Groupon Effect Spreads Further Into CPG as TotalBeauty Launches Deep Deals

E.L.F. Offers $25 of Cosmetics for $10 Via Review Site

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The Groupon-ification of packaged goods is taking another step forward as beauty-review site today launched the first of what CEO Emrah Kovacoglu expects will be many deep-discounted voucher offers for beauty products.

TotalBeauty Deals is another sign of the Groupon-ification of packaged goods.
TotalBeauty Deals is another sign of the Groupon-ification of packaged goods.

Total Beauty Deals launched at around 1 p.m. EST with an offer of $25 worth of E.L.F. cosmetics for $10 and redeemable through

The beauty deal comes less than a week after General Mills became the first packaged-goods player to dip its toe in the daily-deal water by offering via Groupon a 12-item assortment of packaged food valued at $40 for $20 to be direct-shipped to consumers in San Francisco and Minneapolis.

And while traditional CPG couponing players Valassis Communications and News Corp.'s SmartSource so far haven't done their own deep-discount daily deal propositions, that isn't stopping CPG brands from giving it a try.

Part of the impetus for Total Beauty Deals is to go beyond the top 100 beauty brands that have been the biggest advertisers on the site to create a proposition more meaningful to the other 1,300 or so brands in the review database that aren't necessarily big ad spenders but would like to reach consumers with compelling offers, Mr. Kovacoglu said.

"Consumers get to discover new brands or new products from brands and choose those products themselves vs. getting sent a sample that may appeal to them or not," he said. "It's great for the brand, because when you look at the margins of beauty brands, this becomes positive ROI for them from day one, as opposed to sampling programs."

Mr. Kovacoglu, a veteran digital marketer from Procter & Gamble Co.'s CoverGirl business, said at typical beauty margins, even products sold at deep discounts of 50% or more still represent positive gross margins for marketers, unlike sampling, which doesn't guarantee a positive ROI.

"The cost of goods for many of these brands are 10% to 20% of the retail price," he said, "so they're still making money."

He expects some big marketers with multiple brands will also put together offers, a la General Mills, with a goal of getting loyal users of one brand to try others in the company portfolio.

Another idea behind the voucher program, he said, is to attract new registrants to brands' e-stores, though E.L.F., like other beauty marketers, also sells products through retailers.

About 80% of the brands in the Total Beauty review database have their own e-commerce sites today, he said. "But they don't necessarily have to. We do also have retailers coming to us who want to do this program, and we can have a brand directly bring another retail partners into it."

A brand, for example, that would take its deep-discount voucher offer to for fulfillment might also use that as an enticement to get improved display in the retailer's bricks-and-mortar stores.

Mr. Kovacoglu said TotalBeauty is among the top-three beauty sites as rated by ComScore, with 12 million unique monthly visitors. An email to TotalBeauty users last month yielded about 100,000 who were interested in getting information on the deep-discount vouchers, he said, but he expects the number of participants to grow fast once deals hit the market and consumers and beauty bloggers begin spreading the word via social media.

One potential advantage for marketers working through Total Beauty as opposed to Groupon is that it has a customer base that may be less deal focused and more genuinely interested in the products and brands, said CPG industry consultant and former Catalina Marketing executive David Diamond.

"The viral nature of how these deals work is that the sub-segment of Total Beauty who are most interested in deals are going to be the ones who forward them a lot," he said. "But I'd much rather start with a group that's passionately interested in beauty than a group that's just passionately interested in deals."

While fulfillment through their own or other e-stores is one possibility for CPG daily deal programs, Mr. Diamond said he believes CPGs won't ultimately limit their Groupon-style dealing to e-commerce. One possibility he said marketers are exploring is fulfillment through retailer loyalty-card programs, essentially by loading the deal directly into consumers' frequent-shopper accounts. A deal offering $10 off of $20 in merchandise could be redeemed at checkout that way, he said.

But by whatever channel, he expects an explosion of such deals in CPG over the months ahead. "I can guarantee you," Mr. Diamond said, "that there are 10 brand managers who saw the General Mills thing last week and said, 'Oh my God, I've got to do one too.' And it's flexible enough that each can modify it a little or a lot."

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