Opens in new windowAcross the income spectrum, one thing unites all shoppers: everybody likes to feel that they got value for money. While macroeconomic shifts will increase wealth in concentrated pockets, the next five years could also see wealth decline in lower- and middle-income households. Wealthy customers will have more brands vying for their spend, while lower-income customers will want to make every penny count. Perceptions of value will become deciding factors for shoppers.
Kiko Milano, founded in 1997 in Italy, has long walked the tightrope between high quality cosmetics and accessible pricing. Since 2022, it has begun an elevation strategy, reducing promotions, changing its distribution strategy and introducing more premium products; as well as its $4.50 lip liners, it also offers a $28 serum-primer hybrid and a $32 eyeshadow palette. The brand can now also be found in premium department stores like El Corte Inglés in Spain and Galeries Lafayette in France. So far, the strategy is working: sales grew 14 percent in 2024 to €900 million (approximately $1 billion), while LVMH-backed investment firm L Catterton took a majority stake in the business the same year. Chief executive Simone Dominici says further premiumisation can help grow the brand’s global appeal — and its margins — but that maintaining accessible pricing will enable Kiko Milano to add new customers across the wealth spectrum. Using hero franchises, social listening and strategic relationship-building with suppliers and customers is key to winning over discerning shoppers in the brand’s more than 1,250 stores. Through collaborations with tastemakers like the model Sara Sampaio and the hairstylist Rossano Ferretti, the brand is working hard to establish a premium presence, whilst also fending off competition from other masstige players.
The Business of Beauty: Is your core customer shopping for affordable beauty only?
Simone Dominici: They mix and match. We define ourselves as an entry prestige brand now. In our stores, we see Prada bags and Louis Vuitton bags. The customer might have a lipstick from Chanel that they match with their eyeshadow from Kiko; the common denominator is the quality. Because we want to be entry prestige, it doesn’t mean we need to have a lower prestige level than a true prestige brand. We need to have the same quality but more democratic price, otherwise, the equation doesn’t work.
The Business of Beauty: People sometimes say that affordable beauty is not as good quality as prestige. How do you challenge that?
SD: When I started here three years ago, low price was confused for low quality, and 80 percent of our sales were done on promotion. When you discount your product too much [it loses appeal], and that is what some drugstores and some chains do; that’s why I don’t want to have my product in drugstores. Instead, we’re entering department stores and speciality retailers, among the more important ones. We replaced promotions with services, and invested heavily in them. We offer a 10-minute makeover in store for free, and we don’t force you to buy. It’s just for pleasure and to inspire your confidence. It’s about exploring, experimenting, touching and playing with our products. When you convince people about the quality, then they become a loyal customer.
The Business of Beauty: The beauty space is being overtaken by dupe brands. How do you make a strong identity for yourself when other brands in your price bracket are doing dupes?
SD: There was a season in which consumers were loving dupes, but we never had a temptation to go for it. We’re an innovative brand, and one of the reasons why we are strong in innovation is because we are sitting very close to the producers that produce half of the global cosmetics used in the world. So our marketing and R&D departments engage with these companies every day, and so we differentiate our innovation with our concept, packaging, design and quality, and the experience in our stores is luxurious and very unique. The environment where you buy the products also creates part of the positioning.
The Business of Beauty: What role do hero products play in your overall strategy?
SD: When we shifted from being a mass brand to becoming more premium, we immediately reviewed our portfolio. To become an iconic brand, my belief was we need to have strong franchises. The brand needed an iconic product that people chase, search for and have confidence in. Then we created a few iconic franchises, one of which is the 3D Hydra lip gloss. On one hand, the goal is to recruit new customers, but also, it’s to create inspiration to create different looks. Now we have more than 35 shades, so you can create different looks, combine with a lip liner, and so on. You enter through a product, and then you explore the assortment and you fall in love with the opportunities to create looks. That ends up having a higher average ticket because you have more pieces per unit. Through the iconic franchise, you expand your community footprint, then store exploration, and then you expand the portfolio.
To become an iconic brand, my belief was we need to have strong franchises. The brand needed an iconic product that people chase, search for and have confidence in.
The Business of Beauty: What does the rest of your premiumisation strategy look like?
