Sugar Cosmetics is taking the Indian cosmetics market by storm with its 3000+ stores. The question is, what do Vineeta and her team do that a company that started just 5 years ago is today beating big brands? And more importantly, what are those powerful business lessons that we can learn and apply in our own business?
At the age of 23, after working hard and clearing ITM and turning down a package of 1 crore, would you do a job for Rs 10,000? Well, the story of Vinita Singh (Founder of Sugar Cosmetics) is quite similar.
A girl from a small district of Gujarat has taken such big steps which you and I cannot even imagine. No one ever thought that a business started with only 2 products on Shopify is churning out brands like Maybelline and Lakme and is now a 3000 crore company.
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How did Sugar Cosmetics get started?
The story begins in 2012 when an investment banking fund offered a 1 crore package to Vinita Singh, a graduate of IIM-Ahmedabad. If you or I were in his place at 23, we would have happily taken that package. But Vinita Singh did not do this.
Very few people know but starting Sugar Cosmetics was never the first choice of Shark – Vineet Singh. Her priority was to start a lingerie brand. Intending to launch a lingerie brand in India through e-commerce, Vinita Singh pitches her idea to investors.
But sadly, wherever she went, she got the same answer – why should we fund you, why not someone with experience? Why would people buy from you? And this thing shook Vineeta Singh mentally. And then he decided that whatever happens, now the startup will be bootstrapped. ‘I don’t want any investor’s money.’
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With empty pockets and no experience, but with determination, Vinita Singh starts a small service company. This company provided services to other companies to conduct background checks on their employees. They did background checks and charged money for it.
At one time he was getting 1 crore, now he used to get only Rs 10,000 per month. The business was booming but there was a problem. The problem was scalability. Many low-service businesses are scalable in a big way. And most importantly Vinita Singh was working but she was not interested in this work. This was not her passion and this is where Sugar Cosmetics begins.
Did anyone think that a company with barely Rs 30 lakh in its bank account would shake the foundations of big brands? The question is what did Sugar Cosmetics do that within 5 years the valuation of this company became 3000 crores?
Sugar Cosmetics’ first business strategy?
When Vinita Singh was looking to quit her service business, she identified a huge gap in the Indian cosmetics market. Gap was missing the mid-range segment. In 2015 you will find Maybelline and Lakme for 300 or less. And in the range of Rs 1000 and above you will find MAC and Estee. But the segment between 300 and 1000 was non-existent in the Indian Cosmetics market. No brand thought of launching a product in this category.
Maybelline, MAC, Lakme, Revlon- all these brands whenever they launched products, the products were amazing but because these brands are international, their products were launched on global skin standards.
But when Vinita Singh spoke to consumers, she got insight from several customers. The insight was that these international products did not suit her skin. B’coz Indian skin type is different. And pollution is also more in India as compared to other western countries. So the make-up that the girls had put on used to get removed in just half a day.
So no durability and the product also did not suit her skin type. All the products of B’coz were made based on global skin standards. And then Sugar Cosmetics launched its matte range of products. These products were durable and cost-effective to suit Indian skin. The range was such that girls could use it anywhere. And this thing skyrocketed the sales of Sugar Cosmetics.
Sugar Cosmetics Another Business Strategy?
In cosmetics, innovation is limited. How much can you change lipstick? And Vinita Singh also knew this thing. But if you see today, Nykaa and Sugar Cosmetics are the only two creative brands in the Indian cosmetic market. Did you know that Sugar Cosmetics only sold 100 lipsticks in its first year? You must be thinking that this brand sold only 100 lipsticks in the initial year.
Then what is so special about it that it grew at such a fast pace? So the answer is hidden in the book – The Psychology of Selling. If you read this book carefully, you will come to know many things about buying psychology which was never taught in school and college.
Selling Psychology.
Whenever someone buys a product, these 2 things are more important than other things. There are 2 things Gender and Association. Now understand this thing a little carefully.
Gender Influence on Our Buying Behavior
There is a lot of difference in the buying psychology of boys and girls. For example, if a guy goes out to dinner with his friends, he’ll likely go to a place where they can get a lot of food for a cheap price. And the food should be edible. Enough is Enough.
On the other hand, if a girl goes out for dinner with her friends, then in most cases, they would prefer to eat where the food is whatever it tastes. The look and feel should be good. They should feel safe there.
The interesting thing is that no one is wrong. The thing is, our gender heavily influences our shopping behaviour.
How does self-esteem affect our shopping behaviour?
And not only this, be it a boy or a girl, there is one thing on which the buying behaviour of both depends. It is a matter of self-respect. Everyone wants to feel good about themselves. Everyone wants to be socially influential.
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In the case of boys, they feel socially dominant by earning money and having power. In the case of girls, they feel dominated by looking beautiful. I know you must be thinking that a girl can feel good by buying a product worth Rs.300. Then why do they buy Sugar Cosmetics Ingredients products?
Now she goes to the girl with a beautiful box and says to her “madam, what is in this box is not as expensive as your normal makeup but it will make you look like your normal makeup.” I guarantee you that girl will have a smile on her face. Hearing which 90% of girls will smile. And sales happen when there is a smile on the face.
Sugar Cosmetics’ third business strategy?
Sugar Cosmetics placed its products in the mid-range price product range. But packaged it so beautifully that it looked better than premium products. So when a woman saw Sugar Cosmetics products even from a distance, she was attracted to them. And when you get a product with beautiful packaging which is also durable and suits your skin type. So do you think girls won’t brag about it to others? And it happened with Sugar Cosmetics.
When Lakme and other brands were spending money on celebrity endorsement. On the other hand, Sugar roped in its customers as its influencers and marketed its product on social media. And the girls who used the products of Sugar Cosmetics used to automatically tell about Sugar Cosmetics products. And so Sugar Cosmetics got free publicity.
Today Sugar Cosmetics is beating many big brands with its hybrid model i.e. online store + offline store. And for this reason today the valuation of his company is more than 3000 crores. Anyone can build a business from scratch by identifying market gaps and understanding consumer insights.
Learn This Most Effective Business principle
More importantly, what is some of the most effective business principles that we can learn from and apply to our company?
1) People buy feelings, not products.
Nobody wants to buy the product. It is our misconception that we believe in the product. But the reality is that we do not accept products but the emotion attached to them. No girl buys lipstick, liner or blushes from Sugar Cosmetics. But they buy Confidence, Happiness and Social Dominance Feeling. Associate emotions with the products you want to sell. And then see the magic.
2) A brand is built on consistency Why do you buy Adidas or Nike shoes?
for the logo? No! You never buy them for the logo, but ’cause Adidas or Nike consistently provide you with a good quality product. So in my mind, you know that if I buy a product from Adidas or Nike, I will get good quality.
Similarly, Sugar Cosmetics has consistently provided its consumers with quality products at a reasonable price range. And hence his brand is a huge hit today. If there is no consistency – there is no growth and if there is no growth – there is no business.
3) Customers can be your best salespeople.
Hire any brilliant marketing team, and spend a lot of money on bringing in celebrities and creating great ads. But if your product is not good then it will fail. Great marketing kills a bad product fast. On the other hand, if your product is good then you do not need all these things. Your customers will tell others about your product. And that too for free.