Subscribe
Share
Share
Embed
Ecommerce on Tap is a world where Supply Chain meets storytelling. Join Nathan Resnick and Aaron Alpeter each week as they offer insights into the backend of successful businesses. Brought to you by Sourcify and Izba Consulting!
Aaron Alpeter (00:00)
they literally made a fragrance that smells like someone took a shower and did laundry. And like that was that sold well and I just that blows my mind.
Nathan Resnick (00:13)
Hey, welcome back to Ecommerce on Tap brought to you by Sourcify and Izba. I'm your host, Nathan Resnick, joined by my co-host, Aaron Alpeter. Aaron, for those that are joining us for the first time on Ecommerce on Tap, do want to give a quick overview of what we do?
Aaron Alpeter (00:27)
Yeah, so each season we
industry. This season we're focusing on fragrance. And each episode we profile a well-known company. We tell their founding story, reverse engineer their supply chain, and talk about their exit potential.
Nathan Resnick (00:40)
Yeah, and this season we've been covering fragrance. We've got a pretty incredible story of this luxury fragrance brand today. And just the growth is really, a lot greater than I thought it would be, to be honest. So I don't wear too much cologne, but you know, definitely a interesting category and a lot of strong margins here to dive into. But before we do, were there any interesting tidbits that caught your eye the past week?
Aaron Alpeter (01:05)
Yeah, why don't you go first?
Nathan Resnick (01:08)
I saw that Luckin Coffee, which was kind of this, go to coffee brand in China that I used to have, all the time when I was living over there, it was kind of like a go to delivery coffee that was actually like pretty decent. They went public, I think they went public on the New York Stock Exchange or NASDAQ. And then they basically got caught as a fraud overstating their revenue by a few hundred million dollars. And so.
They got delisted and they have since bounced back actually. So they really have this kind of bounce back story. And they just announced that they bought blue bottle coffee for an estimated $400 million. And so I think it's pretty interesting to see them, expand into the U S we'll have to see what happens to the quality of the coffee at blue bottle. But at the end of the day, I think it's pretty amazing to see this, Chinese oriented coffee brand.
Number one, bounce back from a delisting and actually grow. And number two, make a pretty major strategic acquisition here in the States.
Aaron Alpeter (02:11)
Yeah, Luckin, that's the one that has like the telephone box size like stores, right? Like they're they're really small. It was really cheap. I got that's the one I'm thinking of,
Nathan Resnick (02:18)
Yeah.
Yep, that's exactly it. you know, coffee margins are strong, right? It's the best selling drug in the world.
Aaron Alpeter (02:28)
I guess so. It's just interesting that Blue Bottle, I mean these aren't huge stores, these aren't Starbucks Reserve stores, but they are bigger. So I wonder if that's a signal that they're trying to maybe be a third place to do something different or if they're just like, hey, we need access to quality or maybe they're gonna keep the brand or we'll get rid of the brand, but that's an interesting piece for sure.
Nathan Resnick (02:48)
Yeah, I mean, I think it's strategic. they probably want to, get relisted and I think it's strategic for them to say, Hey, we've got this really strong, us based asset that can help emphasize our brand and hopefully grow our market cap when we go get listed again. So pretty interesting stuff. what about on your end? What, what was top of mind?
Aaron Alpeter (03:07)
Yeah, tariff refunds.
been a massive story over last couple of weeks, really. obviously, IEEPA was struck down and the court basically said, hey, you have to refund people. And depending on who you talk to, these refunds are either happening in 45 days or they're going to happen in the next two or three years.
I think the really interesting thing about the tariff refunds is that there was a great Twitter thread that I found that was basically an engineer who had built the tariff collection software. They launched it in 2018. It's processed $175 billion for the tariffs and it works very, very well. He says, hey, look, this took us 18 months and 14 engineers and
You know, we had a lot of stakeholders in the White House, all these sorts of things. And now basically what he's saying is I got a JIRA ticket, a P2 JIRA ticket that said, you we need to build out this capability to refund. So he talks about how they built this data pipeline for the money to go in one way. You know, it's events driven. It happens at the port. Like it's, it's very thoughtful that way. And he's basically saying like, look, they're asking us to do something in 90 days that, you know, it took us 18 months to do the other way.
