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EP 1: THIS IS WHY WE CAN'T HAVE NICE THINGS, THE SUNDAY RILEY REVIEW SCANDAL

Julianna talks to Stephanie Kim about fake products reviews, the Sunday Riley scandal, paid Amazon reviews, and influencer gifting.

[JD]: Hi, and thanks for listening to The Highlight, a podcast about the beauty and wellness industry hosted by myself, Julianna of Deco Miami. Whenever I have conversations with other founders about the beauty industry, I think, wow, I wish we could have recorded that, and that's exactly what The Highlight is.

In this episode of The Highlight, I talk to Stephanie Kim about fake product reviews, the Sunday Riley scandal, paid Amazon reviews, influencer gifting, and everything in between. Stephy is turning in from LA today to chat with me, and before we get started, here's a quick bio of who she is, besides one of my favorite friends in the beauty industry.

Stephanie Kim, known to many as Stephy, is a cofounder of Moonlit Skincare, an indie beauty brand that combines skincare, sleep, and wellness with products like silk pillowcases, bath salts, and beauty sleep formulas. After getting her BFA from Parsons, Stephy's career in beauty began at Birchbox, right when the subscription box company was beginning itself.

The idea for Moonlit came up when Stephy was living in New York City with her Parsons roommate and best friend, Kriszta when the pair realized what late nights and stress were doing to their skin. The duo joined forces to carve out a niche in the market for nighttime beauty and wellness products, and Moonlit Skincare officially launched in 2017.

Moonlit caught the attention of beauty editors and buyers from the get-go, and has been featured in publications like Refinery29, Into the Gloss, PopSugar, to name a few, and can also be found in Urban Outfitters, and later this season, Anthropologie. Stephy also just told me that they will be in Nordstrom's holiday pop up.

Stephy, thank you so much for being down to talk with me.

[SK]: Thanks for having me. Delighted to be here.

[JD]: We talk a lot, and catch up about running indie beauty businesses, and ask each other random questions. So… this feels fun and new, and I know I can pick any topic that falls into the realm of running an indie beauty business to chat with you about. I decided to pick something hot this month. So, let's talk about fake product reviews and the Sunday Riley review scandal.

To jog everyone's memory. Two years ago, a whistleblower on Reddit posted email screenshots from the CEO of Sunday Riley, who is actually named Sunday Riley, (I did not know that), where she instructs her employees in detail how to leave glowing positive reviews on Sephora’s website for their products. Sephora evidently figured out that something was going on and deleted reviews that were seemingly coming from the same IP addresses, which prompted Sunday CEO to explain how to create a VPN to mask where the reviews were coming from and bypass this problem.

Sunday also instructed employees to use specific language in reviews about describing how amazing the products were for curing acne that wasn’t real, and [fake] skin problems. The FTC investigated this matter, and they published a ruling in October 2019 stating that fake reviews are a known problem online that needs to be addressed, or “attacked”, in their words, and that moving forward, there should be monetary compensation for offenders, even though it's not really clear exactly what kind of damages fake reviews caused. These statements suggested that consumers and “honest businesses” (again, their phrasing) are affected by this market distortion.

[0:03:32] I think that most people are somewhat aware that customer reviews can get kind of sketchy, but what made this a particularly egregious offense? Do you think it was the smoking gun email, the bit about acne, or both things?

[SK]: I feel like the reason why this is so different is, number one, it was a deliberate initiative to go around Sephora's review system. I also think reviews are such a sacred personal testimonial thing that to go against the grain and have these emails, screenshots, proof, was obviously very damaging to Sunday Riley in the long run.

[JD 0:04:17]: Sure. So, one thing that I thought was interesting when I was doing my research between Reddit threads about it and the Instagram account Estée Laundry, (which is kind of like a watchdog account, if people are familiar with Diet Prada), is that people were kind of like, yeah, this happened. It's pretty sucky. But also, of course, this happens.

So, what do you think the future holds for online product reviews in the beauty community? Also, do you think that this kind of represents, like, a curtain lifting for consumers? Or do you think they were already aware that some fake review fudging was already occurring?

[SK]: I feel like most of the general public knows to take reviews with a grain of salt. I think it's tough though, when I'm sure Sunday Riley relies very, very heavily on Sephora.com for their sales. So, those reviews are worth their weight in gold.

The future of reviews though, I think will be--. I was actually surprised to hear that Sephora had this like VPN tracking, IP address tracking system nailed down. But I think reviews in general will be, there'll be way more guidelines around writing them and you know, you have to be like a verified purchase. That kind of thing.

[JD]: Sure. Yeah. Well, one thing that I noticed too is like in the beauty community, we evaluate reviews a little differently compared to other product categories because there's this idea--. I mean, I said community for a reason. So, if you're familiar with voluntary response bias and surveying, the idea is that only people with really, really positive or really, really negative experiences with a product or service leave a review. I would agree that that's the case for most beauty items.

