Beauty Store Business magazine - January, 2020

Natural & Eco-Ethical, Derma E Finds Its Place in Beauty

Established natural skincare brand Derma E is winning beauty retailers and consumers over with its effective products, authentic identity and refreshing digital marketing approach.

Today’s beauty consumers not only want effective skin care that delivers real results—they also want it to contain clean, natural and organic ingredients. And while they are willing to pay more for quality skin care, they still want good value. With the organic personal care market segment projected to hit $19.8 billion by 2022, beauty retailers need to consider what natural brands will work for their customers—and which ones deliver results. This month, we are featuring the rising star of natural brands, Derma E. Founded more than 30 years ago, this true, efficacious, skincare brand found its first home in the natural market, but in recent years, has made a successful move into the beauty sphere, all the while staying true to its natural roots. What’s more, Derma E has focused its marketing efforts on reaching out to millennials and beauty influencers through social media and other avenues, making it a known beauty brand to a broad range of consumers. Holding the No. 2 spot in natural facial care and No. 3 spot in natural skin care, according to SPINS data, we are excited to give you a closer look at this winning brand and its founders.
Shortly after meeting David Stearn, cofounder and chief executive officer of Derma E, and the company’s cofounder and chief formulator, Linda Miles, D.O.M., it becomes clear these two successful entrepreneurs are genuinely passionate about what they do—and are really excited about bringing their effective natural skincare products further into the beauty space. With a bubble of positive energy surrounding them, they arrive at our Van Nuys office sharp, attentive and ready to share their nearly 80 years of combined business experience. However, the talk is not all business, of course. As our managing editor, Breanna Armstrong, applies their makeup, we learn about their active personal lives too. Stearn talks about his recent two-week stay in Hawaii, while Miles, a doctor of oriental medicine (D.O.M.), dispenses herbal medicine advice to our art director. She also tells us about riding motorcycles and waking up early to feed her horses. It seems that these two business owners have struck that rare work-life balance amidst running a thriving business.
Perhaps they have arrived at this place because Derma E’s journey and success has been a slow and steady ascent over decades—33 years to be exact—marked by several growth spurts along the way. For the beauty retailer, if you are looking to build your natural skincare offerings, Derma E is a leader in this regard. Already available at Ulta Beauty and in mass beauty outlets, Derma E is now focused on building relationships with independent beauty retailers. Having started out establishing their brand firmly in the natural products world with independent natural health retailers, it’s a familiar place for them and they have dedicated staff, education and resources to support their brand in ways that other natural brands do not. And unique to Derma E, the brand is ethical—in the ingredients it uses, its choice of packaging and the causes it supports—what they call “eco-ethical.” But to understand how this natural brand came to be what it is today, it’s important to look at its history.

The makings of Derma E really began more than three decades ago, after David Stearn and his father, Sam Stearn, sold their successful natural skincare business, Nature’s Family, which they started 10 years earlier, at a time when health foods and health products first gained traction. Linda Miles had worked for their company as an 18-year-old secretary still in college. “When they first started that company, the reason it was successful was because they both cared that the products were efficacious. If you can make a product that works, you have a customer for life,” Miles says. It’s an idea that Stearn and Miles carriedforward in their venture together. “After my father and I sold the company, Linda and I looked at each other and said, ‘This is really a lot of fun, let’s come up with a skincare product and concentrate on natural ingredients, quality and an industry that will appreciate it and focus solely on that.’ So that’s how we got started,” David Stearn recalls.
It was 1984. They focused on the natural products industry and finding distribution in independent health food stores and health retailers. They had success. And that success stemmed from the fact that they started out with an effective natural product featuring a well-studied antioxidant offered at an affordable price point. Antioxidants and other key botanicals and proprietary ingredients have since continued to be what makes Derma E a leading natural skincare line that resonates with natural health and beauty consumers alike.