And it's just not as simple as reversing the pipeline and, you know, control Zing, what was coming through. I kind of see things like that. I also hear stuff from, from CBP, which is saying, oh yeah, we're going to be up and ready. We'll be fine. And you know, if, if Elon was still in the government, then I just think this was a typical kind of Tesla thing where they're saying, oh, it'll be here right away. And it's actually going to be in 2030, but I don't know. Like, what are you, what are you seeing on this as well? And do you think that people will ever get the refunds back?
Nathan Resnick (04:47)
think a lot of people are kind of a little bit disgruntled, they're confused and not really sure what to make of it. Right. mean, lot of the e-commerce founders that I talked to almost hear something different every single day. Right. And that causes a lot of frustration because at the end of the day, it does seem like they are going to be tariff refunds. But the key question is how do you actually get your refund? Right.
And then you have already some hedge funds that are trying to buy rights to your refund at like 20 or 30 cents on the dollar. usually that indicates, okay, you know, these refunds are going to come through at some point in the future. and then it's a matter of how do you navigate to actually get your refund? ⁓ and I'm sure it's hard for the government to actually,
do that from a technological standpoint, like you mentioned with this engineer. I think on the other end for most of these brands, it's okay. Well, you know, this is money that I thought I didn't have. And now I've got this refund that could be in the millions of dollars, right? Depending on how much you imported during that period. And for pretty much every e-commerce brand, I mean, that is significant capital that you can reinvest in growth and inventory, et cetera. So
I think it's frustrating for most e-commerce founders that I talk to because, it just kind of goes to show how challenging our system is at times.
Aaron Alpeter (06:11)
Yeah, 330,000 importers, $130 billion, 45 days to go. I'm not too optimistic that they're going to meet that deadline, maybe the Vibe coding tools at CVP have gotten really good.
Nathan Resnick (06:24)
Yeah, yeah, yeah, we'll see about that. if you believe you have a tariff refund that you are owed, then I would say hang in there. And I do think it will come, right? I just think it's going to take longer than they say.
Well, I feel like we can't have a season of fragrance without touching on the luxury of the market. And I think a key question is kind of what makes a brand or product luxurious, right? mean, most people think of luxury defined by price, right? And if a product costs a lot of money, people in general assume it to be luxury. ⁓ but, that explanation kind of falls apart pretty quickly. If you think about it, like anyone.
really could launch an expensive product, right? You could release a, $4,000 scented candle tomorrow that you made in your kitchen. And you could go to a print shop and make a, $9,000 hoodie. Um, and then in some cases too, some people make their own perfume and fragrance, right? And you could say, Hey, this is a thousand dollar bottle of perfume. And so I think pricing something high doesn't necessarily magically turn it into a luxury brand.
But it does turn it in, of course, to an overpriced product that consumers may or may not ignore. And so I think the key question that we're going to focus in on today is what actually creates luxury.
Aaron Alpeter (07:57)
It's a good question. And when you look at a brand like Hermes or Chanel, it really is easy to assume that luxury, if it's not price, it must come from history. these two companies were built over centuries. They've got craftsmanship traditions. They've got ateliers. They've got this cultural prestige, these long-standing relationships with elite customers. It's not uncommon for someone to gift a Birkenberg from grandmother to daughter or things like that.
And historically luxury brands were built on this heritage and the fact that they had heritage or that they were a heritage brand was inherently the barrier to entry for these. And so if you wanted to start a luxury brand in the 20th century, you would need to have manufacturing capability, ⁓ actual craftsmanship knowledge, not just this idea of or illusion of craftsmanship. And you needed to have some sort of
institutional credibility. fashion houses had ateliers, perfume houses had trained chemists. These industries were very closed systems as a result. But an interesting thing has happened over the last 20 years where a number of entirely new luxury brands have come to market.
and none of them have this heritage. And this new generation of luxury brands emerge without this traditional prerequisite. And these companies don't have this craftsmanship. They don't have all these other elements you'd normally associate with a luxury brand, but they do have something else that actually matters, and that is taste authority.
And so what we're seeing is that luxury is starting to shift from being institution driven to being more taste driven. And so if you look at brands like Aesop, Rick Owens, Off-White, Le Le Labo which we profiled in previous episode, and of course the company we're talking about Byredo today, these are very new, modern luxury brands, true luxury brands in every sense of word.
