This story was originally published on October 25, 2017.
Last year, a well-known celebrity took to Snapchat for an important announcement: A product in her debut makeup line had just sold out in one minute! Her fans had crashed the site in the process — and the newfound beauty entrepreneur had every reason to celebrate. With stats like these, her beauty brand looked like an immediate runaway success.
But behind the scenes, Alex*, a former beauty industry professional who worked with the brand at the time, says it wasn’t all emoji hearts and high fives. In the brand’s quest to make the launch newsworthy, hundreds of thousands of people had come up empty handed — and, Alex says, it was her team's job to diffuse the countless frustrated emails and social media posts. But what made this deluge of consumer contempt particularly rough was that, according to Alex, quickly selling out was the brand’s plan all along.
“Only 3,000 units were stocked at the time of the launch, even though the brand founder had mentioned that there were 300,000 visitors to the website,” Alex tells R29. That means that just 1% of the brand's anticipated customers were actually able to make a purchase. “I cannot even explain how many angry emails I had to reply to,” she says.
The solution seems obvious to consumers: Make more product. And yet, somehow, it keeps happening. Just look to direct-to-consumer brand The Ordinary and its highly-anticipated foundation launch, which garnered a wait list 25,000 people deep in April of this year, or the frenzy caused by the Too Faced Sweet Peach collection, which launched right before the holidays last year and found many fans (unsuccessfully) clamoring to get a piece of the pie. Of course, we can’t forget the Jenner and Kardashian effect: Whether Lip Kits or the newest contour sticks, a new release almost always causes hysteria online.
The question then becomes: Are these brands really running out of products, or is the 'sold out' accolade just a clever manipulation to inflate brand buzz? Turns out, it’s a little of both.
The first business strategy at play is a classic: scarcity. By shorting supply, a product is not only primed to sell out, but it also appears to be incredibly high in demand. On top of that, it builds an aura of exclusivity, limits excess, and in turn, intensifies customer demand. It's a smart move for brands — and the beauty, tech, and fashion worlds rely on it consistently.
“There is some very basic supply and demand math being executed here,” says Paco Underhill, an environmental psychologist who has consulted with cosmetics companies for more than 30 years and penned several books on consumerism, including What Women Want: The Science of Female Shopping. “If you manufacture 10,00 items that sell out in 10 minutes, you will make more money than if they make 50,000 items and 20,000 stay on the shelf.” He tells us that brands see the economical advantage to producing exactly what a company can move — and not a highlighting palette more.
“Scarcity is a very common marketing strategy in the beauty industry,” Alex adds, referring to her time working for a top beauty brand. “Not only does this strategy increase the perceived value of the product, but it also helps give estimates of demand to producers.”
One such way of activating excitement? Limited-edition launches. “The brand I worked with frequently restocked its products,” Alex continues, "This strategy was adapted through special, limited-time products. Although the products are made in-house and could be made permanent any time, by choosing to make special-edition kits, they created scarcity for these products."
Another benefit to creating a sell-out culture? It can legitimize newcomers to the beauty world, as was the case for Alex's client. If you’re a celebrity with little experience in the cosmetics world, then “sold out” headlines may just help legitimize you as a beauty industry heavyweight, too.
While social media, celebrities, and vloggers are all important players used to push makeup in the beauty world, there's another, much deeper level to this. Many experts believe that the thing that really moves product at a record pace is something a bit more raw: an element of danger.
Susan Weinschenk, a behavioral psychologist and author of How To Get People To Do Stuff, says that a strategy of scarcity is one that companies use to tap into desire at a primal level. In her 30-plus year career consulting with Fortune 1000 companies, Weinschenk has advised some companies to use the strategy because it fuels public thirst and product street cred.
“It can be extremely appropriate for all kinds of products or services,” she says. “You’d think that it’s a silly strategy: You have a new product and people want it, so why would you make it hard to get? But it can increase the desire and the likelihood that people will try to buy it right away.” She adds that for some consumers, the perception of exclusivity can also make a product seem more valuable and increase the tendency to buy — and it’s all tied to how our brains register danger.
