Brazil’s leading beauty ecommerce company, BelezaNaWeb (“Beauty on the web”), has raised a $30M Series C round from an undisclosed New York City private equity firm.
Brazil is the largest market in the world for beauty products behind the US and China, pushing $43 billion of cosmetics, perfume and personal care products to a population of almost two hundred million.
BelezaNaWeb founder and CEO Alex Serodio estimates that less than 1% of that volume is sold online (compared to 10% in the US), painting an eleven-digit market opportunity to get digital at just the right time. Brazil just cracked the Top 10 list of retail ecommerce markets globally, with 22% growth last year, and fashion and beauty driving more transactions online than all of electronics, mobile phones and books combined.
Unlike the US, with massive and varied retail distribution channels for beauty products, direct sales dominate in Brazil, accounting for 70% of cosmetics and perfume sales, according to Serodio (versus 9% of cosmetics sales in the US).
Two of the top three players, Natura, a Brazilian company, and AVON, whose biggest market is actually Brazil, distribute product entirely through direct sales networks, with over a million sales reps each — and only carry their own brands. The third player, O Boticário, sells product mainly through almost 4,000 franchised retail stores across Brazil. Natura and O Boticário are also selling product via their websites.
“The market leaders in Brazil own their distribution channels,” says BelezaNaWeb CEO Alex Serodio on a call from São Paulo. “It’s very hard to get products to people in Brazil. Ecommerce is a way to get them.”
Serodio cites Natura and Sephora as BelezaNaWeb’s principal competitors — Sephora entered Brazil in 2010 by acquiring Sack’s, an online beauty retailer. The big differentiator between the two, in Serodio’s mind, is the purchase experience.
Riffing on the power of social recommendation (and direct sales networks) for making beauty product purchase decisions, BelezaNaWeb works with a “Beauty Team” of fifty of Brazil’s top beauty professionals, creating channels of digital content covering beauty trends, how-to instructionals and “very high curation” for product recommendations.
It’s paid off in terms of sales. BelezaNaWeb sells over 200,000 items per month to over 800,000 registered customers, and has been growing 50-60% year over year since its Series B financing in 2013. They are on a run rate to close R$100M (US $32M) in sales for 2015. The company has raised $15 million in funding from Kaszek Ventures and Tiger Capital since 2011.
Serodio started BelezaNaWeb in 2008 with his own capital in São Paulo, selling the kinds of high-end beauty products that are sold exclusively at salons, and trying to replicate the experience of a beauty professional giving recommendations online. “We could sell them online because we began as a very small beauty salon,” Serodio explains. “But we were born to be digital.”
We had no inventory in the beginning, had a single motorcycle delivery guy, and in parallel were trying to convince brands that we were going to do a good job online. Cosmetics brands are very worried about preserving their value online.
And Serodio says he was practically born inside the beauty industry. His father, Ademar Serodio, served as AVON’s President of Latin America for a number of years. After stints working in fragrance and cosmetics, he decided to start his own business.
Serodio describes the early days as “living in chaos”. “We had no inventory in the beginning, had a single motorcycle delivery guy, and in parallel were trying to convince brands that we were going to do a good job online. Cosmetics brands are very worried about preserving their value online.”
BelezaNaWeb was already profitable when they closed a $5M Series A in 2011 with Kaszek Ventures and Tiger Capital. “After we raised capital we weren’t profitable, because we were gaining structure to grow, but we were still seeing three-digit growth year over year,” Serodio says. The company is currently profitable and growing 50-60% year over year.
Serodio says the new capital infusion will go towards expanding the team of 120 employees, expanding the inventory of brands they carry, and building on the company’s core focus since the beginning — the consumer experience. He says mobile is important and growing; social recommendation is something they have experimented with and are looking at. There are also plans to develop a private label.
Like ecommerce upstarts Dress & Go and Lema21, BelezaNaWeb is also experimenting with augmenting the digital experience with an offline concept retail store in São Paulo. “It’s good to understand how customers look at your brand online, but to scale volume I don’t think it’s the way to go,” Serodio says. “We want to dominate digital.”