From Rejection to Revolution with The Lip Bar

Speaker 1:
Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.
Oliver Chen:
Welcome to the Retail Visionary Podcast series, a podcast about visionary ideas and people. My name is Oliver Chen. I'm TD Cowen's new platform retail and luxury analyst. In this episode, we explore the journey of a bold disruptor who built The Lip Bar to challenge beauty industry standards and create space for inclusion. Today we're thrilled to feature Lip Bar's, founder and CEO Melissa Butler. Melissa obtained her bachelor's degree from Florida A&M before working on Wall Street as a licensed stockbroker. Her journey to beauty is one that she describes as natural because she was frustrated with the industry and created a solution. It was her belief in health and inclusion that led her to make lipstick in her kitchen and develop the vegan line, The Lip Bar.
Since launch, Melissa and The Lip Bar have been seen on Shark Tank. She's been featured in Forbes, Fast Company, Allure, Cosmopolitan, and Essence among others. The Lip Bar is headquartered in Detroit and proud to have a team of a hundred percent women. It's sold in its flagship store, located in downtown Detroit, as well as Target, Walmart, and thelipbar.com. Melissa, it's really exciting to have you here. Thank you.
Melissa Butler:
Thank you for having me.
Oliver Chen:
You started The Lip Bar in your kitchen with a bold vision. What inspired you to take the leap?
Melissa Butler:
Yeah, so most people who start beauty brands are makeup artists, or they grew up loving and playing in makeup. That was not my story. I was always a numbers girl. My goal when I graduated school was literally to work on Wall Street. I remember watching movies like Wolf on Wall Street, and I'm like, "That's me." I was not the girl who wanted to just play in Barbie dolls and be beautiful. I really wanted to do something purposeful. And so while working on Wall Street, I'm literally living my dream. I was like, "Do I really like this? Is this actually what I want to do with my life?"
While also, I was at the point where I was so frustrated with this very narrow standard of beauty, I felt like, and this was 2010, 2011, I felt like everyone was trying to look like each other, and it drove me mad because we are so unique. We are so uniquely beautiful, but I found that the media and the beauty companies were perpetuating sameness, and that frustration led me to making lipstick in my kitchen, which is kind of crazy because who knows how to make lipstick in their kitchen? No one, but I figured it out.
Oliver Chen:
Melissa, I teach a class at Columbia called Magic and Logic. How do you link your love and interest in numbers with the beauty industry?
Melissa Butler:
Well, every industry boils down to numbers. So there's always the marketing and the creative piece, which is fun and the innovation piece. But beyond that, if you're building a business, there's always numbers. There's always data to chase, there's always understanding that you have to seek out if you're actually trying to build something with purpose, but something that truly serves your customer. So while The Lip Bar is very much a heart-centered business and a community focused business, the reason why we've been able to stay in business for 13 years throughout all of these tumultuous economic times is because we center the data. We know who's shopping us, we know why they're shopping us. We know the price point they're comfortable shopping us with. We know what they're watching on TV. We can predict the snacks that they're into. We study our customers, and that's numbers purely.
Oliver Chen:
In terms of being customer-centric and anticipatory, as well as embracing this community in a two-way manner. So Melissa, how did you know what you were doing in your kitchen?
Melissa Butler:
I didn't.
Oliver Chen:
And you've been amazingly successful, but what was the first thing you did in your kitchen? What did you learn in that process? Or did you make some really bad stuff that got better?
Melissa Butler:
Yeah, I mean, I think in this journey of 13 years, I've made lots of bad decisions, and I think there's the beauty in that. There's the beauty in learning, there's the beauty in failing, but making sure that you fail forward. Those early days, I was literally just excited to see what happened next. If I tweaked this, how much better can I improve the product? If I changed the pigment load, would it show up on dark skin? If I added more shea butter or more castor oil, would it have greater slip? So I was literally becoming a cosmetic chemist. So I was deeply into testing and learning, but also I would take those findings and I would share it with mentors. I would reach out to cosmetic chemists. I would read books on cosmetic chemistry. At this point, I had four years of experience on Wall Street, no real experience in terms of being a cosmetic chemist, but I was so determined that it just worked.
