Hope you are having a great week.
Look, it’s clear this is going to be a challenging year. The Fed has said GDP is down as of today, and public consumer companies are getting slammed. Beauty is hit pretty hard right now, luxury as well. There are some bright spots, like in health. But it’s clear this year is going to be challenging, and not a big growth year. Prior to the start of the year, there was a bunch of optimism but most of that has faded and faded hard.
I’ve been looking at a bunch of beauty market data, and it’s not strong. And don’t even get me started on tariffs. But, before we do, I want to tell you about a cool new offering from one of today’s sponsors, Statiq.
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Usually in our industry, success is growth, or profitable growth. Let's say growth is off the table this year. What does success look like? Usually when growth is off the table, profit becomes the north star. That’s also unlikely to increase for most brands with tariffs.
- Survival: A bunch of businesses will go under. The first thing brands need to do is ensure their survival. Do not run out of cash. Don’t worry about next year or the following if your survival is not certain. It sucks, but you may need to drop any pride and be ok with less revenue this year with far fewer fixed expenses. Investors or potential buyers will understand; and if you can survive you always have a shot of turning it around and coming out of this on the right foot. If you run out of cash, you have no more at bats left. My unofficial armchair position is that they won’t stay at 145%, but it’s good to plan for the worst case and make more cuts than needed. You can always add back. You need less than you think. That software that was a necessity is a nice to have now.
- Reset Growth Expectations: Nearly every business I know has re-forecasted this year to revise expectations down. Do not be afraid to do that. Pay attention to your market’s growth rate, and really question if you are going to grow faster than the market. You can’t force growth, so if your market is not growing you need to be taking market share, and to do that you need to be operating at another level. It’s easier to do this when you’re just starting out, once you get to “scale” you’ve grown into your potential and it becomes more challenging. Just be honest with yourself about where you’re at in your journey.
- Become anti-fragile: I bet most of our businesses are better off from everything we’ve endured the last few years. It’s been a grind, and it’s forced all of us to level up. From iOS to freight costs and everything else, this is no different. Many brands won’t survive, some will stop thriving, and others will adapt and be better for it. I don’t know what that looks like, and I’m not suggesting moving your supply chain. I just know there is always a way to become more resilient. It could be leaner opex out of necessity. Maybe this is the push you need to become leaner and become AI first. Maybe you’re forced to cut non-incemental spend, or negotiate with more vendors to get better terms. Whatever it is for your business, if you make the hard decisions now, you will come out of this stronger even in good times.
- Get on the offensive: You have to do the first 3 first; but some brands that are in solid positions can use this time to get aggressive. How do you want to be positioned when we come out of this, because this will pass and there will be good times again. Are there opportunities to be greedy when others are fearful? For example, I think we are in a good position to aggressively expand our retail footprint and get very good deals on rent while other brands are vacating their stores. Are their partnerships or influencer deals you can do that are cheaper now than normally? Can you price a SKU lower than your competitors to gain share while everyone else is raising prices? Just some ideas; but if tomorrow is guaranteed how do you set yourself up for success coming out of this?
I hope this helps; we chatted through some similar ideas on the latest pod so definitely check it out.
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Let’s continue to innovate and grow together!
Best,
Cody