Rodan + Fields recently unveiled a simplified business model intended to drive growth and reach new customers. Starting September 1st, Rodan + Fields will move away from multilevel direct selling, eliminating commissions for recruiting agents while reconfiguring its corporate structure to eliminate approximately 100 jobs. ( Rodan and Fields news )
Proactiv founders Katie Rodan and Kathy Fields amassed an astounding billion-dollar enterprise through multilevel marketing sales; however, this business model has encountered difficulties over time.
Lash Boost Rodan and Fields
Rodan and Fields was established by two dermatologists to offer skin-care products and an eyelash growth serum, known as Lash Boost, designed to promote fuller and longer lashes. Their offerings include multi-function eye creams, hand treatments, face masks, vitamin D supplements, sun protection creams and body moisturizers – as well as hair products like shampoo conditioner and treatment rollers. Also offered are multi-task eye creams designed with multiple functions (multiple eyelid shades!). Their Lash Boost eyelash growth serum comes in various sizes for daily application – it promises fullerer and longer lashes with every application! (Rodan and fields news)
This product, sold in a reusable glass bottle with a brush applicator and touted as both safe and effective, may not be appropriate for everyone; those allergic to ingredients like phenoxyethanol and methylparaben may experience adverse reactions when applied directly onto their skin. Furthermore, pregnant and breastfeeding women or anyone suffering from existing eye conditions such as glaucoma or herpes should avoid using this serum product.
Though lash booster has been proven to lengthen and thicken lashes, many users report side effects including itchy eyes or darkening of eyelid skin. Others even claim the serum can lead to eye infections or permanent discoloration of their iris – yet the company continues to sell their product regardless of these side effects.
As part of its efforts to meet customer demand, Ulta Beauty is unveiling a range of products without parabens or phthalates formulated for sale both online and at their stores. In addition, Ulta is creating a Dermatologist Advisory Board which will collaborate with their product development team on innovative technologies and breakthrough ingredients for product advancement.
As part of its restructuring plan, the company is also restructuring its business model and eliminating 100 jobs. This move will enable it to better serve its customers and expand market reach while more effectively competing against online retailers and direct selling companies. Moreover, reorganization will save payroll taxes and administrative expenses while supporting sales efforts with incentives like increased product commissions for existing consultants. (Rodan and fields news)
Rodan and Fields Payday
Rodan and Fields skin and hair products company recently began selling select items at Ulta stores nationwide – marking its first retail availability ever! Additionally, this event occurs one year after Rodan & Fields switched business models and ended its multilevel marketing program.
This move came in response to declining sales and a decreasing number of independent consultants selling the company’s products. Established by two dermatologists, the company offers skincare, haircare and eyelash growth serum products sold through over 300,000 independent “consultants.” (Rodan and fields news)
Rodan and Fields had long employed multilevel marketing (MLM), in which its distributors received commission for both product sales as well as recruiting others as resellers. This approach drove sales and profits at first; however, last year’s coronavirus pandemic resulted in far fewer new recruits joining up, diminishing revenues significantly and leading them to modify their business model accordingly.
Rodan and Fields announced in a press release that it will no longer compensate consultants for recruitment efforts, and begin offering an affiliate program instead, effective September 1. Furthermore, it restructured their corporate structure while cutting about 100 jobs.
Rodan and Fields recently implemented its new business model to reach more consumers while providing better services to existing consultants, improve financial performance and meet future growth expectations. Furthermore, Rodan and Fields moved its SAP-based ecommerce platform onto Google Cloud which offers high availability and scale while using BigQuery for data warehousing purposes and Confluent for real-time streaming of real-time data streams. (Rodan and fields news)
Rodan and Fields faces numerous challenges. TPG invested in it in 2018, yet its sales and consultant count have continued to decrease since. Moody’s downgraded their debt rating for $600 million this April; Moody’s warned of possible further declines in sales as well.
Legal Issues
Katie Rodan and Kathy Fields founded a skincare company that was later acquired by Estee Lauder three years after its inception. However, its founding duo later bought back the brand back and implemented direct selling, employing over 100,000 salespeople who promoted its products via social media or one-on-one discussions – this strategy ultimately resulted in over $1 billion revenue generated for the firm in 2017.
Now, however, Rodan and Fields faces numerous legal hurdles that threaten its future. Consumer advocates allege that its Lash Boost product contains isopropyl cloprostenate – an FDA-regulated drug – which violates federal law when sold without being prescribed from a doctor – making Rodan and Fields violate federal law by selling drugs without FDA approval and violating federal laws by selling without valid prescriptions from doctors. (Rodan and fields news)
Rodan and Fields faces another hurdle with its legal battle with Procter & Gamble’s Olay Regenerist line over Rodan and Fields’ anti-aging products, specifically claims regarding retinal. P&G issued a cease-and-desist letter last year accusing Rodan and Fields of false advertising regarding its Intensive Renewing Serum which contains retinal, which it believes has anti-wrinkle benefits that outshone other ingredients used to formulate its product line.
Recent downgrades to its credit ratings for this company were further compounded by Moody’s warning of how coronavirus pandemic could force them to implement “social distancing practices”, which would conflict with their direct sales model and negatively affect revenues and earnings.
Rodan and Fields also faces significant changes in its business model. Instead of offering multi-level marketing, Rodan and Fields plans on providing a broad array of marketing and advertising support to its Consultants while reaching out to new customers.
People familiar with the matter indicate that the company intends to restructure its debt. Lenders who do not participate in its new financing may be offered to convert existing loans into third-lien loans with a 30% haircut rate; those with lower rankings could exchange them for combinations of fourth-lien loans and common equity, according to sources familiar with its plans. (Rodan and fields news)
Social Media
The skincare market is an incredibly crowded one, with new products and brands constantly emerging. Additionally, consumers have increasingly turned to brands which focus on green and eco-friendly practices – this shift could place added pressure on companies like Rodan + Fields; but that does not necessarily spell its demise.
Recently, this company has experienced serious financial difficulty, and may be struggling to maintain its growth rate. Furthermore, debt payments for 2022 come due and could pose further trouble if not paid on time.
One telltale sign of Rodan + Fields’ struggles can be found in its recent restructuring announcement. Recently, they unveiled plans to overhaul their multi-level marketing business model and layoff approximately 100 employees; all changes supposedly designed to reach more customers while competing with online shopping platforms. (Rodan and fields news)
Rodan and Fields was established by dermatologists Katie Rodan and Kathy Fields in 2000, after the pair invented Proactiv in 1995 – eventually sold to Estee Lauder. Following its acquisition by Estee Lauder in 2007, however, Katie Rodan and Kathy Fields purchased back the brand, then relaunched it under direct sales model via independent consultants who could sell products directly to customers.
Brand continues to sell their products through consultants, yet has come under criticism for its reliance on this sales model and compensation plans. A class action lawsuit was filed in California alleging that the brand exploited their consultants by misclassifying them as independent contractors instead of employees.
Although the brand has experienced financial setbacks, it remains an integral component of the skincare industry. Customers rave about their products, earning them loyal followings. Many customers have voiced their support and wish to keep this iconic skincare brand going strong. (Rodan and fields news)
Rodan & Fields faces an uncertain future. While recent operational changes may raise concerns, but they’re still striving to remain competitive within their industry. Restructuring and a refocus on e-commerce are attempts by Rodan and Fields to appeal to Gen Z shoppers who prefer more transparent shopping experiences while at the same time creating products to address current skincare needs.
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