But also, there's, again, with that idea of community. I feel like people want to leave reviews because they want to “play influencer,” but also there's this idea that my input matters for someone else, or my experience matters. I want to help someone else. So, it's a little confusing for beauty, but also, I'm wondering if that, going back to my initial question too, is why it was also particularly terrible that they did this.

[SK]: I think it's particularly terrible because Sunday Riley is one of those brands that was word of mouth based.

[JD]: Right.

[SK]: And like really rose because there was such good feedback, and to look back now…

[JD]: It’s making you wonder about all the feedback.

[SK]: Exactly, and I think that's why it's so damaging. I also think because the curtain has been lifted now, it's kind of like, oh, wow. The FTC got involved.

A lot of beauty brands I'm sure are taking into consideration this specific case, and I think as an indie brand owner ourselves, we know the value of a review, good or bad. But I have to be honest, we encourage everyone to write a review. I'm not going to stop encouraging people to write reviews. I think this particular case kind of crossed that line.

[JD 0:07:38]: Yeah. Those aren't customer reviews. Those are employee reviews. So, it also kind of goes into this idea though of… how do you as a brand ask for reviews? Because I know, I mean, I've seen it. I'm sure you have too, where it's like, “Leave a review and get a discount on your next purchase.”

I mean, even on my own website, anyone can leave a review. But if you do leave a review and you have a customer account, you get reward points for leaving up to one review. You can't leave a hundred reviews, so I guess that kind of matters, but you get something out of it and then you can redeem those points. It's kind of a gray area across a few different categories for reviews. Maybe that's even pushing it.

[SK]: I also think that a lot of people don't understand the actual percentage of people that write reviews.

[JD]: Right, yeah.

[SK]: It's very, very, very low. Less than 1% on Amazon. You as a brand owner, you do have to create incentives, or people are not going to do it. You do have to encourage your friends and peers to write reviews. But I will say, I think by instructing people to go around and do this VPN and basically crash Sephora’s site… that's I think, where it becomes incredibly dishonest.

We tell our interns, we tell our friends and family, like if you can write an honest review, to be honest. Not all of them have been glowing, but I'm just glad we have some feedback and I think that's the most important part. That's the true value of a testimonial. It's not just telling other customers about your product; it's telling the business.

[JD 0:09:05]: Right, right. I mean, the feedback is that's absolutely true. Building off of that idea, you mentioned Amazon. How do you think Amazon plays into this? And a phrase that actually my fiancé used to describe Amazon was, “It’s a jungle of reviews.”

There's a lot of data points, but you really have to know how to weed through that. We've talked about Amazon before, so what do you think?

[SK]: Yeah, Amazon is a beast. It's the number one beauty site in America. The amount of people going to Amazon and searching for something is-- it's incredible power. Obviously, they have a very powerful algorithm, and you've seen like the Top 100 in supplements and like the Top 250--. They rank you. That's a very powerful tool as well. We at one point had broken, I think we were like number 200-and-something on the nighttime ratings and there is a difference.

[JD]: Amazing.

[SK]: What Amazon does is couple the frequency of your product being purchased, plus the reviews. I think it's interesting that a lot of the bigger companies are trying to beat this algorithm and trying to use it to their advantage and I don't think that'll go away just because it does have so much weight. You know, the rankings and there's all this crazy stuff happening with buying fake products.

[JD]: It blew my mind two years ago when I talked to “an Amazon marketing guru” who basically told me that the only way to sell a product while on Amazon was to submit your product to… I don't even know what to call them, really. But basically, you create a code and then people use that code to get your products for free, and in return, they leave five-star reviews.

He told me like, “If you're not going to do something like this, don't bother trying to sell on Amazon.” Which blew my mind and made me not list my products on Amazon for like another year because I was just like, well, I'm not going to do that, so, I guess there’s no point. It's crazy.

[SK]: Those items are funneled through that program of we're going to gift 5,000, whatever, laundry detergents, to these people, but they must write a review and that company gets paid to basically coordinate those reviews.

[JD]: It just makes me think of Influenster. I'm not exactly sure how the back end of Influenster works, but my understanding is that you're paying them to send a product out to so many thousand people and they give you feedback. It's not clear to me. I think you have to leave the feedback on Influenster but the platform then has become a pretty powerful review place, but also it kind of makes me wonder… this nicely segues into my next question about influencers and gifting product and what the expectations are. If you give someone a product as a brand to review, well, of course, they're going to leave a really great review.

It's just so interesting to see the outrage with this fake customer review stuff with Sunday Riley and then relating that back to just influencer marketing. My exact question is like, what? What's the difference? Is it just that we as consumers understand influencer marketing?