Nathan Resnick (09:45)
Yeah. I mean,
Byredo was, was founded in 2006, right? And it's not ⁓ a perfume dynasty by any means. It's not, fashion house and really there's no kind of inherent luxury legacy here. It was actually founded by a former basketball player who went to art school. And yet somehow this brand became one of the most respected names in the niche fragrance category
And eventually sold majority state to Puig one of the largest beauty conglomerates in Europe. And so I think the interesting question isn't how they built a fragrance brand, which is also interesting in its own right, but more so how did a modern luxury brand actually get built here? And so I'm really excited for this episode. Before we dive in, we've got to ask you to like and subscribe.
leave us a review. Aaron and I read each and every single one of those, so we greatly appreciate it.
Aaron Alpeter (10:41)
before we get into the actual story of, Byredo. I want to talk a little bit about, modern luxury and kind of what it means to actually build something in this modern context. Cause think that's one of the key lessons from here. And as you mentioned, luxury is not about price or even the product features. When you zoom out and look closely at successful luxury brands, they tend to succeed in one of four areas or multiple of these four areas.
The first one is they possess this aesthetic authority or this like clear visual and cultural worldview that permeates everything that they do. And so these would be examples of brands that become so recognizable even out their logos and their taste system is unmistakable. So you can tell an Apple product, which I would argue is becoming a luxury product, just by the nature of its advertising or its packaging. And people will buy into that aesthetic.
even if other products are technically superior. My wife is always talking about how great her Pixel phone is and how it's got more features and can do cooler things than my iPhone. And yet I still choose to buy the iPhone. The second is cultural legitimacy. And this is often validation through influencers, influential retailers, creative communities.
I'm thinking about Le Le Labo is like a great way of how they came to market. If you go back to that episode and these brands gain legitimacy by appearing in the cultural institutions and the curated spaces that drive the culture, right? It's not about being known by the most people. about being known by the right people. it's almost as if a product goes to like an Ivy league school and tells everybody that they went to an Ivy league school.
That's like the equivalent of being in those retailers and distribution really acts as a form of validation for these types of brands. so, if I'm a food product, I'm sold in air wands. People just assume a certain level of quality and they just assume that it's, it's good for you. they assume all these things just because of where it's being sold. the third engine is narrative meaning around their products. And so these are people who are able to transform their objects into.
symbolic artifacts that again, promote a particular worldview. And so these brands succeed because their products have a strong emotional or cultural story. one that comes to mind is Patagonia and all of their storytelling around environmental commitment is so core to what they are. again, I wouldn't say that, Patagonia is a luxury brand, but there's certainly not a inexpensive brand. but they have done a really good job tapping into this ethos. so
their customers say, I want to support the environment. I'm to order a Patagonia jacket instead of something from a different shop. And the last is one that I think I would associate most closely with luxury, and that's controlled scarcity. And these brands have enough confidence, enough wherewithal to prevent their brand from becoming ubiquitous. And that controlled scarcity is really what creates the cultural value.
And so whether it was like Beanie Babies in the 1980s, right? Everybody wanted a particular Beanie Baby or like a Birkin bag with Hermes or Rolex with like tightly controlled distribution, long wait list. These are the sorts of things that would go into it. so typically what you're going to see in a modern luxury brands are going to focus on one or several of these cultural engines. the key thing here is that these aren't about the product. in each of these, I didn't talk about the features of the iPhone and the features of the bag where
know, Patagonia's weatherproofing. This is all about the culture and creating this cultural system that these companies are representing and their products are almost like a secondary idea.
Nathan Resnick (14:10)
Yeah, I mean, I think one way to look at and understand luxury is what happens when it breaks, I think a classic example is Burberry in the late And Burberry began as this prestigious British heritage brand known for real craftsmanship and its iconic trench coats. But during the 1990s, the company really
aggressively expanded into licensing deals. so, Burberry and their check pattern appeared across baseball caps, scarves, handbags, and just kind of a wider range of inexpensive accessories. And this kind of pattern became ubiquitous. And eventually the brand became associated with, counterfeit goods and mass culture, And what's interesting about this story is that Burberry didn't necessarily suddenly lose
It's craftsmanship. was kind of culture positioning collapse, right? It's not like the product quality collapse. was really more so the culture positioning because they just licensed too aggressively. And so I think, kind of once a brand becomes too common, the perception of luxury is kind of evaporated, right?