Oliver Chen:
There's a huge market opportunity in terms of Black, Indigenous and people of color, and also it's very underrepresented in product relative to the market and the beauty enthusiast, what did you see in terms of this market and what sets The Lip Bar apart? What are your core competencies? It's a very competitive industry too.
Melissa Butler:
Yeah. Beauty is, specifically color cosmetics is one of the most competitive parts of consumer and personal care, and I think it's largely because it's not essential, right? You think skin care and it's like people need to wash their faces every day. You think about hair care and no matter the brand you're buying, it's a part of your actual hygiene. The reality is no one actually needs color cosmetics, but it's fun. It's that cherry on top.
And so the reason why I started out was reading all of these articles about how specifically Black and brown women are outpacing non-Black and brown consumers in terms of their spend. But you look at the offering, and as a Black woman, I saw that the offering was minuscule. I saw that the offering was certainly lacking, and I was like, "If no one is talking authentically to this customer, if no one is understanding the buying power of this customer, and if no one is encouraging them to be exactly who they are, as opposed to forcing assimilation, this is not only something that's great for the community, but it's also a business that can be developed." And so I've always approached The Lip Bar with authenticity while also understanding that this is a huge market that I could go after.
Oliver Chen:
What products are you most famous for, and what do you mean by authenticity? How has that concept evolved in your 13 years?
Melissa Butler:
Yeah, I mean, I think authenticity for us is just about being honest. Being honest about who we are, who we're serving, why we're serving them, what that looks like, centering women of color. So oftentimes you go into mass retail stores. We're sold in mass retail, and if you are a woman of color, it's the norm that you don't see yourself because women of color are oftentimes not the default beauty standard. And so those customers are often grasping for something that looks like them, something that says, "I have permission to play with this product, with this brand. This brand will understand my needs." And so when I say authenticity, it's really understanding who they are and what they're looking for. And what they're looking for is just to see themselves.
And so when you think about color cosmetics, earlier I mentioned the pigment load. It's actually very easy for anyone and everyone to develop products for dark skin. Now it's a little bit more expensive because you need to use a little bit more pigment to show up on dark skin. And so understanding that some companies were intentionally deciding to use less pigment, knowing that it wouldn't necessarily serve the entire population. I was like, "Okay, we can tell that story." And it's led us to having or being known for a very long wear and very boldly pigmented products to ensure that it actually shows up on every skin tone.
So that's been our superpower. One of our tent poles is performance, our customers are very much dynamic women. We describe them as booked and busy, which means that they need their makeup to work for them. And so we tell those stories. We talk about the mom who is an executive, while also being a parent, while also just wanting to look good. She doesn't have time to watch a 30-minute YouTube video on how to make her makeup work for her. So we create products that will last long for her.
Oliver Chen:
That sounds very practical and also very versatile in terms of consumers looking to have everything all at once and performance. Earlier in your journey, you appeared on Shark Tank. They didn't invest in The Lip Bar. You went on to prove the market was really ready for you. What gave you the courage and what happened in the Shark Tank experience?
Melissa Butler:
We went on Shark Tank. We did not get a deal. It was actually so funny looking back at it. Some people are like, "You didn't get a deal because they didn't understand the business. They weren't the customer." Which is true. But also, we didn't get a deal because the pitch wasn't that good. And so again, 13 years out, we've raised funds. We are sole and national retailers. I am now a business woman. When I first launched The Lip Bar and when we first went onto Shark Tank, I wouldn't invest in me either. I think that they were cruel in their approach, unnecessarily cruel. But at the end of the day, business is meant to be invested in not just to have money spent on. So I tell my team this all the time. No one's looking to spend money. Everyone is looking to invest, which means that you expect a return.
And so while we didn't get a deal on Shark Tank, it didn't stop us because ultimately I didn't build my business for them. I wasn't going to start or stop my business for them. But I did realize that I had gaps. I learned so much from that experience because I was like, "My pitch wasn't good. It wasn't clear, it wasn't concise. How do I improve that? And then how do I make sure that I'm always talking to the core target consumer?" So it allowed our marketing dollars to be more efficient. It allowed our future pitches to be better, and it gave us a ton of brand awareness for free.
