A good match with a local market is important

December 23, 2016 by
Janine Nothlichs

When former lawyer Janine Tillema finally found an effective treatment for her skin problems in Paula’s Choice products, she was so impressed by the brand and its unique story that she decided to bring it to Europe. Today, the ‘accidental entrepreneur’ heads an online business that has grown from a single website and 3 employees in 2005 to a company boasting a workforce of 32, running 9 international sites in 10 languages with 7 currencies and 10 VAT numbers.  

This article previously appeared in the Cross-Border Magazine, Edition 1, June 2016

How it all began
Paula Begoun, an American journalist, suffered from acne and eczema since her childhood. She made a career writing investigative books on ingredients of popular skincare products, which earned her the reputation of ‘cosmetics cop’ in the US. Dutch lawyer Janine Tillema, also plagued by a serious skin condition, came across the book in Amsterdam and ordered Paula Begoun’s skincare products from the US. The result was stunning: The skin problems disappeared. Neighbours and family asked her to place bulk orders, which led Janine to investigate if there was an opportunity to bring Paula’s Choice to Europe. “I only found a distributor in Singapore and Australia, so I researched the legal conditions for selling these products in Europe. I realised there were little obstacles, so I wrote Paula a letter and attached my research. Of course, at first I heard nothing and people started to make fun of me,” laughs the sympathetic business woman when we meet at the European headquarters in Amersfoort.

paulas-choice-8
Picture: Léon van Bon

However, a few weeks later Paula Begoun called her back. The two met in Amsterdam and a first business plan was drafted. “Because the cosmetics legislation in the EU was mostly harmonised, we decided to ship to all EU countries from the beginning. It was clear right away that this was going to be a business with a major online focus,” says Tillema. After the startup phase, she quit her job. “I am an ‘accidental entrepreneur’. It happened to cross my path, but it is amazing: To see where we came from and where we are now, receiving so much positive feedback and seeing that you have launched a product that really can make people happier, that is very special to me.”

A good fit with the German market
Having rolled out one English-language website for the entire European market at first, Paula’s Choice decided to localise dedicated online-shops for Germany, the Netherlands and the UK, following the size and accessibility of these markets. Tillema: “Germany was high on our wish list because there was a great fit between the market and our brand.”  

In other countries, Paula’s Choice works with sub-distributors and either single- or multi-brand resellers. “Most of our sub-distributors came to Paula’s Choice in exact the same way that I did,” Janine Tillema explains. “If you look at that strictly from a business perspective, you might first do market research and an opportunity analysis. But these entrepreneurs were enthusiastic, they knew the market and our brand. We trusted them and it turned out fantastic. Business-wise, this might have been a risk. But if someone approached me tomorrow with the same passion, I think I would do it all over again.”  

Paula’s Choice Europe avoids involving too many intermediaries, as this would drive up costs: “A good price-to-quality ratio is one of our strongest USPs, so focusing on the online channel is a logical choice.” Omni-channel is no priority for the company. However, there are some beauty salons and a few resellers with brick-and-mortar sales points.

All products are manufactured in the US and shipped to a central Dutch warehouse. Resellers and sub-distributors determine their stock and assortment themselves and are supplied from the warehouse. The Dutch warehouse also directly fulfils customer orders from all European countries without a local representation.

“Which celebrities use your product?”
Germany, the UK and the Netherlands are the top-three performing countries. However, to Janine Tillema, being successful in a market such as Romania is also very special: “I think the resonance there is good because people want objective information and our no-nonsense philosophy appeals to people in this region”. The same goes for Germany, where customers investigate thoroughly before pledging their loyalty to a cosmetics brand. However, once they are convinced, they order again and again. “Our customer retention is really high for a cosmetics brands,” explains Tillema. “It is a tough market, but our performance shows the power of our products.”

The UK, according to the entrepreneur, is more sensitive to hypes and has a dominant celebrity culture. Bloggers are also highly influential: “The question we hear often in the UK is ‘Which celebrities use your products?’. But we are not really into that kind of marketing.” Still, the marketing mix needs to be adapted to this and other local trends. Sometimes, the success of the brand manifests itself in the most unexpected ways: “Once, before there was even a reseller active there, we were sent an award for best skincare product from Sweden. Apparently, a local beauty journalist had put us forward in the competition, which was a pretty big surprise at that time.”

Brand building in a tough market environment
When Paula’s Choice first came to Europe, brand building was a challenge: Whereas in the US, founder Paula Begoun was a celebrity before she launched her product line, in Europe, both had to be introduced from scratch. The cosmetics industry makes use of strong emotional marketing, beautiful packaging and promising claims, which makes the market very competitive. For consumers, understanding ingredient lists is complex, but the general trend is that consumers are becoming more conscious and more inquisitive about the products they consume or use on their skin. “Paula has understood this trend at an early stage, and this is what makes us successful in Europe as well,” Tillema believes.

Cross-Border means local focus
When starting off the business in the EU, Tillema quickly realised that selling cross-border in Europe means tackling a number of administrative challenges, such as correctly managing VAT payments in all the markets. In the cosmetics sector, labelling and local wording requirements pose additional challenges. Next to that, managing local customer expectations, creating relevant marketing campaigns and customer care are crucial elements that need to be taken care of for each local market. There are, for instance, 12 different dates for Mother’s Day throughout Europe. “You can’t sell into a market like Spain without working with local partners,” Tillema is convinced. In Spain, Paula’s Choice works with a sub-distributor who coordinates a PR agency, and works with Bryte and Salesupply for online campaigning. The account management is done in Amersfoort: “In this way, we can coordinate our marketing effort with our central vision without losing focus on details in the local Spanish market.”

In the UK, brand marketing in the beauty sector has become tougher: “Being a brand ambassador has become a well-paid business,” laughs Tillema. “In the UK, bloggers were paid even before it became the norm in other countries. That blurs the boundaries between content and editorial”. However, as social media increasingly empowers customers to exchange honest advice and ‘real’ opinions, this tendency might move towards a less commercial approach shortly.

Different mind-sets
Local know-how is also crucial in order to understand the way that customers think. The mind-set towards online shopping can differ dramatically. In Romania, it is common that the delivery man waits until the client has opened the package and checked the contents. “In the Netherlands, you would never expect consumers to behave like this. This is why we need local expertise more than anything!” Janine Tillema insists.

No level playing field in the EU
Within the framework of the Digital Single market, the European Union is actively stimulating cross-border online trade. However, according to the successful online business woman, the question is if the European Commission is fully aware of all the challenges merchants really face in cross-border online retail. It is not without reason that only a small percentage of SME’s engage in cross border e-commerce. “They talk about a level playing field in the EU, but as long as the purchasing power and operational costs differ so immensely, that is not given at all. The Single Market and equal opportunities are not yet reality, even if EU officials seem to believe they are. Offline, we understand and accept there is a price difference between Poland and Germany, for example, but online there is a lot of fuss about price differentiation all of a sudden.”
Also, ideas like an obligation for online retailers to deliver in all EU countries are, according to Tillema, a sign that the obstacles entrepreneurs face are not yet fully understood. “There are certain aspects of cross-border e-commerce that the European Commission simplifies, but it is very positive that the topic is at least on the agenda”.  

The future
Paula’s Choice is determined to further build its success as a Pan-European brand. Before 2018, they are eyeing a localised launch in France and Italy; countries that already provide a steady stream of orders without any marketing efforts. “We will research these countries carefully,” says Tillema, adding: “I am curious if our brand is as good of a match for these markets as we believe!”

 

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