{"id":891,"date":"2015-12-03T23:15:25","date_gmt":"2015-12-04T04:15:25","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-honest-company-no-smoke-mirrors\/"},"modified":"2015-12-04T13:40:35","modified_gmt":"2015-12-04T18:40:35","slug":"the-honest-company-no-smoke-mirrors","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-honest-company-no-smoke-mirrors\/","title":{"rendered":"The Honest Company: No Smoke &amp; Mirrors"},"content":{"rendered":"<p style=\"text-align: justify\">Markets have deemed The Honest Company (\u201cHonest Co.\u201d) a start-up unicorn, with a $1.7 billion valuation after several rounds of funding. The Santa Monica-based brand arose to fill a significant gap in the baby retail industry for products that didn\u2019t contain petrochemicals or synthetic fragrances. It has become wildly popular with those millennials and parents willing to pay a premium for peace of mind.\u00a0<em>Honest Co.\u2019s business model is in close alignment with its sustainability- and transparency-driven operations.<\/em><\/p>\n<p style=\"text-align: justify\"><strong>Business Model \u00a0 \u00a0<\/strong>&#8230;<em>Simple Vision &amp; Customer Promise<\/em><\/p>\n<p style=\"text-align: justify\">From its beginnings, Honest Co. made clear what it stood for:<strong> effective, \u201cunquestionably safe,\u201d eco-friendly yet affordable baby and home products.\u00a0<\/strong>This message resonated with mothers, bringing quick success to the brand\u2019s baby product line and its non-toxic, plant-based diapers and wipes in particular. Honest Co. has since introduced a wide range of personal care products, household cleaning supplies and lifestyle essentials for the entire family. The company has inventory available both online and at select retail outlets in the U.S. and Canada. It has plans to expand into Europe and Asia in the near future. Roughly 80% of revenues come from its monthly subscription service. [1]<\/p>\n<p style=\"text-align: justify\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"http:\/\/www.chiefpackagingofficer.com\/wp-content\/uploads\/sites\/4\/2015\/07\/outside2-1024x586.jpg\" alt=\"outside\" width=\"632\" height=\"362\" \/><\/p>\n<p style=\"text-align: justify\"><strong>Operating Model \u00a0 \u00a0\u00a0<\/strong><em>\u201cHonest is in our name and everything we do.\u201d<\/em> [2]<\/p>\n<p style=\"text-align: justify\"><em><strong><u>Product Development &amp; Production<\/u><\/strong> &#8211;\u00a0<\/em>Honest Co. designs, formulates and manufactures all of its own products. Early on, it invested in the vertical infrastructure required to <strong>maintain control over the creation of chemical-free and sustainable products from scratch<\/strong>. As a result, all product lines and collaborations reflect the customer promise. Many attest\u00a0to seeing alleviated symptoms of allergies and dermatological issues in their kids. As the company establishes itself as an authority in the space, it underscores sustainability in its sourcing, production and packaging practices. For instance, Honest Co. continues to:<\/p>\n<ul style=\"text-align: justify\">\n<li style=\"text-align: left\">Track all materials and ingredients used so customers can see the entire cradle-to-grave impact<\/li>\n<li style=\"text-align: left\">Source natural, organic, sustainably harvested, renewable raw materials for all products<\/li>\n<li style=\"text-align: left\">Seek the most credible suppliers and raw materials geographically close to operations<\/li>\n<li style=\"text-align: left\">Minimize petroleum-based plastic in product packaging; only use recycled shipping materials<\/li>\n<li style=\"text-align: left\">Specify and closely monitor QC standards\/protocols in manufacturing to ensure quality, cleanliness and overall ingredient integrity [3]<\/li>\n<\/ul>\n<p style=\"text-align: justify\">Honest Co. extends its sustainability model to all\u00a0aspects of operations, including employee work environments, waste management and energy usage. For example, all electricity used in HQ and warehousing is from 100% renewable sources (by purchasing REC). Electronic and fully automated management systems help dramatically reduce paper, printing, and copying usage and supplies. Facilities feature energy efficient lighting, electric forklifts, and full recycling programs for all shipping boxes. Office spaces utilize low-impact and non-toxic materials, from furnishings to water filtration. [3]<\/p>\n<p style=\"text-align: justify\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"http:\/\/cdn.shopify.com\/s\/files\/1\/0736\/3973\/files\/honest-banner_2048x2048.png?1435\" alt=\"\" width=\"787\" height=\"312\" \/><\/p>\n<p style=\"text-align: justify\"><em><strong><u>Distribution<\/u><\/strong> &#8211;\u00a0<\/em>Honest Co. started out solely as an e-commerce platform, a strategy aligned with serving the modern generation of parents, and leveraged technology to build the brand. <strong>For its target market of busy but conscious moms, convenience is a real factor.<\/strong> So the brand\u00a0took a gamble to launch as a subscription service\u2014long before the Birchbox model became common. Parents\u00a0are invited to sign up for the recurring delivery of monthly bundles of any five items. Bundles represented 35% in savings over the sticker price. [4] Subscribers pay up front, providing predictable revenue and cash flow. Customers are also free to buy individual products on a one-off basis without subscribing to a bundle.