Recently, we came across Sugar Cosmetics’ financials, and honestly, we were surprised. Revenue down 18%. Losses doubled. This is the same brand that had built a massive following and positioned itself as the go-to for Indian skin tones, and now it’s struggling to stay profitable.
And Sugar isn’t alone. Mama Earth’s revenue growth dropped to 7% and its profit fell 34%. Stock price? Still below its listing price. Wow Skin Science, Arata, Juicy Chemistry – they’re all struggling with the same issues. In this blog, we’re breaking down why these brands are failing, and why the few that survive are doing something completely different.
Contents
4 Critical Reasons Why Skincare Brands Are Failing in India
1. Zero Differentiation
Take onion shampoos, for example. Did you know that most brand selling onion shampoo use the same manufacturer. Yes. Same factory, same formula, just slapped into different bottles with different labels. It’s not just onion shampoos either. Scroll through Instagram, and you’ll see the same thing everywhere. One brand launches a Vitamin C serum, and ten others pop up with the same ingredient. Caffeine eye creams. Salicylic acid face washes. Same trends, same packaging aesthetic, same influencer marketing strategy.
Because of this customers don’t see any real difference between brands. They pick one. Try it. Then move on to the next trending brand. This lack of brand identity is a common thread among failed brands in India
2. The Retail Distribution Problem
Most brands start with social media marketing, create content that goes viral, and get early traction. Plus, launching online is way cheaper than setting up physical distribution from day one. But e-commerce accounts for only 15% of India’s beauty market. What it means? It means to scale, brands eventually have to go offline – and that’s one of the biggest challenges brands are facing in the skincare industry today.
Selling offline means dealing with carrying agents, distributors, wholesalers, and retailers, and each layer takes a cut. Suddenly, 35-40% of your MRP just disappears into margins, shipping, and promotions. And there are more problems:
- Inventory chaos: Retailers demand overstocking, and when products don’t sell, they send them back.
- Geographic imbalance:: Stockouts in one city and excess inventory rotting in another because demand is different in different parts of India.
- Cash flow suffocation: Payments take 3-5 months to come through, so your money stays stuck while expenses keep running, and cash flow slowly dies.
Take Sugar Cosmetics, for example. They built a strong digital brand, then went offline aggressively with retail touchpoints across the country, TV campaigns, and celebrity endorsements. Revenue spiked then dropped by 18% in 2025, and they eventually had to shut down offline stores.
3. Low Customer Loyalty
An average Indian spends ₹1,214 (about $14) every 6 months on beauty products. Compare that to China at $38 or the USA at $313, and you’ll see why Indian brands struggle with customer lifetime value. What’s worse? Indians don’t stick to one brand. They hop constantly based on discounts, new launches, or whatever influencer they follow that week. They’ll buy shampoo from one brand, face wash from another, and serum from a third. This constant brand-hopping keeps the average order value low, which means brands are burning cash on acquisition without building any real customer base. Now add advertising to this. In 2020, India had a few hundred beauty brands. Today, there are over 3,300 brands, and guess what, all of them are bidding for the same eyeballs on Instagram, Google, and Meta. The result? Ad costs have exploded. Brands now spend 40-50% of their revenue on marketing campaigns just to stay visible, while acquiring customers who only buy during sales promotions.
4. The Premium Segment Problem
India’s beauty market splits into three segments:
- Mass Market (80% of the revenue): This is tier 2/3 cities and rural areas where people are price-sensitive and buy for function. In this segment, brands like Himalaya, Dabur, and Dove have already dominated.
- Masstige Segment (15-16% of the revenue): These are metro professionals who want “global quality at an accessible price.” In this segment, brands like Mama Earth, Minimalist, and Sugar play, but the problem is that they can’t keep these customers. Once people start earning more and want premium products, they graduate to the third segment.
- Premium Segment (4% of the revenue): Though small, it’s fast-growing, and the problem is that foreign brands like The Ordinary, Clinique, and Chanel dominate 93% of this segment.
Why? Because when customers move up the income ladder, they start wanting premium products, and in their minds, premium usually means foreign. This gap explains why so many failed brands in India couldn’t scale beyond the masstige segment.
That said, not all brands are stuck in this trap. A handful have found ways to break through and actually turn profitable, and what they’re doing is worth paying attention to.
Recommended Reading:
Here’s how to build a social media strategy that creates loyal customers (not just followers who disappear after one purchase).
The Skincare Brands That Didn’t Fail (And What They Did Right)
Not every skincare brand is struggling. A few have figured out how to break through, and there’s a clear pattern in what they’re doing differently.
Take Minimalist, for example. They’re doing ₹500 crore in revenue and are actually profitable, which is rare in this space. Their edge? In-house manufacturing. While most brands outsource everything from formulation to production, Minimalist controls the entire process, which gives them an edge that competitors can’t easily replicate.
Then there’s Forest Essentials and Kama Ayurveda, which took a completely different route. Instead of positioning Ayurveda as “affordable” or “safe,” they positioned it as a luxury, which is why Estée Lauder invested in Kama Ayurveda.
The takeaway?
These brands that survive don’t outsource everything. They build real differentiation through manufacturing, heritage, or ingredient innovation, and above all, they don’t copy other brands. They understand that standing out is the only way to survive.
Conclusion
So here’s what we’ve learned: Indian skincare brands aren’t failing because the market is bad or because customers don’t want good products. They’re failing because they’re making the same mistakes over and over.
They’re copying formulas instead of building something unique. They’re scaling too fast into offline without understanding the economics. They’re burning money on ads to acquire customers who never come back. And they’re stuck in a perception trap where premium customers default to foreign brands. The growing list of failed brands in India proves that these mistakes are fatal.
But the good news? It’s fixable.
The brands that survive aren’t the ones with the biggest marketing budgets or the most viral campaigns. They’re the ones that build real differentiation, understand their unit economics, and position themselves correctly from day one.
If you’re launching a skincare brand or working with one, the lesson is simple: don’t rush to scale before you’ve figured out what makes you different. Don’t assume Instagram traction means you’re ready for retail. And definitely don’t treat profitability as something you’ll “figure out later.”
The market is brutal, but it rewards brands that do the hard work up front.
And if you’re building or marketing a skincare brand and need help cracking distribution, fixing unit economics, or building a strategy that doesn’t implode in year two – we’ve worked with brands navigating exactly these challenges. Reach out to Brandshark, a digital marketing agency in Bangalore, and we’ll make sure your brand doesn’t become another case study in what not to do.
