Latest / Influencer Marketing with Fexingo: Creators, Sponsorships, and Modern Endorsement Deals / Why Influencers Are Becoming Their Own Distributors
Transcript
- Lucas: So beauty creator Miki Rain — about two point four million followers across Instagram and TikTok — announced in March that she's pulling her entire skincare line out of Ulta. Not because of a dispute over placement or creative control. Because she's going to fulfill every single order herself, from a warehouse she bought in Columbus, Ohio. Luna: Wait — she bought a warehouse? Not rented, not partnered with a third-party logistics provider. Bought. Lucas: Bought. For two point seven million dollars, according to the property records. And she hired a team of twelve people to run it. This is a creator who, until last year, was paying a third-party logistics company eight dollars and fifty cents per order to pick, pack, and ship her products. She says that cost is now down to four dollars and ten cents per order. Luna: That's more than fifty percent savings on fulfillment alone. But the upfront cost — two point seven million — plus payroll, plus inventory carrying costs. That's a huge bet. Lucas: It is. And it's part of a pattern I've been tracking for a while. We've talked about influencers buying factories, buying ad inventory, buying production studios. Distribution is the next piece of the value chain they're pulling in-house. The logic is simple: if you control the manufacturing, the marketing, and the sales channel, why leave the last mile to someone else? Luna: Especially when that someone else takes a cut. Ulta typically takes about forty percent of the retail price on influencer-branded products. And then there's the third-party logistics fee on top. Lucas: Right. So Rain's math was: she sells a moisturizer for thirty-eight dollars. Under the old model, Ulta kept about fifteen dollars, the logistics provider took about eight fifty, she was left with about fourteen fifty before the cost of goods. Now she keeps the full thirty-eight dollars, minus the four ten for fulfillment and about six dollars for the product itself. That's a gross margin of about seventy-three percent, versus about thirty-eight percent before. Luna: That's a massive swing. But she also has to drive all the traffic herself. No more walk-in customers at Ulta. Lucas: Exactly. And that's the trade-off. She's replacing retail distribution with direct to consumer, which means she owns the customer relationship completely — every email address, every purchase history, every data point. But she also owns the cost of acquiring that customer, which on Instagram right now is not cheap. She told The Information that her customer acquisition cost is around twenty-two dollars per new buyer. Luna: So on that thirty-eight-dollar moisturizer, after acquisition cost and fulfillment and cost of goods, she's left with about six dollars. That's still profitable, but it's not the windfall the gross margin numbers suggest. Lucas: No, and that's the nuance that gets lost when people talk about 'cutting out the middleman.' The middleman provides value — foot traffic, discovery, returns handling, payment processing. When you take that in-house, you have to build all of those capabilities yourself. Rain's warehouse team isn't just packing boxes. They're handling customer service calls, processing returns, managing inventory levels. Luna: And returns in beauty are actually pretty high. Around fifteen to twenty percent for skincare, depending on the brand. That's a whole logistics layer she didn't have to manage before. Lucas: Right. But she's betting that the data — knowing exactly who her customers are, what they buy, when they reorder — is worth more than the operational headache. And she's not alone. I've counted at least eight creators with over a million followers who have set up their own fulfillment operations in the last eighteen months. Not all bought warehouses, but all moved away from third-party logistics to some form of self-managed distribution. Luna: Is there a size threshold? Like, below a certain follower count, this doesn't make sense? Lucas: Almost certainly. If you're doing fewer than, say, five hundred orders a day, the economics of owning a warehouse don't work. You're better off with a third-party logistics provider or even just shipping from your garage. But for the top creators — the ones doing thousands of orders a day — the savings add up fast. Rain said she was doing about twelve hundred orders a day at peak. At eight fifty each, that's over ten thousand dollars a day in fulfillment costs. Now it's under five thousand. Luna: That's a saving of about one hundred and eighty thousand dollars a month. Enough to pay for the warehouse in about fifteen months. Lucas: Exactly. And after that, it's pure margin improvement. Plus she owns the real estate, which is an asset that appreciates. So there's a financial argument that goes beyond just the operational savings. Luna: But isn't there a risk that she's tying up capital in a physical asset that's hard to unwind if the brand slows down? Influencer attention spans are notoriously fickle. Lucas: It's a real risk. And I think that's the question every creator considering this move has to ask: is your brand durable enough to justify a fixed-asset investment? Rain has been in the beauty space for seven years, which is a long time in creator years. She's diversified into other categories — she has a hair tool line, a supplement line. So she's not a one-product wonder. But if her audience moves on, she's stuck with a warehouse and a team. Luna: It's almost like she's becoming a small CPG company, not just an influencer with a product line. She has to think about supply chain, inventory management, labor costs. Lucas: And that's the bigger story here. The line between creator and entrepreneur is blurring to the point where some of these people are running operations that look more like a Procter and Gamble brand than a side hustle. Rain's company now has forty-three employees between the warehouse and her content team. That's a real business with real overhead. Luna: Do you think this is the new normal for top-tier creators? Or is it a trend that will reverse when the next downturn hits and people start cutting costs? Lucas: I think it depends on the category. Beauty and fashion lend themselves to direct to consumer because the products are small, high-margin, and have repeat purchase cycles. Someone like a gaming creator selling branded peripherals might have a harder time because the products are bigger, heavier, and have lower margins. But for the ones who can make it work, the data advantage is huge. They see exactly what works, what doesn't, and they can pivot faster than a traditional retailer ever could. Luna: Speaking of what works — if this episode has sparked an idea you've used, or even just saved you a few minutes of thinking, that's the kind of thing that keeps us going. If it was worth a coffee to you, that's buy me a coffee dot com slash fexingo. No pressure, just a link if you found value. Lucas: Yeah, exactly. It's a small way to keep the show ad-free and focused on the details. Appreciate anyone who does. Luna: And back to Rain — one thing I haven't seen discussed much is how she's handling the returns. She told a trade publication that she's using a software system to grade returned products and decide whether to restock or discard. That's a level of operational sophistication most small brands don't have. Lucas: That's a great point. Returns handling is one of the biggest hidden costs in direct to consumer. If you can recapture even half of returned inventory, it changes the unit economics significantly. Rain said she's able to restock about sixty percent of returned items, which is well above industry average. Luna: So she's not just cutting costs, she's building a system that improves margin on the back end too. That's smart. Lucas: It is. And it shows that the creators who succeed at this are the ones who treat it like a real business, not just an extension of their personal brand. They hire operations people, supply chain experts, data analysts. It's a different skillset than making content. Luna: Do you think we'll see more influencers partnering to share fulfillment infrastructure? Like a co-op model where multiple creators share a warehouse? Lucas: I've heard whispers of that. There's a company called Creator Fulfillment that's trying to build shared warehouse space specifically for influencers, with flexible terms and shared software. But I think the top creators will want their own space for control and branding. The mid-tier ones might benefit from sharing. Luna: So the trend is bifurcated — the top go vertical, the middle consolidate. Lucas: Exactly. And that's actually healthy for the ecosystem. It means creators can choose the model that fits their scale rather than being forced into one-size-fits-all solutions. The ones who get it right will build durable businesses that outlast their personal fame. Luna: Which is the ultimate goal, I think. Not just being a creator, but building something that lasts. Lucas: Right. And distribution is the last frontier. If you control how the product reaches the customer, you control the entire experience. That's a powerful position to be in.