Immaculate | Disruptive Innovation in the Beauty Industry

IMMACULATEDisruptive Innovation in the Beauty Industry

Executive Summary, Market Opportunity & PropositionThe Beauty industry could be classified into 4 main categories: Skin care, Make-up, Men and Body products. The fastest growing one is the Men’s category. The steadiest are skin care and make-up, but they are also the most threatened, with traditional and constantly emerging new brands developing products.

We will focus on the make-up industry by providing a solution to a typical problem.

Among the make-up products available to consumers, the one that drives more loyalty to a brand is a Foundation. This is a product typically applied on the face over a moisturizer and under a make-up powder.

Women are constantly looking for the “perfect” foundation, the perfect match. There are 4 main areas to look at before purchasing this product: • Skin type (Normal/Combination, Dry & Oily)• Coverage (from natural, where you can still see skin imperfections, to full) • Finish (Satin, natural and matte)• Shade & undertone (Golden/Olive to Pink/rosy)

Every woman’s preference (except for the skin type) and culture is different. If we just consider the shade/colour, for instance, Asian cultures prefer their skin appearance looking whiter, while Western clultures opt for shades that will help the skin look darker, “sun kissed”.

Women will try different foundations launched in the market, however, once they find one they like they will stick to it for a while.

Currently, there are not many digital options in the quest to finding the perfect foundation. There are some companies that offer virtual make-overs or shade finding options, but they are not totally tailor made or based on every individual’s particular skin.

The majority of consumers will still make their way to a department store to try the product before they buy it, mainly to test the texture and colour. This is why shopping for this particular product online has not been a success to date, unless you are buying one that you already know.

The idea is to provide a solution to this issue and offer to consumers globally (we will run a trial phase in the strategic UK market first) a mobile phone application that they can download to help them find their ideal foundation. This App will prompt the consumer to scan their skin (in the lower part of the jaw) to determine skin type, and undertone. Once that is established, the consumer will choose the type of Coverage, Finish and Shade they prefer.

The App will then come up with a range of products to choose that will include many different brands and price points. There will be an option to click on a Map to identify the closest point of sale for the chosen product or if the preference is online, it will link the consumer to this website.

There will also be an option for “Receive a sample” or “Try before you buy”, where different brands will participate offering sachet samples or deluxe trial sizes to be either posted to their address or to be collected from a retailer.

There will be a strong awareness campaign mixing both traditional channels like Print and outdoor campaigns and digital channels like Social media with a primary focus on Facebook, Twitter, Pinterest and Bloggers.

The beauty industry is still very much in the hands of beauty editor’s opinions and bloggers comments and reviews. We will pay particular attention to this section making sure we communicate our product to all the right influential channels and the movers and shakers of the UK market.

Competitive environmentModiface+ Over 28 Million downloads+ Award winning technology powers over 100 web and mobile apps- Not a niche product

Pretty In My Pocket+ Community/sharing spirit + Leverages readership of online beauty bloggers- Small market share

Daily Makeover+ Very established and licence product to big industry names+ 30 Million monthly “try ons”.- They don’t target the foundation makeup niche or dermatological issues

Brand Specific Apps such as L'Oréal, Lancome, Max Factor+ Leverage off their reputation+ Improves customer loyalty- Licensed solutions

THE TARGET MARKETHigh Information Requirement

Low Information Requirement

TailoredServiceStandardService

CommonersSeeking perfection

Loyals

One-time Users

Industry Experts

Special Skin Requirements

Minimalist

Customer Segmentation

Customer Segmentation

Routes to Market

•Immaculate website | Newsletters | SMS Campaigns

•Celebrity endorsements

•Blog within website

•Immaculate App

•Facebook and Twitter pages

•YouTube channel with videos

•LinkedIn profile

•Specialist industry advertising

•Print media advertisements (beauty magazines)

•Outdoor campaign (billboards)

•PR Management including relationships with influential bloggers

Customer Relationships Activities & Resources

•Language of the brand in print / online

•Interaction with sales people in-store

•Quality of samples / trials and distribution

•User experience of website / app / social channels / blog

•Affiliate company communications

•External agency tendering and management

Revenue StreamsWe will be adopting an affiliate scheme with manufactures / merchants to generate revenue from the sale of skin products (after our recommendations have been made), such as foundations (primarily), moisturisers and cleansers

We propose making 8% commission or margin from each sale with an average spend of £20 = £1.60 of revenue per purchase

The specific affiliate model we would like to adopt, related to our app and website, is described below

Co-branding: As the affiliate we would maintain our web-site / app identity after a customer links to the merchant web-site. The merchant web-site will handle all the sales, and will host the page, but will configure the page so that it appears as though it's still part of our affiliate web-site / app (by including our web-site's logo, for example).

Please see below for our revenue projection based on some of the assumptions sited above

Revenue Streams: Yr 1 (Cumulative Monthly Forecast) •UK market for make-up sales in 2012 was £665m •38% of which was purely face foundation. = £252.7m

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Totalᴓ Unit Sales £20 £20 £20 £20 £20 £20 £20 £20 £20 £20 £20 £208% Margin £1.60 £1.60 £1.60 £1.60 £1.60 £1.60 £1.60 £1.60 £1.60 £1.60 £1.60 £1.60

Volume (Month) 200 1000 2500 5000 8000 11500 15000 22000 30000 40000 50000 65000 250,200Revenue (Month) £320 £1,600 £4,000 £8,000 £12,800 £18,400 £24,000 £35,200 £48,000 £64,000 £80,000 £104,000 £400,320

Volume (Cumulative) 200 1,200 3,700 8,700 16,700 28,200 43,200 65,200 95,200 135,200 185,200 250,200Revenue (Cumulative) £320 £1,920 £5,920 £13,920 £26,720 £45,120 £69,120 £104,320 £152,320 £216,320 £296,320 £400,320

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Volume (Cumulative)

Revenue (Cumulative)

Cost Structure

Staff costs £90,000

Website development £15,000

App development £35,000

Market/product research £15,000

Overheads £30,000

Digital advertising £80,000

Marketing agency £27,000

Print and magazine advertising £95,000

Specialist industry online advertising (Glam) £40,000

Celebrity endorsement £25,000

TOTAL £452,000

Summary

• We have identified an opportunity to create innovative disruption in the coloured skin beauty product market, principally foundations.

• There is a sizeable market of which a new dynamic of on-line purchasing could harness a significant source of revenue through affiliate purchasing schemes.

• On-line purchasing of foundation and coloured skin products will only work effectively if accurate skin assessment of skin colour and undertone are made and appropriate product choices presented.

• The Immaculate™ skin app provide exactly this capability and service.

• We believe there is a sizeable opportunity in the UK market alone where we forecast to turnover c£400k in year 1.

• Beyond the UK the concept has global reach and potential.