SD: Other than creating franchises and switching from promotions to services, it’s also elevating the pricing. This is mainly thanks to product mix, so we’ve introduced new products with a higher value perception. We did this partly through collaborations, which we’ve done with Disney, Bridgerton, and then celebrities like Sara Sampaio and Emma Roberts. We had our haircare range designed with [hairstylist] Rossano Ferretti. We don’t want to become a multi-brand retailer — these are all still Kiko-branded products — but this allows us to increase the average price. Another way to increase average price is by growing in categories with a higher average price, like skincare.
The Business of Beauty: With those collaborations that retail for a little bit more, presumably that’s beneficial for your margins as well.
SD: Correct. That’s why our gross margin has expanded and then we create room to open more stores, and room to increase our marketing investment, especially on digital and social media influencers.
The Business of Beauty: In what other ways have you been able to make incremental savings and boost your margins?
SD: We work very closely with our manufacturers, and we have an understanding of the formulaic products that maximise efficiency. Then when we launch a collection, we buy two million pieces. Our operational team, our supply chain, is capable of negotiating better pricing with our suppliers. It’s like if you are in tech and you live in Silicon Valley, your network is helping you to be more innovative.
The Business of Beauty: A lot of beauty brands use social media virality to get people excited. How do you generate that with your customers?
SD: Of course, it’s always good to go viral and have good user-generated content, but we couple [social media] with more traditional media like TV in countries where it’s relevant to build penetration. We have 17.5 million people within our social media network. If you listen to them, you start learning a lot. Plus, we have over 7,500 beauty advisors in our stores. These people are connected with the customers every day, and most of them are real beauty lovers. They can give you a lot of insight into a community. We have an app that all of us share called Kiko Community.
The Business of Beauty: There’s a lot of pressure to continually deliver newness; tell me how you handle that.
SD: There’s social listening, and talking to suppliers, talking to customers through our loyalty program … it’s an ecosystem. Our marketing team works with suppliers to download these ideas into concrete projects that can last between 12 and 18 months. It’s a medium- to long-term innovation process. You start today thinking of the concept. What you think of today will probably be ready by the end of 2026 … the ingredients, the formulation, the regulation, the compatibility with the packaging, it takes time. True innovation doesn’t come in a month, unfortunately.
The Business of Beauty: But we see that customers are quite fickle, especially in cosmetics. How do you create repeat customers?
SD: Even when we are selling through department stores or marketplaces like Amazon, the majority of our sales are DTC so we have a direct relationship with our customers. We have almost 7 million active loyal customers, meaning they buy with us more than once in a year. On average, they buy with us 1.9 times a year. So in the last 12 months, these 7 million have bought twice. Our communication to them is more and more personalised.The newsletter you receive is not the same one that another one receives; it’s based on your lifestyle and your past behaviours. The more you are personalising the approach, the more the customers feel heard and the more they come back. We also have a unified commerce platform through which our inventory, our customer database and our transaction data are shared.
The Business of Beauty: In 2025, we see a cooling in beauty market growth. How are you feeling about the near term?
SD: In the last three years, we doubled the percent, which is three times the market average. But still there is a lot of room for us because our market share is neglectable in some very large markets, like the US. This is where L Catterton is helping. It won’t be easy, but there is room for high-quality products in this entry prestige market at a democratic price. We signed a deal with Reliance, one of the largest operators in India, at the beginning of the year, and we’re expanding our presence in the market. We opened in Indonesia in January, which is home to 200 million people. We opened in Pakistan in 2024, and we’re in Brazil, Chile and just opened in Mexico. We’re entering Kenya, Ghana, Nigeria. In 2025, there will be 2 billion customers that we have never reached before. Our positioning is also well placed. On one side, we inspire the low middle class when they elevate their standard of living, and they want to have more refined products. At the same time, there will be some macroeconomic difficulties. When you slow down the middle class, they are starting to look at value with much more attention.
The Business of Beauty: What do you think the beauty consumer of tomorrow wants?
SD: I think they are more equipped than previous generations to spot inauthenticity. I think dupes will become less popular and there will be more demand for authenticity. Value will be an important element, because the economic conditions might not be so relaxed in the future.
This interview has been edited and condensed.
This article first appeared in The State of Fashion: Beauty Volume 2, an in-depth report on the global beauty industry, co-published by BoF and McKinsey & Company.
