More than 20 years ago, Toni Ko created a new niche in the beauty industry with NYX’s high-quality, low-cost cosmetics. After selling NYX to L’Oréal for a reported $500M—and taking a five-year break—she’s once again primed to make waves in the industry. Her new company, Bespoke Beauty Brands, partners with beauty influencers to develop their own lines.
CSQ caught up with Ko at her home in Los Angeles, shortly after the launch last fall to discuss her path to success and what lies ahead.
Your parents were in the cosmetics industry. Had they been in the electronics business, do you think you would have gone into electronics or would you still have found beauty?
I definitely grew up in a family business. My parents are first-generation immigrants, and we moved to Los Angeles from Korea when I was 13. Because of the language barrier, they took the classic path and opened a small business. By chance, they came across a small retail space. They were able to buy it and sold budget-friendly designer fragrances like Jordana, Jordache, La Femme. My parents worked all the time, weekends, holidays, and never took a vacation. I was 20 when we took our first vacation, and that was only because the Northridge earthquake had collapsed the store’s roof, so they were forced to close the store while it was under repair. We went to Hawaii for three days.
Eventually, they had a few locations and were doing wholesale business with some clothing and cosmetics too. I was managing all of the accounts and working nonstop. Then, I realized when I was 25 that I was living at home with my parents, basically on an allowance, while my friends were all working and building their careers. On top of that, I was coming into my own as a businessperson, and my mom and I would butt heads when I wanted to do things like bring in a new computer system, change displays, things like that. I needed to do something else for myself.
Around that time, in 1998, I saw a niche in the cosmetics market. I didn’t have a lot of money, and if I went to a department store for cosmetics, it was expensive. A MAC liner was $15, which was a lot of money for me then. If I went to Sav-On, the drugstore brands were all bad and low quality. I couldn’t get what I wanted. Because our family had been in this business, I knew a supplier out of New Jersey making products for the brands we were selling, and I saw how I could start my own brand.I wanted an elegant, chic product that didn’t scream that it came from the drugstore. Brands like MAC and Chanel have packaging that’s just simple black and white, which is actually more cost efficient than the drugstore stuff that was covered in gold foil.
My mom gave me $250,000 of seed money to start it, and NYX was born.
What were the early days of NYX like?
It started with just pencils for eyes and lips. We launched May, 1999, and the trend was the dark lip pencil with nude lipstick inside. There were just 12 lipliners and 6 eyeliners, but that dark lip pencil was the biggest hit. We did $4M in business our first year. 807 Cocoa. I can never forget it.
I was a hit with distributors. I had single retail stores selling 50 liners a day. I was selling wholesale for about $.75 and retail was maybe $1.49–$1.99. At that price point, there was nothing else like it. The quality was good; the texture creamy. Customers liked it and told their friends. It was all word of mouth.
Did you expect that kind of success coming out of the gates?
I was very surprised. I thought we’d maybe do $100,000 our first year. I was not planning for that kind of growth. I was always reacting to the growth, which is common to successful brands…always catching up.
Not all CEOs are amazing entrepreneurs. To be a good entrepreneur, you have to identify what you’re good at and what you’re not good at. I happen to be horrible at selling. I was fortunate that the product sold itself. Wholesalers reached out and were coming to me. Our first stores were local shops like June’s Beauty Supply or Kim’s Cosmetics. I’d do tradeshows and convince my friends to come and help me by paying for their travel. I quickly had about 5,000 accounts nationwide.
Who else was on your team in the early days?
It was really just me. I had a 600-square-foot showroom in California Mart when I started, and I borrowed a corner in a warehouse from my mom’s business, so I didn’t have to pay rent. At that time, everything was in Downtown L.A., so I’d load up my car and take the product down the street to wholesalers.
You sold to L’Oréal in 2014 for a rumored amount of $500M, just 15 years after starting the company. What made you want to sell?
I had brought in a minority investor in 2009. I didn’t need the money, but I wanted to get into places like Target and Walgreens. We had spent years trying to break in, but unless you have a contact within those companies, no one there is going to risk giving you the floorspace. Our investor gave us the intro we needed to the right sales rep, and we got into those stores.
Every investor has an exit goal, and our exit period was 5–7 years. By then, I was almost 40, and had a near-mid-life crisis. I wasn’t married, I didn’t have kids, and I was constantly living out of a suitcase. I was working nonstop but felt like I had nothing to show for it. From 2000 to 2010, I don’t have any personal memories. I was only working. I remember being in Poland for a client’s store opening. It was spring and California was beautiful, but Poland was freezing. I was finally going home, and when I got to the airport and had to go through security and take off all of these layers of coat, scarf, hat, sweater…I was done. I was suddenly tired of it all and just felt ready.
I came home and our team put a deck together. I was chairwoman by then, and we had about 250 employees. Most of the work was led by our CEO and CFO. The process took about nine months, and then we had a list of seven potential buyers. We rented a conference room at the SLS and did individual presentations to each brand.
L’Oréal was the highest bidder, but I had also really wanted to sell to them. They have Urban Decay, Essie, Maybelline…they’re a great brand custodian, and I wanted NYX to have a future.
Cosmetics have been around forever, and there is still essentially just lipstick, eyeshadow, foundation, etc., yet new brands launch all the time. What do they have to do to keep re-inventing the wheel?
The real innovation comes from storytelling. It’s the brand narrative and their authenticity. Consumers are smart. If you don’t innovate in storytelling and how you interact with your consumers, you won’t go anywhere. The technology isn’t in the product itself—it’s in the way it’s told online through social media or YouTube. Fifteen years ago, the online canvas didn’t exist for this. That’s the difference technology has made in the beauty industry.
Why launch Bespoke Beauty Brands?
What do you do if you don’t work? I’ve worked hard my whole life. After I sold NYX, I wanted to be leisurely, but I got depressed. I had a non-compete for five years, but I still wanted to be creative, so I started a sunglass company called Perverse. The non-compete expired in 2019, and I got back into it.
The easy way to explain Bespoke Beauty Brands is that it is a beauty incubator. I’m not reinventing the wheel here, either, but my unique niche is the fact that all of the brands I’m helping to create are in partnership with influencers. My first is Kim Chi [from Ru Paul’s Drag Race]. The look of the brand is totally different from what I did at NYX. It’s all pink and yellow and bright—but it’s her brand. She’s the creative.
The reason to go this route is that the cost of social media is now so expensive. If you launch, it’s hard to make an impression without spending a lot on parties and paying influencers. However, by partnering with them and doing an equity deal, they own the business, get Class A stocks, a board seat, title…they partake in all of the dividends. You can’t rely on the influencer alone to sell for you but having them adds fuel to the fire. We launched in October of last year and by December had 60,000 organic followers. Launching the same thing without her probably only would have gotten us 5,000 followers. On Shopify, 92% of our sales come from Instagram. Numbers don’t lie.
Have you ever failed?
The sunglasses company was not a huge success. It was not nearly what my projections were at. Financially, it was a loss. I had six retail stores, and building stores is expensive. So is paying the rent on the lease. But I gained a lot of information. In 2014, e-comm was only maybe 3 percent of my beauty business. But the last five years have been more like 50 years of growth when it comes to the eCommerce world. Staying in the game at that time made me aware that you don’t need to spend $250,000 for someone to write you custom code for your site. Shopify is a game changer for eCommerce. Also, when you start a new company, you don’t have to buy an expensive inventory management system. Quickbooks is good for at least the first year or two.