<\/p>\n<p style=\"text-align: justify\">Over time, the company began to sell products wholesale to various retail partners, such as Target, Nordstrom, Buy Buy Baby, Whole Foods and Costco, as well as local high-end mommy-and-baby boutiques. This move gave Honest Co. access to an even wider audience. In-store purchases might encourage more customers to become members on Honest.com and sign up for auto delivery once they have trialed the products. This has the potential to be an effective customer acquisition channel.<\/p>\n<p style=\"text-align: justify\"><strong><em><u>Sales, Marketing &amp; Merchandising<\/u><\/em><\/strong><em> &#8211;\u00a0<\/em>From the beginning, Honest Co. <strong>made it clear it was a company that consumers could trust<\/strong>. Paying for the domain Honest.com and similar trademarks has paid off. This simple yet brilliant branding, combined with highly-effective celebrity endorsements, led to glowing press. Cofounders Jessica Alba, actress, and Brian Lee, serial entrepreneur, made for a dynamic duo with high aspirational qualities and a bold story.\u00a0Christopher Gavigan, former CEO of Healthy Child Healthy World, signed on as Chief Product Officer.<\/p>\n<p style=\"text-align: justify\">Honest Co. also innovates in its merchandising strategy. It launched the Collective, featuring collaborations with premium brands and designers committed to the same values. Recent limited-edition items include a crib collaboration with Babyletto and a diaper caddy produced with b.box.<\/p>\n<p style=\"text-align: justify\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter\" src=\"http:\/\/b.fastcompany.net\/multisite_files\/fastcompany\/imagecache\/inline-large\/inline\/2014\/08\/3035047-inline-i-2-how-jessica-albas-the-honest-co-nailed-the-formula-for-eco-friendly.jpg\" alt=\"\" width=\"532\" height=\"355\" \/><\/p>\n<p style=\"text-align: justify\"><em><strong><u>Mission\u00a0&amp; Culture<\/u><\/strong>\u00a0&#8211;\u00a0<\/em>Honest Co. unifies its environmentally sensitive products seamlessly with its social mission, gifting a portion of all revenues to various non-profit organizations. Its charitable partnerships include Baby2Baby, World Wildlife Fund and the YMCA. The company also donates diapers and cribs, similar to the \u201cbuy one, donate one\u201d model of startups like Warby Parker and Toms Shoes. [5]<\/p>\n<p style=\"text-align: justify\">The brand\u2019s loyal fans are enthusiastic and vocal. Honest Co. fosters this community over social media, quality content and noteworthy campaigns. A recent social campaign promised a $1 donation to the MaxLove project for every \u201cLike\u201d on Facebook. Product discovery and lifestyle advice is also available via the company\u2019s widely-followed blog.<\/p>\n<p style=\"text-align: justify\"><em><strong><u>Kaizen Mentality<\/u><\/strong> &#8211;\u00a0<\/em>Honest Co. maintains an organic connection with parents around the world who provide honest feedback on the brand\u2019s products. Really listening to the customers remains an engine to innovate for the needs of modern families. Receiving over 5,000 calls a day, the company uses\u00a0this communication to <strong>continuously improve and iterate on its products and processes<\/strong>. [1] For example, Honest Co. baby wipes received disappointing reviews\u00a0when the product was first launched. The company pulled the wipes, reformulated and re-launched them in a matter of months. They have been a bestseller since. [6]<\/p>\n<p style=\"text-align: justify\"><strong><em>Safety sells, especially when it comes to our children. With Honest Co.\u2019s strong alignment of its business promise and operations, it will likely continue to see envious levels of growth. It is a winner.<\/em><\/strong><\/p>\n<p>&nbsp;<\/p>\n<p>[1] <a href=\"http:\/\/blogs.wsj.com\/venturecapital\/2014\/08\/26\/jessica-albas-the-honest-co-raises-70m-preps-for-ipo\">http:\/\/blogs.wsj.com\/venturecapital\/2014\/08\/26\/jessica-albas-the-honest-co-raises-70m-preps-for-ipo<\/a><\/p>\n<p>[2] <a href=\"http:\/\/www.huffingtonpost.com\/jon-bird\/a-company-for-today-honestly_b_6948062.html\">http:\/\/www.huffingtonpost.com\/jon-bird\/a-company-for-today-honestly_b_6948062.html<\/a><\/p>\n<p>[3] <a href=\"https:\/\/www.honest.com\/about-us\/health-and-sustainability\">https:\/\/www.honest.com\/about-us\/health-and-sustainability<\/a><\/p>\n<p>[4] <a href=\"https:\/\/pando.com\/2013\/11\/11\/honest-enters-the-ecommerce-big-leagues-with-a-25-million-round-heres-how-it-got-there\">https:\/\/pando.com\/2013\/11\/11\/honest-enters-the-ecommerce-big-leagues-with-a-25-million-round-heres-how-it-got-there<\/a><\/p>\n<p>[5] <a href=\"http:\/\/fortune.com\/2015\/08\/14\/jessica-alba-honest-valuation\">http:\/\/fortune.com\/2015\/08\/14\/jessica-alba-honest-valuation<\/a><\/p>\n<p>[6] <a href=\"http:\/\/www.trust.org\/item\/20140914200427-6z5oq\">http:\/\/www.trust.org\/item\/20140914200427-6z5oq<\/a><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>E-commerce startup turned global lifestyle brand refines model to create a culture of honesty<\/p>\n","protected":false},"author":486,"featured_media":892,"comment_status":"open","ping_status":"closed","template":"","categories":[18,49,214,210,46,7],"class_list":["post-891","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-consumer","category-e-commerce","category-honest-company","category-start-up","category-subscription-model","category-winner"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Honest Company: No Smoke &amp; 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