Oliver Chen:
So you've had 13 years of awesome experience. What have been some major turning points that you'd love to share with us?
Melissa Butler:
Ooh, I think the first one is launching in retail completely transformed my business. It forced us to not be so a gut reactive business, which there's always room for gut, but you need data to back it up. It forced us to have more strict timelines. That was a big turning point in terms of growth and scalability, but also process and standard operating procedures, how we actually thought about business.
Another thing was just frankly, hiring. Being an entrepreneur is so trendy right now, but people don't really know how to let go. Oftentimes if you're an entrepreneur, it's because you had a great idea. It's because you're a creative. It's because you want to serve a community in a specific way or solve a specific problem. It's not because you're a numbers person. It's not because you're like, "I'm a great operator." And so as you scale, you really have to learn, how do I let go and focus on the thing that I am best at? So that was a huge turning point for me because I had to let go of a lot of parts of the business in order to see us get to the actual growth.
Oliver Chen:
You sound quite self-aware as a founder, you're not automatically a supply chain expert, and also you're not necessarily focused on agility and speed within that whole route to market and managing networking capital. How did you discover all this?
Melissa Butler:
I think it's a matter of being very clear about the goal, right? At the end of the day, it's a business, so you have to be KPI focused. And so when you're KPI focused, when you're very goal-oriented, you then put that goal above everything else. You have to put it above your ego. You have to decide and be clear that you're not the SME. So anybody can be a CEO. Anyone can start a business. It doesn't mean you're a good leader. Just because you have people reporting to you doesn't mean that you're automatically going to grow. And so I think it was just a matter of taking a step back, taking stock of my skill set, and then again, being very clear about where I wanted to go.
Oliver Chen:
Well, you mentioned business and generating returns, and clearly we're here on Wall Street and we love internal rates of returns, but how do you balance returns and purpose and stakeholders as you think about that aspect? You can also, as we cover luxury goods here, where there can be hundreds of years of goals, but there can also be a daily goal, our monthly goal. So how do you balance short and long term?
Melissa Butler:
Yeah, I mean, at The Lip Bar, we count our money daily. We are a direct-to-consumer company first. Sure, we're sold in mass retail stores across the country, but our direct-to-consumer relationship is our most powerful one. Number one, because we have the strongest margin. But number two, because we get to have the relationship with the customer, we get to maintain understanding of their why, understanding of what they're looking for. And I think when you are rooted in a customer-centric model, it forces that authenticity. It forces the transparency because you're always talking to the customer. If we were solely relying on third parties to sell our products, I think we would have a different perspective. But I'm the CEO who's reading the comments. I'm reading the reviews. I love the negative reviews. They tell exactly where I need to go and how we consistently improve. So I don't think it takes much effort for us because it's in our DNA.
Oliver Chen:
What have been your biggest surprises? The consumer is so dynamic, and we're a big proponent of TikTokification. And also as you think about generation Z, a lot of changes happening very quickly and things go in and out of fashion very quickly as well. So what have been your most exciting consumer surprises when you think about your community?
Melissa Butler:
I think it's like some of the customers who come to us who were not even necessarily speaking to. A really recent example is last year, Governor Whitmer of Michigan, she became a huge fan of The Lip Bar. We didn't even know that we weren't necessarily targeting her profile, but she's wearing it on her book cover. She gave away 300 of her favorite Lip Bar color at the DNC. Those moments when people are finding us who we're not necessarily talking to, but when we see them and we understand what they stand for and it's in alignment with our values, that is probably the coolest part. There's no way in the world we would've ever said, "Yeah, the governor of Michigan is going to become one of your biggest proponents, or one of your biggest sale drivers of Q4 '24. So stuff like that.
Oliver Chen:
And what are your thoughts in terms of advice would young professionals showing up authentically, as a mentor and a leader yourself?
