Feelunique & Online Beauty Retail

Founder of Feelunique

Feelunique

Why is this company interesting?

Feelunique is one of Europe's largest pure-play beauty retailers and was purchased for £132m by Sephora, owned by LVMH, in 2021. Feelunique forecasted ~£100m revenue in 2021 with a gross margin of 27-28% and negative £3m EBITDA in 2020. The company sells thousands of products from over 300 premium beauty suppliers, operates the 2nd largest beauty box subscription service in Europe, and has zero private label offering today.

We're studying Feelunique to gain insight into the opportunity for the two listed pure-play beauty retailers: Adore Beauty and THG Beauty. Adore Beauty is an Australian ecommerce retailer with attractive economics and a long growth runway ahead and THG is spinning out the £1bn Beauty division in 2022. Adore's LTV / CAC return is over 6x in Year 4 and revenue is growing ~30% and THG Beauty is growing at 50%+.

We believe beauty is an attractive category to sell online due to favourable product dimensions, high-value-to-weight ratio, and high repeat rates due to the intimate nature of the category.

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Executive Bio

Aaron Chatterley

Founder of Feelunique

Aaron is the founder of Feelunique, one of Europe's largest pure-play online beauty retailers. Aaron founded feelunique.com in 2005 and has scaled the business to generate around £100m in revenue selling thousands of brands. In 2021, Sephora agreed to purchase feelunique in a bid to finally enter the UK beauty market.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Aaron, can you take us back to 2005, when you first started the business? What was the original founding idea?

I had previously had a web development company, in Oxford, that I sold in 2000. I moved back to Jersey, in 2004, and was looking at doing something in a similar space. We had some friends that had launched a business called play.com, which was doing particularly well, with north of half a billion a year, at that time. There is only so far you can scale that service type business, so we decided, rather than starting an agency and with the way that ecommerce was going, there were probably some other sectors that we could look to go after. Instead of agency, we would go client side.

We looked at several different verticals, such as digital cameras and music downloads. Eventually we hit upon beauty because of the replenishment nature of the product. There were several players but nobody was really doing it particularly well and nobody really had a depth of range. There were players like Lookfantastic that were very focused on the hair market; there was Buy Cosmetics, who were a bit more discount based. Obviously, HQhair was, again, hair focused. Nobody really provided that end-to-end range-based offering.

After quite a bit of research and working out the product market fit, we figured that beauty was a real white space opportunity. Our intention was always to try and create a real global destination so we wanted something where there was a really significant opportunity, in the way, at the time, that Net-A-Porter owned high end fashion, ASOS were coming through on fashion, Amazon owned books and Play owned DVD and games. We felt that there was an opportunity to own a big piece of the beauty market.

How do you look at the potential unique characteristics of beauty as a category online? You mentioned replenishment. Obviously, the value relative to the weight is really attractive for shipping. Is there anything else about how customers behave or why it would be particularly attractive to ecommerce, as a category?

Yes, I think there are a whole bunch of reasons. The first is, obviously, the fact that almost everything that we sell will run out. You will buy it, you will use it and you will need more of it. Whether it’s the same product or brand is not quite so important. But generally, if you buy a moisturizer, a shampoo or conditioner, you’re going to need more of it. The replenishment is the key thing.

Behind that, particularly with relation to beauty, there is a real community piece and an opportunity to create a narrative and story. It is one of the things that separates fashion and beauty from being under such an obvious threat from the likes of Amazon and some of the other more mass retail environments that exist, such as Alibaba and eBay. Beauty and fashion is, often, a very narrative and experiential purchase, so I think that gave us a bit of an edge. There are very few businesses that I would want to start in ecommerce nowadays because of the dominance of Amazon and others. It is easy to replicate straightforward retail but with luxury, fashion and beauty there is a real defensibility around the fact that it is part of the retail experiences that is the special nature of what you are buying.

These products are quite intimate; you put them on your face and body. Does that meant that, typically, we could see higher repeat rates or loyalty or retention of customers, in the long run, versus other categories?

Yes, absolutely. We have learnt an awful lot about the beauty industry in the last 16 or 17 years but, yes, there is a really strong sense of loyalty between consumers and brands in beauty. Historically, before we got involved in the industry, I think there was probably a lot more brand loyalty than there is now. Often, you would get women who were Clarins customers or Chanel customers. Whilst there is still an element of that now – and I think it’s more around hero products – I think the typical girl or woman nowadays will have several products and brands that they are loyal to – their staple products – but they will probably shop across five or 20 different brands, on a regular basis.

That is where we’ve been able to really capitalize. We entered the beauty market at a time where that was becoming more prevalent. Most of the brands that we work with do have D2C themselves; they do have their own dotcom presence. Whereas 20 years ago that would have been fine because the woman was an Elizabeth Arden customer and they would buy most of their products, now they might buy an Elizabeth Arden cream, a Chanel lipstick and a Maybelline mascara. What multi-brand pure play beauty retailers, like us, provide is that it’s a one-stop shop, but still within that narrative led community environment where the experience is still a strong one.

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Feelunique & Online Beauty Retail(September 7, 2021)

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