What we can learn from Kylie Jenner’s $600m sale of majority stake in Cosmetics Company

November 24, 2019

By: tme

Ai Law Legal Services

22 year-old Kylie Jenner, who’s Twitter following is at 29m and Instagram at 150m and counting, has sold 51% of her Cosmetic’s company to Coty Inc., in a deal that leaves her with a retained 49% stake and $600m in the bank.

The Cosmetic’s company was only started in 2015 and within just three years its valuation had surpassed 1bn. The company’s notable product is the popular Kylie Jenner Lip kits, which are retailed for $29 per kit and tend to sell out within minutes of coming in stock.

Four years after launch of her company, Jenner boasts a valuation of over 1bn and is a household name. Oh, and let’s not forget the company only has 7 full-time employees. Such an impressive feat merits looking into how all of this has come to pass and what one can learn from Jenner’s business model.

What can we learn from Kylie Jenner’s recent $600m sale of the majority stake in her Cosmetic’s Company?

There is a lot to learn from the Kylie Jenner’s recent $600m sale of the majority stake in her Cosmetic’s Company, and it is a textbook example of how to invoke the power of marketing to grow a business.

“It’s the power of social media,” Jenner told Forbes in 2018. “I had such a strong reach before I was able to start anything.”

Sure, Jenner’s multi-million person follower base garnered through the Kardashian’s reality TV show has undoubtedly been the ultimate enabler for Jenner to grow her business in such a short space of time to its stratospheric valuation, but the principles used by Jenner are what’s important to understand.

A meeting of old and new

The success of Kyle Jenner’s business is a meeting of old and new. The strategy utilises all of the modern technologies available. It uses social media advertising, social media posts and interactions, engaging other popular social media ‘influencers’ to use the product and post about it to create a sense of exclusivity, product launches streamed over the internet and email mass marketing that sometimes appear to be a little ‘spammy’ to tell people about upcoming product lines and flash sales.

Any business owner should take note of these tactics, for they are available to everyone. Perhaps not on the same scale, but they are available nonetheless and can be used to steadily build up both a reader base and client base for your business. Never before have we all had free and unrestricted access to a global platform through which literally the entire world can view our product or hear our thoughts or see our brand. Coca Cola and McDonalds are two of the most well-known and well-recognised brands in the world. The golden arches and the red and white ‘coke’ logo are symbols that are recognised no matter where we go, on every continent. Those brands have taken 50 years at least of steady strong growth to get there. Today, companies can achieve what McDonalds and Coke have achieved in less than a decade. Today, it is possible for trends to go ‘viral’ and sweep the globe in a matter of hours.

It should not be forgotten that there is no need for a mass marketing budget to do this. For small SME’s, this type of marketing can be done in-house entirely for free (and every business intent on growing their brand should start doing this as early as possible to ‘get the snowball rolling’). For growing and larger SME’s there are SEO companies, Web designers and social media monitoring companies that are all available for a price that is not going to break the bank (or marketing budget) and these techniques can be utilised to create growth that then enables more traditional and aggressive forms of marketing reserved for those with more disposable income – radio, TV, billboards, magazine adverts, sponsorship.

No matter how much you market or get your name out there, it is paramount that the underlying business has a value to it away from the razzmatazz of marketing. Human nature remains the same as does economics and Jenner has introduced some good common sense business acumen into her company’s model.

Jenner has been able to increase its profit through maximising its sales whilst keeping overheads low. So many businesses, from sole traderships to publicly floated companies, fail to remember this and their spending outweighs their income, investing and growing on credit of another.

Jenner has also used supply and demand to her advantage, creating a sense of urgency around her products whenever they go on sale through offering limited releases and flash sales. Jenner has successfully created a sense of scarcity around her products to the point that demand outstrips supply. For anybody who knows Adam Smith’s invisible hand theory, a situation where demand outstrips supply leads to profit and the market placing a higher value on the products themselves.