Melissa Butler:
I would say confidence is the key to everything. And I think it's being confident enough to be wrong. Being confident enough to say that you don't know, being confident enough to fail and knowing that whatever happens in that moment, that moment doesn't determine the future. You determine the future. Your reactions determine the future. Your resilience determines the future. Young people often make the mistake of thinking that they have to have it all right now and wanting it all right now without actually going through the journey. And though I've been doing this for 13 years and I have a lot of experience, every step along the way, I was still open to learning. I was excited about learning, and I think that is why we've been able to grow in a very competitive industry.
Oliver Chen:
Curiosity certainly matters for being culturally relevant and driving innovation and also tenacity and just showing up and not being afraid, but also having a foundation from which you can grow. Melissa, you mentioned data a few times in the conversation. What pieces of data, and one framework we often use as customer lifetime value, and I teach a class in that too. So which data points are important to you?
Melissa Butler:
Yeah, we think about retention a lot.
Oliver Chen:
That's the biggest variable, yes. In terms of the derivative curves of how you drive true value.
Melissa Butler:
So let's call it six years ago, everyone was fundraising. All of the CPG companies were able to raise big dollars to buy customers. But anyone can buy a customer, but who can keep a customer? That's how you know you have a real business. So retention is one of our biggest indicators of true growth. A lot of companies chase virality. One of the things that my team doesn't like when I say, but it's true, "We didn't create the virality. We may have monetized the virality." And so we don't chase virality, for instance. Sometimes it happens and it's great when it happens, but what we're chasing is true connection because that true connection that will actually build the lifetime value, it'll build the bridge to that lifelong customer in an industry that is very fickle and people are excited about newness, they're excited about innovation and shiny things. And so it is that communal aspect that keeps them in the business longer, that allows you to get that word of mouth.
As a small company, you don't have that many marketing dollars, so you really do need your customers to become your sales team. So why should they talk about you? They talk about you because you make them feel good. They talk about you because the community in which you have built, they're proud to be a part of.
Oliver Chen:
What are your thoughts on retention? So what do you practice in terms of trying to perpetuate that?
Melissa Butler:
Deep personalization. So we talk to our-
Oliver Chen:
You visit everybody's homes?
Melissa Butler:
No, but we talk to them about their specific needs. So it could be speaking to a woman directly about her complexion. "This will work for you. We know this will work for you." Or it could be her lifestyle, right? You're a mom. And we may tell her the story that she feels as though she's experiencing in that very moment, and that's how we are able to hold hands with our customers.
Oliver Chen:
How does that intersect with AI? AI is very powerful for personalization. What do you see happening?
Melissa Butler:
AI is a mixed bag for us right now. We use it a little bit, but I think that everyone is sort of chasing the AI train, and our goal is to use it to make ourselves more efficient, not to build deeper connection. I think that over time, once it has more of that human element and it can help us dig deeper into personalization, it'll be more handy for us. But right now, I think the biggest tool in our toolkit is having that one-to-one person-to-person feeling.
Oliver Chen:
You're a leader and a role model also as a Black entrepreneur. And there's been so much that has happened between economic boycotts, tariffs, incubation in Detroit which is awesome, and changes in the beauty landscape. Could you speak to that? There's been a lot of cross currents, certainly with inclusivity.
Melissa Butler:
Yeah, I mean, honestly, yes, I'm a Black woman and a lot of my customers are also Black women. But ultimately, I'm a beauty founder. Ultimately, I'm a human and I'm a woman. And I'm a woman who happens to be Black. And I'm a business owner who happens to be Black. All of us are humans, and we all want the same stuff. We all want love. We all want respect. We all want to feel like we have found our purpose. And so I really try to make sure that our customers understand that they don't have to have an adjective to describe who they are. They don't have to have this veil in terms of how they show up in the world.
Detroit is an incredible place to build because it's like the underdog city. So for many years, Detroit was forgotten about. It was abandoned. You would look on TV and you would see all of the architecture in ruins, and now it's the city that's cool again. And I think that's a lesson in business. If you ride the trend, you will always be behind because you will always be believing someone else's narrative. I'm from Detroit, I never believed that this was a city of ruin, that this was a city that you should have given up on. And so now on the other side of that, it feels really good to say, "Yeah, I'm proud to be building my business in Detroit." But this didn't fall in my lap. I always knew that this was a good place to build.
