Entrepreneurship Zone: 08 June 2021: Building an online retailer in Kenya: Interview with founder of BeautyClick

Tue Jun 8 10:20:37 CAT 2021

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Entrepreneurship Zone:  08 June 2021:  Building an online retailer in Kenya: Interview with founder of BeautyClick

BeautyClick is a Kenya-based e-commerce business focusing on three product categories: hair, skincare and cosmetics. The company was started in 2016 by Danish-born entrepreneur Jesper Drescher. Gloria Mwaniga speaks to Drescher about the company’s founding, the challenges of running an e-commerce venture in Kenya and the company’s plans to list on the Nairobi stock exchange.

Give us the backstory to BeautyClick and how you got involved in the beauty industry.

I had a professional career in the Nordics building up then selling three different companies in the management consulting sector. I then acquired companies in the mental healthcare and software sectors and sold those as well. That is when I decided to do something in emerging markets and that became digital investments across Africa because I believed in the continent and in digital trends. As I started visiting the continent more, I noticed how Jumia aggressively poured a lot of money into educating the African consumer about e-commerce – a very immature market at the time.

An earlier incident that also inspired me was when Amazon bought Diapers.com back in 2010. I realised that the only reason Amazon would buy another company was because it had built up a success in a huge vertical market. That prompted me to start looking at massive vertical markets across Africa, and I discovered the beauty and fashion vertical was an extremely big market with strong growth. The market’s inefficiencies showed me that it could be up for some disruption, so, I hired a team, built the technology and started the business.

BeautyClick started as a seller of natural hair, but your website currently also features make-up and skincare products. Has the focus shifted from natural hair to a bigger range of beauty products?

With e-commerce, you spend money on acquiring your client, and so, it is best to optimise the customer lifetime value. We knew this right from the start, that’s why our plan was to begin selling natural hair and then move into other product categories.

The beauty industry is fiercely competitive. Tell us about some of the strategies BeautyClick employed to gain a foothold in the Kenyan market.

When people say that the beauty industry is very competitive, they typically look at the retail segment, dominated by mom-and-pop shops, and more people trying to sell on Instagram. But if you take a step back in the value chain, and look at things from a brand perspective, then you’ll see that there’s room for more brands.

So, yes there’s lots of competition on the retail side, but it’s really about mapping out the value chain because, like in any other business across Africa, where things are cash consuming and working-capital heavy, you find really good margins.

In an earlier interview you mentioned BeautyClick works with agents (hairdressers/beauty professionals) to sell its products. Is this model still important to your business?

When we started out in the human hair market, we were inspired by Mayvenn.com whose business model uses hairdressers as selling agents because hairdressers are a very loyal client group and consumers trust them. That’s how we came up with a business model where we tapped into the hairdressers’ network while giving them an opportunity to make money by selling the products to their clients.

That model is not as important to BeautyClick anymore. We have developed a more traditional online e-commerce business focused on both the business-to-consumer (B2C) and business-to-business (B2B) segments.

What is your main distribution channel?

Online sales are the DNA of BeautyClick. We hope to transform the beauty market from traditional brick and mortar to an online community where we inspire people to buy online. We hope to drive the development of e-commerce in the beauty market and be the best at that. I feel as though Covid-19 has propelled the e-commerce market by three to four years.

Do you handle your own deliveries?

Yes, we have our own motorbike riders that deliver products to customers within Nairobi. For deliveries outside Nairobi, and upcountry, we use external courier services that pick up the product from our warehouses and deliver.

What are the biggest challenges of running an e-commerce business in Kenya?

Convincing people to trust you in e-commerce is a big challenge. We have to put a lot of effort into gaining client’s trust because the beauty market has a lot of counterfeit products. Shopping online also means that the clients can’t see the product until it’s delivered to them, so they must really trust us.

Highlight some of the company’s most successful marketing initiatives over the years.

Currently, influencer marketing is working really well for us. The trend has moved from macro-influencers and big couture fashion people, to micro-influencers – smaller bloggers with 10,000 to 15,000 followers.

Discuss some of the beauty industry trends you are seeing in Kenya.

One of the biggest changes in the hair market has been the shift from weaves to wigs. The skincare market is also growing as people are starting to use a lot more skincare products than they did five years ago. Lastly, it’s getting much more acceptable to buy products online.

The shift from weaves to wigs changed our human hair business, and we’re currently more focused on selling wigs. The shift is also one of the reasons why the business model of using hairdressers as agents is no longer that relevant. When you’re selling weaves, the client needs to go to the hairdresser and have them install it but wigs don’t require hairdressers.

We are also pursuing a wider range of products for the growing skincare market, and enjoying a wider market share because more and more people have started to shop online.

There seems to be a growing trend of people wearing their hair naturally. How has this impacted your business?

People going natural drives demand for specific products in haircare and that could mean less buyers for our wigs and human hair products. Luckily, we have a brilliant team in Nairobi that’s researching and monitoring the trends as we look at what popular product range to sell.

If you had to start the company again, what would you do differently?

The biggest lesson would be not to start two new things at the same time. We started selling our own brand of hair called BeautyClick at the same time we started selling it online. We probably should have started selling a branded product that people knew already in the market, and gained the clients’ trust before introducing a new brand to them.

BeautyClick has indicated its intention to list on the Nairobi stock exchange. Why have you decided to go this route?

Shareholders made the decision earlier in the year to allow a capital raise via a potential IPO at the Nairobi Securities Exchange (NSE). We need growth capital, because we are at a point right now where we have an extremely solid unit economy. The cost of acquiring a client is much less than the customer lifetime value, so we are at a good stage. Now it’s about scaling, and scaling requires capital to expand the portfolio.

The idea of going public came about because of two reasons. The first one is a bit ideological. I’m a strong believer that what’s going to drive development across Africa in the future is the ICT sector. So, I do believe the opportunity is really there. And yet, there’s not really any investment opportunities for the average Kenyan person. If you go to the NSE, there’s absolutely nothing in the digital space, and as a retail investor, it’s very hard to get exposure to anything in the venture capital sector. It’s all really limited to high-wealth individuals, or to international VC funds that are backed by some impact money. So, by going public, we actually give the average Kenyan investor an opportunity to participate in the future.

The second reason why we are going public is to create a link between our owners and our customers. We would love our customers to become co-owners of BeautyClick, and we would love our owners to become customers. We also believe that the way to get more people into entrepreneurship is to create more role models. And if you have a company going public, it’s getting more awareness, more stories about it, and that will be really good for the ecosystem.-Howwemadeitinafrica

Jesper Drescher, founder of BeautyClick

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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