[SK]: At this point, what's happening is [consumers] take things for a grain of salt when they see a product on an influencer. I think people know now the numbers that the influencers are getting paid. So, yeah. I think it's more transparent than it was three, four or five years ago.

[JD]: Yeah. Well, specifically with PR, and if you don't know what PR is, it's called public relations, and literally it's just, I actually, I don't even know why we call gifting products, PR. I guess it sounds cool and then it caught on, but basically, when influencers get PR, the idea of getting on that list is that there's no strings attached. Right? You're not being directly paid to say something, to create an ad, or anything about that brand, but obviously if you want to keep getting free stuff from that brand you're going to make it a good review or say something nice about the product, even if you're not obsessed with it.

I don't know. I just keep going back to the parallels between this and like this whole being incentivized to leave reviews because it seems like we're just getting screwed from all directions as consumers about what's a good product and what's a bad product.

[SK]: Yeah. I find it very interesting because I started in beauty as one of Birchbox’s first interns, and they gave a really big incentive to leave reviews on their website.

[JD]: They had a point system that you could redeem those points for products or something or freebies?

[SK]: Exactly. You could redeem the reviews that you left for a discount. People really took advantage of that.

[JD]: Of course.

[SK]: It’s free money.

[JD 0:14:30]: I guess my question specifically with Birchbox is, did they start off as more of like a marketing research tool for brands and less than like a consumer box or where the brands actually getting some like analytics out of those reviews? What was the purpose of those reviews?

[SK]: Well, when I was there, it might. I was there in the beginning, so it was very much consumer facing. I think maybe they had like data on consumers. Their hair type, their skin type, et cetera.

[JD]: Sure, and like what kind of reviews they were leaving. Yeah, because that's something--. Subscription boxes I've worked with, with a few big ones, and they do give you a little bit of data. Just a little bit.

[SK]: But I don't think it's enough to push anything over the edge.

[JD]: Oh, for sure.

[SK]: It’s very broad strokes and most of it, it's what you know.

[JD]: Right. Well, and actually for ipsy, for example, they encourage you to leave reviews. It's not exactly clear to me why, but they're all public. You don't even have to have an ipsy account to see them. It's really tricky to wade through them because when my nail polish was in an ipsy bag last year, you'd see, like, one star, “I don't like blue nail polish” or, one star, “Stop sending me nail polish.” This isn't really helpful. Anyway.

[SK]: I think the demographic also of your audience is really important because ipsy's demographic is young. So, you're going to get literally middle schoolers writing reviews.

[JD]: For sure, and not really understanding, maybe like the weight of that--

[SK]: Exactly.

[JD]: --or like the sense of community too. Because again, I keep going back to that idea that like maybe everybody kind of wants to have that influencer feel when they're reviewing products. I mean, that's what it is.

[SK]: So, another thing that we noticed is with these reviews, the reviews that are getting people into trouble specifically, they're correlated with the products that are actually more expensive. So again, Sunday Riley is not a cheap brand. It's not for like a middle schooler, I think. I think it's for people who want to invest $50 - $100+ in their skincare. Perhaps reviews in that arena are the things that tip the customer over to the edge of like, okay, I'm going to make this purchase.

[JD 0:17:00]: Totally makes sense. So, do you think then that if we could look at all reviews on Sephora’s website, or not even Sephora, but like just across beauty, that we would find more questionable reviews on more expensive products? Like do you think that people don't care as much about like under $35 products and skincare?

[SK]: I think it's interesting because when you look at products that are eight bucks, 12 bucks, like the psychology behind it is very much like if it doesn't work out, it's eight bucks. Right?

[JD]: Sure.

[SK]: It's less than like a Chipotle, a burrito. If it's over a certain amount. If I'm paying over 50 bucks for a serum. If I’m paying over 50 bucks for a pallet--

[JD]: You want to know that it’s going to work.

[SK]: [It’s quite] a chunk a change, and I think for them, they're like as the brand, they're thinking to themselves, this is worth it. If this is the one thing that convinces the customer to hit submit payment, let's do it.

[JD]: I wonder too, what the actual consumer behavior psychology is behind how much time people spend on buying something that's $100 versus $10. Actually, now that I'm thinking about it, I do have a marketing degree and I'm vaguely remembering talking about the differences and buying something. The different [purchasing] journeys for like a car versus toilet paper or something. There is something to say about that. Be more vigilant about those product reviews that are over 40 bucks.

[0:18:43] Okay. We keep talking about fake product reviews. So, what to you when someone says fake product review, what do you think that means?

[SK]: Disingenuous. Not really thinking it out. Never trying it. That's a good start.

[JD]: Never trying. Yeah. A competitor leaving a really negative review because I hate you.

[SK]: I remember the YouTube beauty community when brands would pay these YouTubers to say something very bad about a competitor's product.

[JD]: I remember that. That was like, what? Was that only a year ago?

[SK]: I think it was. About a year. A year and a half.