Jenner’s business shows us the importance and success that can follow when the right principles of business are utilised: not overspending, keeping overheads low, not trading on credit alone. It also shows us how we can maximise our businesses through modern means. Running a business has not changed, but marketing has become more accessible and business owners should be focusing on it. Social media has become a steroid for growing businesses.

Tips for building and protecting a business brand online

Business owners should take note of the power of social media and online marketing techniques. A growing business cannot ignore it. Not only is it a tool for advertising but also it is a creator of value itself. A business’s goodwill, brand reputation and other intellectual property is of utmost importance and the IP becomes an asset in itself. Coke’s bottom line may be based on the number of bottles it sells each year, but its ultimate value and key to success is based on the household name that it has created.

In carrying on business, owners should seek to offer whatever good or service for which it exists and strive to perfect the process to make its offering as efficient as possible. But for the growing business, owners should also focus on the packaging around the product, the things that make the product recognisable or hold value. Don’t just develop the product, but develop the brand.

Make known the ethos of the company to build trust. If it is based on a cheaply priced product let people know that they can get something for less; if it is based on the quality of the product, let people know that the company prides itself on making high quality items; if it is based on the quality of a service, let people know that the company is trustworthy and will put their customers first.

Businesses should have an online presence. Build a website, create content and publish it. Follow items that are relative to the company with a view to get followers back to expand your reader-base. Employ SEO tactics (companies are out there to assist you with this) to get your rankings up on search engines. These are all things to build a platform for your online marketing to grow from. The acquisition of Kylie Jenner’s Cosmetic’s company is testament to the fact that businesses cannot ignore online marketing.

Protecting your Brand

It is of equal importance to protect your brand. If you own a house you take out insurance to protect it. Intellectual Property should be treated exactly the same. As your business grows, your brand will grow, meaning the value of your intellectual property grows and it is prudent and time saving to ensure that your intellectual property is adequately protected. Not only should you seek to protect your intellectual property from a view of ensuring third parties do not take unfair advantage of your brand, but also for tax reasons. IP is a valuable transferable asset, so it is important to ensure that it is owned under the correct entity (or risk leaving it until years down the line when the IP value is much higher and you are required to ‘tidy up’ the legal ownership status which could result in incurring tax liability such as capital gains).

There are a number of practical steps that can be taken in respect of brand protection and online marketplaces, including (in no order of importance):

    1. Ensuring appropriate trade mark and other relevant registrations are in place for the places in which you do or plan to carry on business;
    2. Monitoring online marketplaces for unauthorised use of your trade marks or product names;
    3. Ensuring that the brand has a strong online presence;
    4. Documenting potential instances of infringement as and when they happen to build up a case against any would-be infringers (if legal action where to become necessary, it is important to have a strong case against such infringement).
    5. Being prepared to take swift action should an infringement arise;
    6. Building a strong relationship with customers in order to encourage them to report any offending products;
    7. Taking advantage of technical developments to make genuine products harder to copy, such as by including a watermark or hologram on all genuine products, or having a registration system to note which products have been shipped to where;
    8. Ensuring third parties are aware that the business will vigorously protect itself;
    9. Building strong relationships with the appropriate authorities such as customs and excise and trading standards;
    10. Liaising with trade associations in order to share information and, if appropriate, take joint action;
    11. Briefing lawyers so that they are familiar with your brand and in a position to act quickly should the need arise.

Ai Law advise on Intellectual Property Matters and Brand Building

We advise on all aspects of brand building and intellectual property, including:

    • Trademark advice and registrations;
    • Licencing and transferring of intellectual property;
    • Copyright and Design and patent infringement;
    • Cease and Desist;
    • IP litigation and co-existence agreements;
    • Injunctions and undertakings.

Whether you are a start up, SME or well-established large company, if you need any advice or assistance on intellectual property ownership or brand building matters, please get in touch with Ai Law today and we can help.

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This information is in no way to be taken as legal advice or tax advice. It is for information purposes only and is in no way to be relied upon. You should always seek the appropriate professional legal advice before attempting to act on any of the information given here.

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