As chief formulator, Miles subscribes to the free-radical theory of aging, which posits that aging is the result of free-radical damage to cells over time, also called oxidation. The body produces antioxidants to neutralize free radicals and protect cells from damage, but experts say, not enough. Therefore, getting antioxidants topically or from the diet protects against cell degeneration—including skin cells.
Derma E focused its first product on quelling free-radical damage. “If you look at any of the theories of aging, it all comes back to free-radical damage. So it makes total sense to focus on antioxidants that actually shut down the freeradical damage,” Miles explains. And if you look at Derma E’s name, you might be able to guess the antioxidant they first included was vitamin E: Derma (for skin) and E (for vitamin E). “Vitamin E was the original, marketable, understood antioxidant,” Stearn explains. The first product was a jar of vitamin E-rich moisturizing cream. People were amazed at the results it had on their skin, and Derma E was in business.
Through education and adding independent health retailers, store-by-store, Derma E’s distribution and sales continued to grow. “We figured the more distribution we got, the sales would take care of itself,” Stearn says. And that’s exactly what happened. Miles continued to formulate new products featuring well-studied antioxidants, and the company grew slowly and steadily.

Stearn is a mild-mannered leader who leverages common sense to the company’s benefit. He likes to share stories and anecdotes to illustrate business concepts. He relates the timeless Chevrolet/Cadillac business story to us, which originated from a book written more than 25 years ago. At a certain time in General Motors history, the cost difference between manufacturing a particular model of Chevrolet and a luxury Cadillac model was only $300, according to the story. Of course the Cadillac retailed at a much greater margin than that, but Stearn takes the story as a lesson in investing a little more to make a better product and gain a lifetime customer. “You take that same strategy—you spend the money and build a better product. In other words, you put enough ingredients in your product to do the job and you will keep a customer for life. If you don’t spend that money, you’re not going to keep him or her because your product is not going to be effective. It’s simple to me; it’s common sense,” he explains.
Miles applies this idea to what she commonly sees in the natural skincare marketplace and what Derma E strives to do differently. She explains that the marketplace has plenty of natural “base” formulas that have a nice feel and scent, but lack the key ingredients at the right amounts to truly make a difference. “You can do a lot with the base, but it’s the actives and percentage of actives that make the difference between a mediocre product that’s not going to give you long-term differences and one that is. And that’s the Chevy vs. the Cadillac. You need to make sure the actives are in there,” she says. Actives include antioxidants, vitamins and botanicals that deliver results. Stearn and Miles have not been afraid to invest more in Derma E’s formulations to include high-quality actives at the right percentages to make an effective product—and the company’s success shows that this approach works.

Part of the winning strategy that has yielded results for Derma E’s customers— and for the company, is this commitment to use scientifically researched and patented ingredients—these are the “actives” Miles refers to. In fact, if you look through Derma E’s product line, you’ll see a host of well-researched and proprietary ingredients. Miles works tirelessly to perfect each formula, adding additional ingredients to the actives to create a synergistic boost toward the desired effect—whether that be firming, hydrating, smoothing lines, purifying, sun protection—or a host of other benefits.
“We usually try to make sure that we use synergistically appropriate ingredients to actually boost the formula beyond what that featured active would be,” Miles explains. Being a Doctor of Oriental Medicine, Miles has a vast understanding of botanicals and how they work together in the body and on the skin. She works relentlessly with each formulation to achieve the best blend of proven ingredients at the ideal amounts to deliver results.
“Some of our patented ingredients— for example, Matrixyl and also Argireline— require that you sign documents that you put in the active amount that they’ve clinically tested,” Miles says. Matrixyl is a scientifically researched, patented peptide that specifically stimulates collagen synthesis and skin repair. Argireline is another scientifically researched, patented ingredient shown to decrease wrinkles. Both ingredients are actives in Derma E’s Deep Wrinkle Essentials set of products amongst others.
One of Derma E’s strengths is the high level of integrity it demonstrates in its formulations, which again, points back to Stearn and Miles and the original idea to create effective products. Derma E’s director of marketing Barbara Roll, a 20-year beauty industry veteran who joined the company in 2016, explains, “One of the things that really impresses me about the company is how much integrity there is in what we say about our products and how they perform. And a lot of times, companies will put in just enough of an ingredient to make a marketing claim. But Linda Miles, our formulator and cofounder, would never allow that here. She believes that if you include an ingredient, it has to do something and it has to make it work. And I just love that about this company.”
This sentiment is echoed by those working closely with the beauty stores, too. Nicole Freeman of The Freeman Group, the manufacturer’s representative for Derma E, says, “The stores love the line because it is not only clean—it’s effective—and they have a wide range of products to address a number of skin concerns. It’s a real find for beauty stores. They also like their sampling and packaging. It’s spot on.”