Aaron Alpeter (15:19)
from a traditional business perspective, Burberry acted very rationally in this, in this example. every MBA that came out and joined that team or would have joined that team would have told you that expanding their product lines, expanding their distribution, expanding their markets was a good thing. And I I'm sure that for a time they saw record profits and said, Hey, this is, this is working really well. how smart we are because they were able to command luxury prices.
the same time selling to more people. And that basically lasted until they diluted their brand and they can no longer live off the interests that they had built up and they start to eat into their principle of their brand equity.
Nathan Resnick (15:55)
Yeah, I mean,
I this illustrates something a bit more important. It's that almost as if luxury brands have to be just hyper diligent in showing their restraint and kind of intentionally leaving some money on the table in order to preserve what makes them special. Right. And so the restraint is kind of this key between having a premium brand and a luxury brand. You don't want to flood the market with too much product. I think luxury in general is fragile.
because it really is derived from culture meaning and not just product quality, right?
Aaron Alpeter (16:28)
Yeah, it made it kind of like an interesting thought experiment. which one would you rather own? Would you rather own a premium brand or a luxury brand?
Nathan Resnick (16:35)
for me as a founder, think luxury brand, because you would have to deal with less inventory and your margins would be crazy high.
Aaron Alpeter (16:44)
So all things being equal, you like the lower inventory piece. I could buy that. You know, it's tough because it's like. I think I would answer the question based on when did I buy it right? So if someone had done all the hard work to make the luxury brand, then then yeah, I probably would want that. But like these things take awhile and as we get as we'll see the story like it's it's a very difficult long slog to get there. Whereas if I had a premium brand or I was starting a business, I'd much rather prefer premium brand because.
It's so much faster to get to revenue. It's so much faster to get to an exit. Whereas if you're just trying to play in those luxury elements, it's just a very difficult thing to do. But I don't know. I think it's an interesting question.
Nathan Resnick (17:24)
Yeah, it is.
if you look at the margin profile and you look at kind of inventory management, from that lens, the luxury brand definitely stands out. But, from time to exit and value creation, premium brand, probably wins with that lens. So just depends what kind of, manager and growth you want.
Aaron Alpeter (17:43)
Yeah. Okay. I think we should get into Byredo now. Byredo was founded by Ben Gorham in Stockholm in 2006. And he was born in Sweden to a Canadian father and an Indian mother. And so he had a very decidedly multicultural upbringing. And in fact, his father worked for the Canadian embassy and that meant that he spent time living in Canada, USA, India, in addition to spending time in Sweden.
These international experiences later showed up in the names of some of Byredo's fragrances, but it was just a really important part of his upbringing was just this cross-cultural experience that he had. When he became a teenager, he decided to move back to Sweden. And so he finished school there and became like super focused on basketball. So much so that he played professionally in Sweden's league,
yes, they have other leagues other than the NBA around the world, which I think is hard for people to understand sometimes. But his career was still relatively short.
He just felt it wasn't creatively fulfilling. And so he goes from playing as a professional basketball player to joining the Stockholm art school, where he started to experiment with photography, visual arts, and started developing his own approach toward aesthetics and just creative direction. This was really something that he was experimenting with. He wanted to just kind of learn about art and creativity for art and creativity sake. And his background was really unconventional for the fragrance industry, as you can imagine. He didn't come from a perfume family.
He wasn't trained as a perfumer. At first glance, this idea of not having this background or pedigree would be seen as a disadvantage for most people. But in hindsight, it may have turned into one of the best advantages they had. Because he approached things very differently. And it was kind of through this creative exploration process that he first
Pierre Wulff. And Pierre is a French perfumer.
And he'd spent a long time working inside the traditional ecosystem and had established himself as a well-liked mentor and connector inside the industry. And Ben and Pierre first met in the early 2000s in Stockholm and Ben, had zero background or understanding of fragrance. And during their
started learning about how perfumes were composed, how fragrance houses operated, and how scent could really start to be a vehicle to communicate emotion and memory. And this really served as the basis of Ben's introduction into the mechanics of the fragrance industry.