[JD]: It was crazy. That was crazy.

[SK]: It was a lot of money to say those things. I think you've got to reevaluate your business if you're spending that much money trying to bash someone else's products.

[JD]: Wow. I mean, I absolutely agree with you. Yeah, I mean, I just, you know, this idea of like, what is a fake review and like what crosses the line here? I think it's important to really think about, because the FTC did say, “We're not going to fine Sunday Riley for this.” It basically serves as a warning to everybody else. Do you think that they got off easy, and they should have been fined?

[SK]: I think the biggest damage here is the fact that Sunday Riley and the FTC are in the same sentence. I've got texts from my brother who does not work in the beauty industry saying, “Wow, did you see this?” I'm like, “Of course, I see this, but why do you see it?” It's bad. Like I've never heard of this brand before. Now I do. You know?

[JD]: Definitely bad PR. One thing that I keep thinking about is if you are a brand that has done something similar to this, are you going to freak out and go through and try to delete a bunch of your past reviews, or are you just going to be like, oh well, whatever? I'm just going to keep moving forward. Wouldn't it be kind of suspicious if all of a sudden on Sephora's website, all of the ratings between four and five stars, just dropped to like three stars?

[SK]: I think they're probably going to from here on out.

[JD]: I mean, I guess that's the only way you could do it, but also like, what if the FTC was like, hey, other brand, we see all these reviews that are still live on whatever websites from three years ago that we've determined are not real. We're going to fine you now.

So, I don't know. I think that this whole idea of a fine is so interesting too, because it's true. It's like… how do you put a dollar value on a faking reviews and what this does to the market?

[SK]: Even if Sunday Riley had to pay a fine, the damage is done. But I think they'll still be around.

[JD]: The damage is done. Totally. Everyone's going to associate Sunday Riley with fake reviews, but now they're the most likely brand to not [write fake reviews] anymore.

[SK]: They will never do it again.

[JD]: Right, right. So, it's like, okay, we really need to be looking at, you know, everyone else now under a magnifying glass.

[SK]: Yes. I'm curious to see how social media will turn, and it's already, of course, evolving, and that I think is like a big testimonial piece in this whole beauty community, but--

[JD]: What do you mean? Like on Instagram? Or do you mean other platforms in terms of reviews or…?

[SK]: Instagram.

[JD]: Okay.

[SK]: Yeah.

[JD]: Yeah, because there’s definitely pods of smaller communities in beauty on Instagram that basically operate just literally reviewing stuff. They get PR. You know, brands send them free stuff to try, and for the most part, smaller influencers, micro influencers, they're pretty honest. But again, there's always some bias when you didn't buy it.

[SK]: I'm thinking back to like the old school days, pre-Instagram when I was working in beauty, and it's interesting because the people who you had to sway were beauty editors. Everyone knows this. Like the L’Oréal’s and big brands would fly people out to Germany, and like Europe, The Bahamas. I think the biggest difference now is like they're not editors, they're—

[JD]: 13-year-old girls on Instagram. I used to get a lot of [direct messages] from teenagers just asking for asking for stuff, and in a lot of cases, immediately saying, if you send me stuff, I will review it very kindly. And adults do that too to be clear. That is not just a teenage thing to do.

Which is so crazy, and it makes me feel like for as far as we've come in the last 10 years with Instagram, and Facebook, and social media, and online shopping, I feel like we're going back to getting product recommendations from your actual social circle. What’s your best friend using? When you're at their house and you're in their bathroom, you're literally looking at their beauty products. It's so funny how, again, we're kind of going backwards.

[SK]: Absolutely. I think social media is still relatively new. Right? In the grand scheme of things. It's a new platform, and it really was the Wild, Wild West. I remember when the FTC said, you need to put hashtag ad, hashtag partner.

[JD]: Not so long ago.

[SK]: My point is, and so, I think we're still figuring it out and a lot of people are profiting off of it and a lot of people also again, taking it with a grain of salt, which I think people should do. With beauty, it just depends especially in skincare. It really just depends, and you could be allergic to the most. You could use a product that was exclusively designed for sensitive skin and people still break out, still get rashes. So, it really is test it. Be safe. Do your own research and make a decision.

[JD]: What do you think, Stephy? Is there anything else we need to cover?

[SK]: I think we've covered a lot. Yeah.

[JD 0:25:15]: Do you have any last words of advice for anyone when they are evaluating product reviews?

[SK]: To take them with a grain of salt.

[JD]: Okay.

[SK]: And you have to do your own research. You should look into the ingredients themselves, and the other thing is get a sample. Especially with Sephora and the big guys. Get a sample. Go in the store, test it out yourself. See what it's like and yeah.

[JD]: Any excuse to go into Sephora or Ulta, I will take it. Awesome. Well, thanks so much, Stephy.

[SK]: Anytime.

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