With all Derma E’s focus on science, they have had to invest in education, too. Miles explains, “We are so based on science, our education programs are extremely important because you need to understand why it is we put an ingredient like Pycnogenol in our products or our newest ingredient, Stay C 50. What are they? And what are they going to do for the skin?”
The company provides excellent educational point-of-sale materials to the stores to communicate directly to consumers. They also offer thorough training materials for store sales representatives. An in-house training team actually goes out to different stores to help educate retailers and consumers about their products. Derma E largely earned its reputation by working with independent health retailers, so addressing the needs of independent beauty retailers is, exuse the pun, natural territory. They have a staff person who solely provides support to all of their independent retail customers. “We have a dedicated staff person who handles individual stores. And she’s constantly on the phone helping them eight hours a day,” Stearn says.

While Derma E has been in mass beauty for a number of years now—and in Ulta Beauty since 2011, it has paved a new road from the natural health world to find its place in beauty—and it continues to pull every marketing lever to further reach beauty consumers because there are real differences between the two markets.
For example, while occupying space in natural health retailers, the active ingredients were mentioned in the name of the products because that is an ingredient-driven market. “While we stayed in the health food industry, that worked pretty well. However, as we have gotten into the beauty aspect of it, you need to tell them what it is for—the benefit besides the ingredient. You have to tie the benefit to it. So it changed how we named the products,” Stearn explains. They changed their packaging last year, methodically, based on market research. “We are now talking to the consumer in an appropriate way for them not only to understand the benefits of the products but also the key ingredients. Those two things are really important to actually communicate at shelf,” Miles adds.
Starting in 1995, the company began making changes to prepare for significant expansion. They hired their first marketing director. No longer a two-man management show, both Stearn and Miles realized they needed a smart, capable executive team that had skills and expertise beyond their own in key areas. They added talent strategically over time. Stearns believes they’ve done a great job at hiring the right people at the right time to take the company to a whole new level. One of those hires is Jeff Carducci, who is now the vice president of sales, North America. “Jeff Carducci coming on board with us, having served as a vice president at Neutrogena for many years, brought a wealth of experience to this company,” says Stearn. “He forced us into the data mode,” Miles adds.
Prior to Carducci’s arrival, Miles and Stearn admit that they didn’t look at outside data—only internal data. Now they rely on data and market research. They’ve become a market-driven company. Data has helped them expand their reach too. Both Stearn and Miles credit data showing Derma E’s strong performance in mass beauty as the main incentive for Ulta Beauty picking the line up.
Miles is quick to point out that although they spent many years laying a great foundation for the company that has allowed them to expand gradually and steadily, they have made mistakes, of course, but all in the realm of normal entrepreneurship. “If I have one regret, maybe not David [Stearn], but me, I regret that we didn’t put better people in place quicker. I think the company would have grown faster had we done that. That’s the only thing. We’ve done all the right things just maybe a little slower than what would have been a good thing to do,” she says.
Most recently, they recruited Barbara Roll in March of 2016 to fill the marketing director role. Her leadership has helped catapult Derma E firmly into the beauty community through social media and work with beauty influencers. “Barbara is exceptional. Every time she opens her mouth, I learn something new,” Stearn says. Roll has helped make Derma E a recognizable name and trusted beauty brand for millennials by bringing the brand to the online spaces they visit. Few true, natural skincare lines are doing this, making Derma E an exception.
Speaking to Roll directly, she notes the results she is seeing by focusing on reaching beauty consumers through digital marketing. “The engagement has been growing. We see that with figures from earned media value. We see that with impression and engagement rates on our social media pages. We’ve doubled our following on Instagram and Facebook. It’s really exciting for us. Of course, I’d love it to go faster! Another indication that shows me we are becoming more well known in the beauty sphere is how many influencers, bloggers and vloggers reach out to me—to us, Derma E, on a daily basis saying, ‘I’ve heard about your products, I’d love to talk about them.’ That number is increasing each month.”