Nathan Resnick (20:06)
think it's hard to understate how impactful these interactions were for Ben, right? I I can't really think of another example of a non-founder who hasn't as much impact on a company as Pierre had on the early concepts of this, right? I mean, Pierre kind of helped demystify fragrance and kind of frame fragrance, not as a collection of chemicals or even scents for Ben, but kind of more of as a storytelling vehicle.
which, to someone who was searching for new and exciting formats to be creative and kind of ultimately proved irresistible, right? So he kind of also, learned how collaborative fragrance was instead of, becoming a perfumer himself. He decided really to take more of kind of a creative director role here. Ben approached fragrance, not really as a chemistry problem like most would, but more as a culture design problem.
⁓ I think he would ask, instead of kind of, what's the best smelling perfume we can make, the question kind of more so became what emotional experience should this object represent? And I think he was able to craft scents from a more medium of storytelling versus chemistry, right? And I think that really stood out in their products.
Aaron Alpeter (21:19)
So you call Pierre a non-founder. So if they didn't end up working together and Ben didn't go into making scents himself, how do they end up with an actual product? You can't just sell stories and call it a product, you?
Nathan Resnick (21:31)
Yeah, yeah. mean, I wish you could, but you know, we are missing one key person here. And the other core person of this story is Jerome Epinette Jerome is a French perfumer. He
trained in kind of the traditional European fragrance industry. He studied at one of the most famous perfumery schools in the world where many of the world's top perfumers are trained. And so after training, Epinette joined Robertet
one of the world's oldest and most respected fragrance and flavor houses, they develop formulas for luxury brands.
So he definitely knew the inner workings of fragrance, that's for sure.
Aaron Alpeter (22:12)
this guy was extremely well established in the industry and he could have stayed where he was the rest of his career and been happy with it. How did Ben find them? And more importantly, why did Jerome decide to work on Byredo
Nathan Resnick (22:23)
through industry introductions that connected him to Robertet and Ben began collaborating with Jerome in the early stages of development,
And so the partnership worked, extremely well because their roles were very clearly defined. Ben really focused on the concept and story and Jerome really focused on the fragrance composition. And so instead of trying to compose the perfume itself, Ben would describe the emotions that he wanted to evoke in perfume, memories of places and aesthetic references. Jerome would then kind of translate.
those ideas and dissent structures. it sounds a little bit out there. if I go, Aaron, hey, I
pair of shoes that reminds me of childhood or something. To me, it's a little broad, right? In terms of where that could take us. But Jerome really kind of had this skill honed in from his past experiences. And so this model is actually more common than you would think in fragrance houses. And so the
creative director kind of defines the idea
perfume is built around that kind of idea and formula. And so I think several things made this development, really started this brand interesting to Jerome. And it was kind of number one, creative freedom, right? Many fragrance projects are highly commercial and they involve strict market testing, trend driven scent profiles and
heavy commercial constraints. But this was different, right? The brand was positioned as a artistic niche fragrance and it allowed more creativity, which I think was very attractive to Jerome, right? And so because Ben approached scent through emotional storytelling and cultural references and these kind of abstract concepts, Jerome found this to be much more interesting and more of a creative challenge that I think he really enjoyed,
Instead of being instructed to make a woody fragrance that sells well, the brief might be, create a scent inspired by memories of African culture, filtered through, modernism times, And this actual brief kind of became the Bal D'Afrique which was one of their perfumes, right? And so because Jerome worked on many of these early fragrances, he really kind of helped shape the identity of the brand, right? And I think you can kind of see that.
across their different perfumes that were created by, Jerome, including the Gypsy Water that they released in 2008, which is a pretty unique name there. And the Bal d'Afrique that we just mentioned and the Blanche in 2009, that was kind of this minimalist and clean perfume. I think it just was probably a fun process for Jerome going from more more structured.
place to a more creative driven, storytelling driven type of approach.
Aaron Alpeter (25:12)
Yeah. And when you look at Byredo more broadly at the time of its founding, the concept was, again, very unusual for the fragrance industry. You've got an unusual founder, an unusual approach. They weren't trying to build a traditional perfume house. It wasn't a celebrity fragrance brand. It wasn't even a fashion license fragrance, right? So they weren't licensing Hermes or something like that. Instead, the idea was really to create concept-driven scents that were inspired by memories and places, placed Byredo
well inside what was going to become known later on as niche fragrance. And the niche fragrance had really begun to gain traction in the early 2000s with brands like Frederic Malle and Le Labo and Diptyque. Consumers were beginning to move away from these celebrity fragrances that were heavily marketed and these department store perfumes. And they were being drawn to more artistic story-driven scents. And so this niche trend, they quickly distinguished themselves in terms of their design.
one of the things we talked about in the kickoff episode was just how packaging is usually the most expensive piece of the BOM. And they decided they were going to be deliberately understated. very simple, cylindrical bottle, white label, black magnetic cap. At first glance, it really just looks like something you would get from a over sales stock item store. But closer look reveals that it was signaled like modern luxury and minimalism and really a very Scandinavian aesthetic
also in terms of their naming, instead of describing the scent notes, Byredo used evocative names that helped create emotional narratives rather than these technical fragrance descriptions.