Oliver Chen:
It's a special place. There's a lot of fashion and artistry there too. A lot of innovation.
Melissa Butler:
I left New York to build in Detroit. Why? Because it was the right thing to do. I knew it could work.
Oliver Chen:
But you love New York too. You love the idea of Wall Street.
Melissa Butler:
I love New York. New York is fantastic. Who doesn't love New York? But I think it's a myth that you have to be on one of the coasts to build something big or build something beautiful. We are in charge of our own destinies. Whatever you believe is true.
Oliver Chen:
What is the hardest part of your job?
Melissa Butler:
Managing people is the hardest part of, I think any job, of life. It's the relationships that you are constantly managing. And what makes it hard is that you actually care. I care about my team, I care about my customers, I care about my community-
Oliver Chen:
How do you scale that? You're just one person.
Melissa Butler:
I think it has to be a part of the brand ethos, right? It's not a Melissa show. It's like a, this what this brand means to you, and you scale it because people work for people they want to work for. They want to shop their values, they want to work their values. So I don't think that part is hard.
Oliver Chen:
What does your legacy look like? What do you want to happen in the next five to 10 years? And what about the business complexion? In terms of distribution.
Melissa Butler:
We're actually not looking to expand distribution right now. We're already in thousands of stores. We're looking to continue to build our .com. We do see exciting channels like Amazon, like TikTok Shop. You asked about tariffs and just like the state of the world right now. And ultimately, I think that's our biggest hurdle. It's like, we don't know. I was in Taiwan earlier this year, literally-
Oliver Chen:
My family's from Taiwan.
Melissa Butler:
Oh, lovely. I love Taiwan.
Oliver Chen:
Yeah, A lot of great research and development too.
Melissa Butler:
A lot of good R&D, a lot of great suppliers there. Great food, great massages, great... A lot of great stuff. But I'm there and I'm negotiating, and the tariffs are changing literally every other day. So that's something that a small business owner can't control. We are not market movers. We are absolutely subject to the winds and the whims of what is happening in the world. We don't know what will happen between China and Taiwan, for instance. We don't know what will happen tomorrow. And so that's also one of the challenging parts of business. And I think it goes back to making sure that you have the numbers, you have the profitability so that when these socioeconomic things or when these geopolitical things happen, your business can actually sustain.
Oliver Chen:
Other hot topics, and we wrote a book on this, TikTok explosive growth and Amazon third party, first party distribution. How are you balancing incrementality, cannibalization and margin relative to growth when you think about Amazon or TikTok?
Melissa Butler:
Yeah, we used to be really nervous about this, actually. I used to be like, "We can't advertise for one of our retailers .coms, for instance, because it's taking away from our .com." And the more I've dug into the data, the reality is it's completely different shoppers. The Amazon shopper is completely different from the Target shopper, for instance. Sometimes there's this omnichannel or cross pollination, but for the most part, people who are shopping in stores love to shop in stores. They get a kick out of it. People who are shopping TikTok Shop, they're chasing that impulse high. They're chasing that virality. They're chasing the idea of not wanting to miss out. So that's FOMO. So we create different marketing strategies. We have different ambassadors for different channels because we know that we're attracting different customers for different segments.
Oliver Chen:
What do you see happening with TikTok Shop over time? And also are there any other channels you're paying a lot of attention to? On the new frontier?
Melissa Butler:
It's primarily Amazon and TikTok Shop, in terms of big growth channels for us. I think over time, like everything, people will get tired of it. I think people don't want to be sold to anymore. And TikTok Shop is absolutely becoming a platform where it feels like everyone is selling. It feels like everyone has an agenda. And I think the customer is just becoming more discerning, which is why you actually have to have a brand, which is why you have to have a community because you need those people who are going to say, "Oh, no, I know about The Lip Bar. I've tried The Lip Bar." So it doesn't feel like just another TikTok brand.
Oliver Chen:
And Melissa, what do you see happening with your product assortment? In terms of beauty is pretty vast with multiple categories. What do you think the customer wants and what do you want to do?