A large part of what makes Derma E such a strong natural brand—and what has made it successful outside of the natural market—is that the line has a very clear identity and it has always stayed true to its roots. When the brand first ventured outside of natural health to mass beauty—they would only agree to be in stores that featured natural sets, which is a designated area for natural products.
“That was one of our definitions of entry into any account. They had to have a natural section. If they didn’t have a natural section, we were not going to be sold there. We would never be found sitting next to Oil of Olay and Neutrogena,” Stearn says.
And the brand takes their “eco-ethical” moniker seriously; it’s not simply a marketing buzzword. From the start, Stearn and Miles made a commitment to select ingredients that are natural and organic whenever possible. With few exceptions, they have kept this commitment. They use only recyclable packaging, even though it is often extremely difficult and challenging at times. (The company once spent 18 months in order to obtain a recyclable package for their biodegradable wipes!) “It is a design challenge to make the prettiest packaging out there but still be recyclable,” Miles explains. In the most recent packaging update, market research indicated that consumers wanted “pretty”—something they would want to have on their countertops. So that’s exactly what they did. They made the packaging softer and prettier. However, making it recyclable, was indeed a challenge. “We would have loved to have used some of those pretty pumps with the metal collars. They are gorgeous. But they’re not recyclable,“ says Miles.
Additionally, Derma E’s products are 100-percent vegan and cruelty-free. They do not contain parabens, sodium lauryl sulfates, petrolatum, mineral oil, artificial colors, gluten, soy or GMOs. Their business practices are green as well. “All of our labs have wind energy certificates to offset energy use,” Miles explains.
Derma E gives back by making contributions to our local and world communities. The company supports a variety of humanitarian causes and philanthropic organizations such as The Paraguay Project, the World Wildlife Fund and a local chapter of the Special Olympics, to name a few.

Family owned and operated, Derma E’s identity is an extension of the philosophy of its founders. The strength of Stearn and Miles’ commitment to their values has certainly kept the brand on an upward curve of steady, balanced growth. But there’s also some wisdom in the culture they have nurtured among their employees. One key idea is that every employee has a voice. Stearn explains, “I like to bring people in and let them know we provide a non-threatening, safe environment so they feel free to talk and give their opinion. You never know where a good idea is going to come from. And you never know whose mouth it is going to come out of. And it surprises you a lot!” Stearn says.
When asked what the best business advice she ever received is, Miles readily says, “Oh, just do it. Just do it!” Derma E is poised to continue “just doing it.” While the skincare company will continue to serve its natural consumers well, its eyes are on expanding further into prestige beauty. It’s clear that Stearn and Miles are very excited about what the future holds.
Stearn sums it up well. “Linda and I are having fun. This is a really nice way to spend our days. We are making a difference. We are putting good products out into the marketplace. We are doing just a little something good for our fellow man.”
With more than 40 employees and growing and double-digit sales growth annually over the past five years, they have created something special. “The sky is the limit,” Miles says.
Indeed it is.