Nathan Resnick (26:48)
Yeah, I mean, it seems like they were trying to do a lot at the beginning, right? What was their go-to-market strategy like? I I imagine that the answer today would have been DTC first, but this was really before DTC and really before Amazon was a viable option.
Aaron Alpeter (27:05)
I think if I had to sum up their strategy in one word, it would be intentional. And their early strategy really relied heavily on curated retail environments. instead of focusing on sales and launching widely in department stores, they focused on niche fragrance, boutiques, concept stores, and luxury fashion retailers. some of their early retailers or stockists were Colette Paris, Dover Street Market, Liberty London, Barneys of New York.
If you haven't heard of them, you're probably not the target client, right? So these are very wealthy, very well-to-do, ⁓ very small kind of clientele. But in addition to being a source of sales, these stores were important because they also acted as a cultural validator and getting placed in that and then really signal that the brand belonged in this world of design and fashion. And so again, I come back to this idea of
if I'm a food brand, I give them the Aero-ons, that says something, right? People just, you think, wow, this must be really good, or this must be a really cool niche. It's not, you know, can't give this to Whole Foods, like it's a very cool thing. I think that's exactly the strategy they had when they were coming to market.
Nathan Resnick (28:08)
when you're a young brand though, how picky can you really be when it comes to distribution, right?
Aaron Alpeter (28:14)
I mean, I think the answer is like not very, if you're still trying to figure out who you are, it kind of feels like you should sell to anyone and everyone who's willing to buy your product.
Nathan Resnick (28:26)
Yeah, and I think that's kind of what makes them all more impressive, right? You have to kind of have a lot of conviction about your worldview and what you're looking to build and say no to, probably some distribution channels early on when you don't have other sales channels to replace them with. I think they really had a vision for this.
Aaron Alpeter (28:44)
Yeah, again, I'm sure that Pierre's reputation, his connections, ended up being a huge unlock for them.
they hadn't been able to get those early marquee placements.
Nathan Resnick (28:55)
Yeah. I mean, luckily for them, they got these placements, right? Because unlike traditional fragrance brands, they spent very little on advertising in early years. instead of, really growth came from editorial coverage, press coverage, word of mouth, and just kind of niche fragrance communities. And so this kind of, think, helped maintain the perception that the brand was discovered rather than marketed.
Despite all of this, they weren't an overnight success by any means. In fact, it's actually very, very difficult to build a modern luxury brand. So their first few years were met with a lot of skepticism. Founders, weren't sure, Hey, it's just really gonna work. And the brand kind of had no fashion house backing, the packaging was too plain. many people in the industry did question what this brand last. And so.
I think because the brand intentionally restricted distribution, growth was relatively slow at first. And the downside of running a selective retail strategy meant that, yeah, there's going to be fewer doors and less inventory and slower revenue expansion, right? But I think that, in some sense was part of their strategy because they were so selective on their distribution partners.
Aaron Alpeter (30:10)
it seems that this, this slow growth, this pain is almost the price of admission for building an exclusive brand. if you think back to the early 2000s, the 2010s, the ethos in startups was get big quick, right? This is the era of Facebook, the era of Shopify. And this grow slowly in private sort of ethos is probably the most difficult path that
anybody could take, it may end up being just the most durable way to build a brand.
Nathan Resnick (30:37)
Yeah, they were very capital constrained and despite high margins, most profit went back into R&D product development and inventory really. But I think lucky for them, many of their early fragrances became, cult hits, right? So Gypsy Water was extremely, extremely popular amongst fashion insiders.
Bal d'Afrique was having this broad appeal, but really felt unique and distinctive. And Blanche was kind of this minimalist fragrance inspired by the smell of clean skin and linen. so they really, just hit the nail on the head with some of their early products.