Here’s how Weinschenk explains it: There’s a part of the brain that she calls “the old brain” because all animals have it. (Some even call it “the reptilian brain” since reptiles have it, too.) This part of the brain is largely unconscious, so we’re not aware that it’s functioning or how it affects us. This part of the brain is not only keyed into our survival, but it’s also constantly scanning everything around us. When it sees something dangerous, it puts us on alert, Weinschenk explains.
“You wouldn’t think that a new lipstick being unavailable would alert us to danger, but your old brain is very sensitive to fear of loss and fear of losing out on an opportunity,” she says. “Your old brain picks up on that before your conscious brain does and sends out danger alerts, like, ‘You’re going to lose this opportunity — you’d better act right now.’ Anything that sets off that old brain danger alert is going to be extremely effective.”
This is exactly the kind of thing that goes down when we see countdown clocks on flash sale sites, “Only one left!” pop up messages, or Snapchat and Instagram posts by the brand or its celebrity face. Weinschenk says that these signs of scarcity can even cause physiological changes — like increased heart rate or blood pressure — as a way of trying to get us to act.
But, aside from the deliberate use of scarcity, there are other times that the product supply really does run out — thanks to glowing press from editors or influencers. Whether a brand is able to keep up with demand almost entirely depends on if it can make more of a hot item at a rapid rate. That is, whether it is built to control the production in-house or if it must outsource it to other manufacturers.
Too Faced is an in-demand beauty brand that uses high profile YouTube collaborations to move product, but co-founder Jerrod Blandino doesn’t mince words about using scarcity as a hype tactic.
“As a consumer, it’s frustrating when companies play those games,” he tells Refinery29. “It pisses me off. I don’t want this Cabbage Patch thing happening [with Too Faced].” His comparison to the coveted dolls of the ‘80s is dead on for what’s happening in the beauty world right now.
So why, then, did Too Faced’s own Sweet Peach product line sell out almost instantly and amass a wait list of 10,000 people right before Christmas of last year? According to Blandino, the brand outsources the production of the products in massive shipments and simply couldn’t keep up with demand. “[The peach palette quantity] was supposed to last for a month,” he says. “When you create something that catches fire, you have no ability to [control getting more quickly].”
That’s the price that companies pay for being stocked in the biggest stores, he says. “It would be almost impossible to work with Sephora and Ulta Beauty any other way because the numbers are so large,” he tells R29. “It’s a matter of something being loved with such intensity that the quantities you were hoping would last, don't."
However, some brands can restock products swiftly — or even better, prevent a sell out from happening in the first place — because it controls the manufacturing in house. One such company is Southern California-based Seed Beauty, which supplies cosmetics for brands like ColourPop, Kylie Cosmetics, and KKW Beauty — some of the very lines most known for quickly selling out. Given its on-the-fly manufacturing capabilities, why the frequent shortages in products?
“We can certainly turn on the machines and start making more products within minutes,” Seed Beauty co-founder Laura Nelson tells R29. “There are times when we’re dangerously close to stocking out and we don’t — and that happens by increasing production in very real time."
Kardashian-backed anything consistently sells like crazy, but Nelson says that predicting a shopper’s habits isn’t as easy as one might think. “The consumer shifts so quickly and so there are certain times where all we can do is our absolute best to meet that demand,” says Nelson. “I always think about asking somebody: ‘What do you want to eat from dinner a month from today?’ And the answer is, you just don’t know.”
But even with the power to send production into overdrive, Seed Beauty’s brands still sell out. “There are times when Colourpop has a product that hits a chord. In that case, we’re scrambling on the backend to make as much of that product as we can as quickly as possible,” Nelson says. “We can manufacture 24/7, but still not have sufficient supply to meet demand.”
Trend forecasting aside, we’re reminded of Underhill’s pragmatic take on product production: It’s better to make less of something and sell out, than be stuck with a surplus of immovable stock. In the end, engaging in that backend hustle may make better business sense than making too much, but it’s still not foolproof. “We have things sitting on the shelf that we thought were going to [do better],” Nelson adds.
