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How Did Sugar Cosmetics Destroy Lakme? Full Case Study

How Did Sugar Cosmetics Destroy Lakme?
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Vineeta Singh who worked very hard for clearing ITM, At the age of 23 after rejecting a package of 1 Cr, start doing the job for only 10,000Rs. A girl from a small district of Gujarat took so many huge steps which you and I can’t think of. No one had ever thought that a business started on Shopify with only 2 products is beating brands like Maybelline and Lakme and is now a 3000 Crs company. Sugar Cosmetics with its 3000+ stores is creating a splash in Indian Cosmetics Market. A question arises here. How did sugar cosmetics start? How did sugar cosmetics destroy Lakme and other big brands? And what are the business lessons we learn and can apply to our business?


How did sugar cosmetics start?

This story starts in 2012 when an investment banking fund offers a 1 Cr package to IIM- Ahmedabad graduated Vineeta Singh. If you or I were at her place at the age of 23 then we would have happily taken that package. But Vineeta Singh didn’t do it.

Starting a sugar cosmetics brand was never the first preference of Vineeta Singh. Her first preference was to start a lingerie brand. With the motive to start a lingerie brand in India through e-commerce, Vineeta Singh pitches her idea to investors. But sadly, wherever she went she got the same answer -why should we give funding to you, why not to someone experienced? Why will people buy from you? This thing mentally shook Vineeta Singh.

She decided that the startup would be bootstrapped and that she would persevere. Vineeta Singh started a small service company that provided services to other companies to check the background of their employees.


They would check backgrounds and get paid for it. At one point, she was making 1 crore rupees per month, but now she only makes 10,000 rupees. The business was growing but there was one problem. The problem was that it wasn’t scalable. Fewer service businesses can grow to a large scale. And most importantly, Vineeta Singh was working but had no interest in this work. And from here starts Sugar Cosmetics.

How Did Sugar Cosmetics Destroy Lakme?

When Vineeta Singh was thinking of leaving her service business. At that time she identified a big gap in Indian Cosmetics Market. The gap was missing Mid Range Segment.

In 2015, you could find Maybelline and Lakme products for Rs. 300 or less. For products that cost Rs. 1000 or more, the segment between 300 and 1000 didn’t exist in Indian Cosmetics Market.

No brand thought to launch products in this range. Maybelline, MAC, Lakme, Revlon- all these brands whenever launched products and the products were amazing, But because these brands are international, so their products were launched on Global Skin Standards.


But when Vineeta Singh talked to consumers, she got one insight from many customers. The insight was that these international products didn’t suit their skin.

Because Indian skin type is absolutely different from that of the Western countries and the pollution levels are also higher in India as compared to other Western countries. So, the makeup that girls applied used to get removed in just half a day. Thus, there was no durability and the product also didn’t suit their skin type because all products were made on basis of global skin standards.

Sugar cosmetics then launched their middle-range products which were less expensive and more durable to suit Indian skin. The range was such that it could be used anywhere, which contributed to a significant increase in sales.

How Did Sugar Cosmetics Destroy Lakme?

In cosmetics, Innovation is limited. And Vineeta Singh also knew this. But today if you will see then Nykaa and Sugar Cosmetics are the only two creative brands in the Indian Cosmetic market.

Sugar Cosmetics Business Strategy

Did you know that Sugar Cosmetics only sold 100 lipsticks in the first year? You might be thinking that this brand only sold 100 lipsticks in the first year, so what’s so special about it that it grew so quickly? The answer is in Psychology.

How Did Sugar Cosmetics Destroy Lakme?

When someone buys a product, the two most important factors are gender and association. Now, understand this carefully.

For example, if a boy is going out to dinner with his friends, he is more likely to go to a restaurant where the food is less expensive and good. However, if a girl is going out to dinner with her friends, she is more likely to go to a restaurant where the environment is good, irrespective of the taste of the food. The look and feel should be good. They should feel safe there.

Interestingly, no one is wrong. The problem is that our gender greatly influences our purchasing behavior. Not only that but there is one thing that both boys and girls depend on when buying. The thing is self-respect. Everyone wants to feel better. Everyone wants to become socially dominant.

In the case of boys, they feel socially dominant by earning money and having power. In the case of girls, they feel dominant by looking beautiful.


Sugar cosmetics placed their products in the mid-range price product range. But packaged it so beautifully that it looked better than premium products. So when a lady looked at sugar cosmetic products from afar also, she used to get attracted to them. And when you get a product with beautiful packaging which is also durable and suit your skin type.

Sugar Cosmetics Marketing Strategy

When Lakme and other brands spent money on celebrities, Sugar turned customers into influencers and pitched their products on social media. And the girls who used sugar cosmetics were automatically talking about sugar products. And that’s how Sugar Cosmetics was advertising for free.

Today Sugar with its Hybrid Model i.e. Online Stores + Offline stores is beating many big brands. And because of this, today their company’s evaluation is more than 3000 Crs. By identifying market gaps and understanding consumer insights anyone can build a business from scratch.


Lessons

1) People buy Feelings and not Products. No one wants to buy a product. This is our misconception that we buy products. But the reality is that we don’t purchase products but the feeling associated with them. No girl buys Sugar Cosmetic’s Lipstick, Liner, or Blush. But they buy Confidence, Happiness, and Social Dominance feeling. Associate feelings with the products which you want to sell.

2) A brand relies on delivering consistent quality to its consumers to build trust and loyalty. This is why people buy Adidas or Nike shoes – because they know they can trust those brands to provide quality products consistently. Sugar Cosmetics has followed a similar strategy and has seen great success as a result. If No Consistency then-No Growth and if No Growth then-No Business.

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