Monday, July 25, 2011 – Brazil’s Exciting Beauty Products Startup

As promised in my last post – late last week I visited my friend’s internet startup here in Sao Paulo called (translated: Beauty on the Web) . The company is one of the leading online retailers of salon-quality hair and skin care products, like L’Oreal Professionnel, Redken and Paul Mitchell. Founded and run by Alexandre Serodio, Felipe Mansano (my friend from Goldman Sachs) and Lucas Mendes, the company delivers products throughout Brazil that can’t be found in drugstores/bodegas.

The company is exactly the type of 'oportunidade' that I imagined when I decided to come to Brazil.  Just look at the numbers - on average the company is growing 15-20% month on month, and they are currently shipping on average 450-500 orders per day, to all over Brazil! I toured their warehouse and IT center with Felipe and saw firsthand how Brazil’s startups are bootstrapping their way to scale and success.

The company is pursuing an exciting opportunity.  Brazil is the third largest cosmetics market in the world (after US and Japan). The estimated size of the market in 2010 was of US$ 19 bn, of which 24% was haircare. Penetration levels for the online segment in the cosmetics industry in Brazil is 10 times smaller than in countries such as US, Japan and Western Europe. Source

The company is also riding favorable trends in the Brazilian internet market, including over 80mm people (40% of population) connected to the internet and a government plan to increase the municipalities connected from 27% today to 80% by 2014. This is especially positive for a company that delivers specialty products that are often hard to buy in smaller cities.

So who is Belezanaweb competing with in the high-end hair and skin care market? Of course, salons. In addition, internet competitors like Belezamundi and Docebeleza. The company also has to fend off well-funded entrants like Dafiti (funded by Rocket Internet but focused on shoes) and Sacks (acquired by Sephora last year but mostly focused on makeup and perfume). Moreover, legally dubious sites, like StrawberryNet, are significantly cheaper than Belezanaweb. From what I can gather here, the Hong Kong-based site seems to illegally buy unused beauty products from salons around the world and sells them cheaply to a global audience. StrawberryNet also does not pay the import taxes on the products that it ships (which based on this blog are around 60% of the products value). If the product gets stopped at the border, StrawberryNet reimburses the fee/tax that the customer pays (same blog, 2nd purchase with no tax).

The market is highly competitive and Belezanaweb’s founders are working to differentiate the company through exclusive content and customer service. As we’ve seen in numerous other e-commerce sectors, long-term success is often determined by who most quickly builds a quality brand and a dominant market share in the early stages of the race.

Exclusive content: the site offers detailed descriptions of the products and how-tos for specific types of hair (curly, straight, etc) and hair conditions (chemically damaged, dandruff etc). The founders believe this is a key differentiator in the purchase experience. In fact, they have a dedicated team that just fills out the site with this information for each product.

Customer service: the company spends significant resources on its customer service, having seen the success of other e-commerce companies, like Zappos, who have placed special emphasis on the customer experience. The company’s customers are mostly women – a target audience that the founders tell me is especially loyal if their first purchase experience is positive.

One of the most interesting things I learned about Brazil’s e-commerce sector is that most products are purchased in installments. Even a face cream that costs 100 reais (~65 USD) can be purchased in 6 installments (at no additional cost). There are two sides to this coin for the company. On the positive side, salons in Brazil don’t sell products in installments – opening a new market. On the negative side, it can be a significant working capital drain for a young, growing company. It is worth noting that the company does not bear the credit risk of the installment plan, but rather the credit card company.

Special thanks to Felipe for organizing the tour. Below are some pictures of the warehouse, customized boxes and inventory. When I asked Felipe and Alex if I could take a picture of them in front of their products for this blog, they were insistent that I include the rest of the team that was there at the time – a small sign of the inclusive culture that is helping make Belezanaweb one of Brazil’s startups to watch.

P.S. Yesterday I discovered Paula Fernandes, a Brazilian singer who recently hit the top of the charts here. She has a strong voice and striking looks and I suspect her success will not be confined to Brazil (a la Shakira). I recommend you check out her music here and here

1 comment:

  1. Awesome post Joshua! Hope you are having a good time!