Of course, playing the scarcity game can also backfire in a big way. Weinschenk says brands that employ scarcity as a strategy must be careful not to use it too frequently because, quite frankly, it can piss people off and sour them on your brand.
“I was here the first year of Kylie [Cosmetics] and I would have a hard time recommending scarcity to anyone,” Nelson says of not being able to keep up with demand at the brand’s launch. “Stocking out is such a bad day for us because we’re getting feedback on social media and [through] customer service. They want something we can’t give them. There’s nothing worse than disappointing a customer.”
She’s right: Those who feel cheated out of the opportunity to buy, or feel like they didn't get the same treatment as others (like shipment time of a sold-out item), often take to social media with a vengeance. Angry tweets instantly flooded Twitter in response to the Too Faced Sweet Peach collection shortage, both of being sold out and not getting their products as expected due to high demand. Blandino’s own Instagram became fraught with comments by frustrated, would-be customers. Fiery emails also poured in (some of which Blandino personally responded to himself, he tells us).
And sometimes, even if the company could ramp up production, the raw materials just aren't available. Blandino points to the often sold-out Unicorn Tears cream lipstick as an example. “It’s always out of stock,” he says. “Not because we’re playing games or [deliberately] not making enough, but because the [pearls require] handmade quality — you just simply can’t mass produce something like that and that sucks.”
Of course, Too Faced has it easy compared to the green category, in which any natural ingredient could cause a hold up in production. Vegan skin care brand Gaffer & Child makes everything in-house but still can’t sideline supply problems when they're at the mercy of a seasonal harvest. Though it’s equipped to go into production overdrive, it’s had three of its five products (hair pomade, hydrating serum and facial cleanser) sell out since the brand’s launch in 2014.
The budget category can be even worse: DECIEM, which owns The Ordinary, has full production control in-house, yet within two weeks of launching its first products, sales exploded, as tens of thousands of online customers snapped up its $6 and $7 bottles of Niacinamide 10% + Zinc 1% and Hyaluronic Acid 2% + B5. Yes, the company made strides to ramp up production, but it hit a wall and ended up with tens of thousands of possible customers waitlisted. “Any expansion we plan today takes at least six months to result in noticeable improvements,” says DECIEM founder Brandon Truaxe. “We are constantly playing catch-up with growth.”
Sure, wait lists can help you feel like you’re in line (and thus, getting a fair shake, Weinschenk says), but it’s slippery terrain in our instant gratification world. “You can get the feeling of ‘I’ve been had’ —that’s back to the old brain being alerted again,” she says. “It can signal, ‘I’m being taken advantage of’ and the value of the product — or entire brand — can go down.” Adds Alex, "Any [sales] results are short-lived, whereas losing the trust of your audience is long-term.”
For its part, Too Faced met its overwhelming demand for Sweet Peach palettes by going in the red. “We were overnighting at cost so customers got the products by Christmas,” Blandino says. “We were losing money doing the right thing.” What’s more, it stepped up production on the next peach-themed line, Peaches and Cream, which remained sufficiently stocked both on the brand’s site and at stores like Sephora.
For Seed Beauty’s part, Nelson says it does look at which products sell out, then ramps up production numbers for those products with each subsequent launch. But even so, Seed Beauty’s Nelson admits that trend forecasting is a moving target that is getting faster as consumers become more informed about the products they’re buying.
“It's a very shifting landscape within beauty that makes for a lot of excitement,” Nelson says. “But it also creates some gaps between between supply and demand.”
Clocking drop times and competing in a race to buy has made for an exciting time in beauty, but how long will consumers engage in this constant game of cat and mouse? Even though the thrill of the chase may get our hearts racing — and the most primitive parts of our brain going — the truth is, according to Weinschenk, playing the scarcity card is a strategy that has its own shelf life. Because no matter how intense the hype for a product, we’ve learned that there will always be another hot new release ready to drop in 3, 2...
*Names have been changed.