Aaron Alpeter (31:15)
Yeah, Blanche has always got me because like they literally made a fragrance that smells like someone took a shower and did laundry. And like that was that sold well and I just that blows my mind. ⁓
Nathan Resnick (31:26)
Yeah, mean, you know, who are we to question? But clearly Jerome knew what he was doing and Ben knew how to tell a story. So that's how it went.
Aaron Alpeter (31:35)
Yeah, mean, that's fair. That's fair. slowly but surely, Byredo began to gain traction inside these fashion circles like you were talking about. And particularly in Paris and New York, they started to appear in fashion editorials, luxury concept stores and creative communities that helped them have this cultural legitimacy that they were looking for. And by the early 2010s, Byredo had began expanding beyond fragrance. And so
categories included candles, home fragrance, body care.
which has reinforced the brand's positioning as a lifestyle fragrance house as opposed to just a perfume brand. And they began opening flagship stores in Stockholm, London, New York, Paris, and these really started to function more
gallery environments as opposed to traditional stores.
Nathan Resnick (32:19)
Yeah, I mean in 2013, Byredo sold actually a minority stake to the London based luxury beauty focused, Manzanita Capital, whose portfolio has brands like Diptyque and Space NK. And so, you know, I think this investment kind of helped them expand internationally, help with their retail growth and their supply chain. Industry estimates that by around 2016, the brand was generating, 50 to $70 million annually.
And it had expanded into Europe, ⁓ America and Asia. And was popular in fashion capitals and luxury department stores and niche fragrance boutiques. So, you know, 10 years in, they had evolved from this kind of small niche fragrance label into this globally recognized luxury brand that had, strong fragrance sales across the world, expanding product categories.
And really this global retail presence and growing culture influence too. I think they kind of positioned it for the next stage of growth. Um, and that led to Puig acquiring a majority stake in 2022.
Aaron Alpeter (33:26)
Yep. Eventually, Byredo had attracted all of this attention from the major beauty conglomerates and, Puig was the ultimate winner. And while exact financial details were not fully disclosed, ⁓ industry estimates suggest that Byredo was generating somewhere between 150 million and 250 million euros in annual revenue. And that's relatively small compared to global beauty companies. you know, luxury brands aren't really valued purely on a revenue multiple.
From Puig's perspective, the acquisition represented more than just a fragrance business. They felt that they were buying a modern luxury platform with cultural credibility especially important younger consumers.
Nathan Resnick (34:05)
Yeah, I mean,
I think that kind of brings us probably to a key question in this acquisition of did Puig buy a fragrance company or did they kind of buy this culturally relevant system capable of producing luxury products indefinitely?
Aaron Alpeter (34:20)
Yeah, I think that's a really good question because despite the inevitability feeling of luxury brands, these luxury brands are extremely fragile. You mentioned how easy it is for one to grow too quickly and to lose its luster. They really rely on taste, scarcity, and cultural legitimacy. And scaling a luxury brand has always been a risk. As distribution expands and product lines grow, the success that created the brand can begin to road its exclusivity.
And so it seems that if I was asked to make a list of companies, I would trust to not screw things up. know, Barcelona based Puig would probably be on that list. and I say that because they had already heavily indexed in fragrance. They've got a portfolio consisting of brands like Carolina Herrera, Paco Rabanne, Jean Paul Gaultier, Nina Ricci and Charlotte Tilbury. And their portfolio was strong, but it's skewed toward older designer fragrance brands.
And Byredo helped them fill a niche fragrance gap in the portfolio. so, Puig was naturally looking to get a return on their investment beyond what the business was going to do anyways. That's why you buy a business is because you can change the directory of it. And I think that there are a couple of key principles that they needed to follow in order to not ruin this luxury brand. And the first one was to control distribution. I think we talked about here a couple of times, the fastest way to destroy a luxury fragrance brand or a luxury brand in general.
is to push it into too many channels too quickly. And so you can imagine if, if Byredo suddenly appeared everywhere, think like airport duty-free mass beauty chains, discount retailers, that brand would really lose its aura. And so I think controlling this, this perception of scarcity and exclusivity is really important to it. The second is that they have to maintain relevancy with the right consumers. And you know, these luxury brands exist partly inside and because of these creative communities. And so if
Byredo starts to become too familiar with the Jessica's at Walmart, as opposed to the fashion editors or the designers or the artists or other cultural taste makers, then it's gonna become a very different business. It can still be a big business. It can still be a premium business, but it be a luxury business.
