailers are like old school modeling agencies, you know, where you have to pay a lot of money to have your own photography taken, go to a lot of shoots, and only a few models ever make it to Vogue and actually make a living being a model. The vast rest of them are making most of their money doing cheap catalogs. So a lot of brands aren't making money at say, a department store or even Sephora. They're making their money on DTC or through indie boutiques where they're selling through Fair. So it's just. But you know, you need to do both. You need to be dtc, you need to be retail. If Sephora is available to you, you got to look at that opportunity. But you can't always rely on that.
[36:15]
Lara Schmoisman
No. And also, I seen so many founders actually not realizing that they're. I mean, keep. Keep your day job, hire the right people to run your business, to do your Instagram, to your TikTok. And don't try to learn how to do TikTok or Instagram because it's going to take you a lot of time and you're not going to do it right. And as a founder, you need to be thinking about other things and running a business.
[36:41]
Nader
You know, I'll give you my perspective on this. I'll give you an analogy. If you look at the most famous directors, filmmakers, all of them had a superpower in one area of filmmaking. So you look at Quentin Tarantino, he was really a scriptwriter. He's an incredible script. He writes all his own scripts. You look at someone like a James Cameron. He was a stage design and CGI X long before he directed movies. He was building stages for people like Spielberg and others. Others were actors. Clint Eastwood was an actor. He understands acting and actors and casting. That's his superpower. So all of these famous directors, before they became a director, Stanley Kubrick, photography. Stanley was a photographer long before he did anything else. That's why all his movies have very unique light and cinematic sense. Same thing as brand founders. If you're a brand founder, you need to look at the value chain of brand building. And there needs to be at least one meaningful area where you have a superpower. It could be in chemistry, where you have incredible knowledge of formulations and ingredients. It could be manufacturing, where you know how to source things and make things at a fraction of the price than the competition. It could be in E commerce and performance marketing. It could be because you're an amazing influencer and you know exactly how to leverage TikTok. But you have a reason to exist in this value chain. You've learned it, you're the best at it, and even then you have to find people to do the rest for you. But unless there's one of these areas that you know how to do well. You shouldn't approach this problem and to approach it because of quote, unquote passion or an unmet need and hoping to learn this skill. I mean, you're literally putting your head into a buzzsaw and hoping that it'll end well. Trust me, the buzzsaw will win. You are not going to win. Plus, you're competing with hundreds of other founders who are smarter, better capitalized. You know, don't have as many kids and a husband or a wife that you do. They're freer to spend their time all day figuring out the Instagram algorithm. So you really have to have something that you're bringing to the table that gives you an advantage in that value chain. Otherwise, trust me, take your money, put it in a 401k account, buy a ETF and just leave it alone. Do not invest it in a brand. Or if you're going to invest in brands, give it to a proper vc. Call my friend Rich Gersten or Brian Thorne and just write them a check. Become one of their LPs.
[39:10]
Lara Schmoisman
That's great advice. Well, Nader, thank you so much for being here. All your insights and being so direct and frank. I really love that.
[39:19]
Nader
Great. You're going to edit all the bad stuff, right? No, especially the nudity you were promised.
[39:26]
Lara Schmoisman
Thank you so much.
[39:27]
Nader
I reshaped today. I don't want to embarrass myself. All right, thanks so much, Laura. Take care, love. Bye.
[39:31]
Lara Schmoisman
Bye, you guys. I will see you next week with coffee number five.
[39:35]
Nader
Bye.
[39:36]
Lara Schmoisman
Find everything you need at larashmoisman.com or in the episode notes right below. Don't forget to subscribe. Was so good to have you here today. See you next time. Catch you on the flip side. Ciao, ciao.