Melissa Butler:
Yeah, I'm really excited because I feel like for the last four years, skincare has been at the forefront of everyone's makeup bag. It's been a skincare first economy. Fragrance is really hot right now, but it's really leading us to be more color focused. People are starting to put clothes back on for instance. For years, people only wore athleisure. Now people are going back to work. They're showing up in offices, they're putting on clothing, which means that they're also going to put makeup back on. So we're working on expanding back into the glamour, which I'm really excited about, and I think we're perfectly positioned for it.
Oliver Chen:
What's happening with strobing and contouring, and how might glamour play out with what glamour means now versus previously?
Melissa Butler:
Yeah, contouring died for a while, baking died for a while. Eyeshadow died for a while. If you look at eyeshadow sales, they're still down significantly. But beauty, as you know, in fashion is very cyclical, and it's on its way. I don't know that strobing will necessarily come back. I think that that's a word, it's another word, like highlighter is another word. So it'll be another kitschy term that does something very similar. But I'm pretty confident that the idea of highlighting or full faces of makeup is making a comeback.
Oliver Chen:
Why is that happening, and how do you know that?
Melissa Butler:
Well, if you just look at the market trends, it's literally like a rollercoaster. And it's like makeup has been out. If you look at the M&A market, there have been very few color transactions, for instance. So right now, all of the strategics are loading their portfolios with skincare, and then they will try to grow those more. And then they'll realize that, "Hey, we haven't focused much on color, and now there's a color incumbent, and now we're losing share and color." It is like every other industry.
Oliver Chen:
Last question, Melissa, and related to how you've been answering this is what is your idea of innovation? How do you perpetuate innovation? How do you conduct research and development?
Melissa Butler:
Oh, we talk to people. So we have one store downtown Detroit. We will never open another store. That is not the goal. But the cool thing about the store is we actually use it as an incubation lab. So we're talking to customers, we're watching them apply products, we're asking them questions. We actually provide makeup services in there. We hire a makeup artist. So we're deeply connected with the customer in the store, and we actually get to see it in real life. Beyond that, we are calling customers every year. Every year we call 100 customers just to know, "How did you find us? What are you looking for? What was your product experience?" Like I mentioned earlier, I'm the person who's reading the comments and reading the reviews. I think social relevance and social listening is the most powerful thing that any brand of any size can and should be doing right now to let you know where the customer is going, because everyone is sort of on that same wavelength. And you can find out information and find out what your specific customer needs and wants in that very moment.
Oliver Chen:
So Melissa, and for people who haven't been to Detroit, what are your favorite restaurants and things to do?
Melissa Butler:
Ooh. My favorite restaurant in the whole city is Selden Standard. It's been there for, I don't know, 13 years. It's my favorite because it's consistently good. You know restaurants fall off, it'll be good for two years and then-
Oliver Chen:
It's like The Lip Bar, consistently good.
Melissa Butler:
Consistent. I love it. I love the consistency. So if you come to Detroit, go to Selden Standard, you have to go to the Motown Museum. You didn't come to Detroit if you didn't go to the Motown Museum. So do that and then go to Belle Isle. It's my favorite thing about the whole city.
Oliver Chen:
Can they see you in the store too?
Melissa Butler:
Probably not.
Oliver Chen:
Melissa, for those who haven't used The Lip Bar, what are your iconic products that everybody should try?
Melissa Butler:
Everyone has to try Boss Lady. It's the best-read lipstick on the planet. It works for every single complexion. If you go to sleep in it, you'll wake up in it because it's long-lasting. It's going to go with you throughout your day. So try that one. And then I would say try our lip oils. They're hydrating. It's summertime. We're outside a little bit more. We're looking for that hydration, so we have a collection of beautiful lip oils.
Oliver Chen:
Well, Melissa, it was lots of fun. You gave us lots of tips on where to eat, and also your story is remarkable in terms of being so dynamic, yet having a real commitment, and you serve a really unique market that needs this kind of innovation. Thank you for your time.
Melissa Butler:
Thank you. Thanks for having me.
Oliver Chen:
Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.