Nathan Resnick (36:31)
Yeah. I mean, that's a fair point. And I would say since the deal was announced in 2022, it seems like Puig has done a good job so far. Right. I mean, they continue to expand Byredo's global retail footprint by opening additional flagship stores and these key luxury markets. I would say one thing that could be challenging for them, but they have done is they've
began expanding beyond fragrance, right? So they did this even before the acquisition to makeup, leather goods, accessories. And the makeup line is particularly interesting if you look at it because it was launched in 2020, know, focused kind of on these more artistic colors and packaging design. And I think Puig likely sees this as an opportunity to build a full beauty ecosystem around the brand. ⁓ But I think behind the scenes,
The biggest contribution has been in global distribution, supply chain, regulatory compliance and global marketing. And so this allows them to expand internationally much faster rather than as an independent company could. But, as we mentioned early on with Burberry, you you don't want to expand across product categories and just put your logo and brand and everything. And so I think that's something that they still need to.
you know, tiptoe into as they they expand.
Aaron Alpeter (37:56)
Yeah, I think this has been a really interesting episode. there's really nothing unique or special about their supply chain or even their product. I mean, it is traditional perfume. they use great ingredients, quality, all that sort of stuff. But the really unique part here is how they went about building a luxury brand in the 2000s. And so I'm just curious, like, what are your biggest takeaways from the episode in terms of either Byredo itself or just luxury brands in general?
Nathan Resnick (38:22)
Yeah. I mean, for me, would say distribution really shapes brand perception, right? And you've got to kind of be in it for the long run as you grow a luxury brand. they were really picky around where their products were and what stores they worked with. And so I think where you sell a product really determines how people perceive it. if Byredo went into target, be completely different story here. And so I think their early retail partners were very upscale and niche and kind of
function as culture gatekeepers. And I think being stocked there, really signaled this kind of legitimacy within the fashion industry and creative communities. I think that's something to keep in mind for any brand as you think about retail distribution and how that's going to affect your brand perception.
Aaron Alpeter (39:07)
Yeah, I think for me it's that, fragrance is just the ideal luxury entry product. And so if you want to create a luxury brand, if you want to build something that's going to allow you to get into all the other stuff, like fragrance is a great place to start. Because, you know, like let's look at all the things that are great about it. It's got high margins. It's got this emotional resonance. Again, you're selling memories and emotions for the most part. It's relatively simple to manufacture and
it can be an accessible price point for a luxury item. You're not talking about your first consumer spending $20,000 on the handbag. You're talking about spending $300, $500 in fragrance, which is much more accessible to a lot more people. And so that's an important piece that's there. And I think that the interesting thing about fragrance and luxury is that this begins to allow these brands to build this cultural presence before expanding into these other higher margin.
funny to say higher margin for luxury, more higher ticket item ⁓ products are out there. And so I think that a lot of founders probably believe that luxury begins with expensive materials or premium pricing. But in reality, what this episode has least taught me is that that's backwards. And it's really that luxury brands command the pricing that they have because the culture has already granted them the authority. People are paying to access that club or that ecosystem.
And it's built through, those four things we talked about, the aesthetic coherence, the cultural validation, the narrative meaning, or the controlled scarcity. they never tried to justify their price with ingredient complexity, but instead it was really about this emotional aesthetic world, and consumers wanted to enter that world. And so they were willing to pay the price of admission.
Nathan Resnick (40:51)
Yeah. Yeah, that's
for sure. That's for sure. Well, I enjoyed this episode a lot. mean, this was a great deep dive and I appreciate everyone tuning in to e-commerce on tap brought to you by Sourcify and Izba. Please leave a like review, share it with a friend and Aaron, know Sourcify has an upcoming webinar. Is that right?
Aaron Alpeter (41:12)
Yeah, so we are celebrating the anniversary of Liberation Day as much as one can celebrate. And so we will be having a special webinar with actually quite a few experts that are coming. We've got folks from media, we've got folks from international trade, and of course, our GM of Sourcify. That will be on April 2nd at 2 p.m. Eastern.
Nathan Resnick (41:37)
Awesome. I'm looking forward to that. Well, thank you again, everyone, for tuning into this episode of Ecommerce on Top brought to you by Sourcify and Izba.