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Sat 30 Mar 2013 11:49 AM

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The business of beauty

When Shant Oknayan and three friends started GlamBox they embarked on the exciting but perilous road that all start-ups have to take. He tells StartUp how they navigated the difficulties in front of them and turned an idea into success

The business of beauty
Oknayan worked at Google, which he says helped encourage his entrepreneurship

The story of GlamBox not only serves as a symbol of a successful start-up, but also holds within it several lessons, hurdles and pleas familiar to entrepreneurs in the region.

Whether it’s logistics, staffing, finances, or anything in between, GlamBox has been through it and, so far, come out the other side. And with the challenges it still faces, the company’s journey is a telling one in terms of difficulties new businesses have to overcome.

GlamBox was born in 2011 when four friends attended an event and were inspired to step out into the world of start-ups.

One of this quartet, Shant Oknayan, explains that a thirst for entrepreneurship and a can-do attitude drove them to explore how they could go into business together.

He said: “We were listening to the talks, and we all looked at each other and said ‘we can do this – what’s stopping us from doing it?’ We’re all passionate about entrepreneurship, so why don’t we go for it? I still have the piece of paper where we noted down what we wanted to do.”

Deciding to be an entrepreneur and actually starting a business, however, are two very different things. So the group sat down to work out their plan.

“We took time to understand a couple of things,” continues Oknayan. “What’s working well in the US that’s shooting through the roof in terms of growth? What’s missing in the market here?

“We noticed that women were underrepresented online, and while doing our analysis on what’s hot, we came across Birch Box in the US and found a model for sample beauty boxes.”

The blueprint Oknayan and co had found was for an online company offering subscribers a monthly beauty box full of samples, which users can try before buying from the website.

Looking at beauty products was a shrewd idea. The beauty market in Saudi Arabia alone is worth about $3bn and growing, while the global beauty care industry is due to hit $265bn by 2017.

The quartet’s research led them a specific corner of the market.

“Lots of businesses doing mass market offerings in beauty, but not so many doing niche. They do ‘women and beauty’, or ‘mums and babies’ but these are very general. We wanted to do something much more niche than that.”

And so GlamBox was born. In 2011 one of the team took a sabbatical to help develop the business, and the company officially launched in June 2012. They funded the project themselves, about which Oknayan says: “It was a lot of money, but we wanted to at least try to be entrepreneurs.”

With designs on becoming a beauty hub for the Middle East, GlamBox also introduced an online magazine with expert contributors, and the business opened to a good response.

Oknayan explains: “Beauty products are expensive. It’s hard to convince somebody to buy when they’re not sure of a product. We put a box together with established brands and new brands for them to try.

“This box is sent to your home, with deluxe size beauty samples to use for two weeks. Online you have tutorials, bulletins and so on to help you use the products. You also have the full size product available to buy from the website if you like it.

“There’s value there for the customer and the brands.”

What’s more, GlamBox already has plans to increase its service. One example is that the company hopes to collect a ‘beauty profile’ of each subscriber and tailor a box to each person’s wants, needs, skin type, hair colour, and so on.

“This would really improve our service,” says Oknayan. “But it’s also great data for the brands. It’s great market research and good exposure for the smaller brands.”

On the surface the GlamBox story sounds like plain sailing. Indeed, unusually for a start-up the company was making money from day one, as subscribers pay for the service upfront.

However, behind the scenes a series of difficulties pushed Oknayan and his colleagues to the limits of their patience and business skills.

One of the first hurdles they had to overcome was money. Not just in terms of investment, but also in terms of how customers pay for their boxes.

Oknayan says: “When it came to money we were putting so much in and it was disappearing very quickly. Obviously with such a good response from customers we needed to keep things moving smoothly as well as expanding our operations. This requires investment and funding.

“In the latter part of last year we purposefully slowed our growth. We slowed down and spoke to investors – venture capital companies in the UAE, Middle East and Europe.

“The problem was that while venture capitalists understand traditional e-commerce, it required much more back and forth to help them understand niche offerings.

“There’s room for growth in niche e-commerce. Customers are more comfortable buying online, and investors are jumping into traditional e-commerce more and more. Companies like Souq.com are big news for the Middle East and I think niche e-commerce is the next big thing.”

Within the Gulf Cooperation Council (GCC), total e-commerce sales are estimated to be about $3.5bn, with the UAE accounting for up to 60 percent of transactions. According to a 2012 study by Visa, the e-commerce industry is predicted to continue growing at a rate of 30 to 35 percent year on year to almost $15bn by 2015.

But even though the figures are promising, Oknayan says there are still challenges.

“With the payment gateways it’s difficult to find a good service offering. When you do it’s very expensive so it’s really eating into your finances.

“Also, a lot of people still want to pay cash. Cash is king in the Middle East and small e-commerce businesses have to be aware of that. Paypal has come to the region but it’s still a long way from offering a good proposition and other gateways are very expensive.”

The subject of payment gateways is one which Oknayan and GlamBox have found particularly tricky, citing strict bank regulations as one hindrance to smooth operations.

“Banks are very conservative in this part of the world. That’s good in some ways as they can protect you and your business, but it’s not good in other ways.

“Central Bank has stringent rules. In the US you can subscribe to a service automatically and your details are saved to that website so you don’t have to fill them in again. Central Bank won’t allow that here. You have to do a one-time transaction every time.

“There’s certain due diligence the banks need to do. It’s very thorough and offers protection to the merchant and customer, but it’s very stringent when they don’t understand why you’re selling something specific online.

“If it’s something that they don’t understand and that they don’t see the online demand for then it can get really tricky. Why are they stopping consumers from accessing it? Regulations need to be made specifically for e-commerce and things are improving, but payments in general is a problem.”

More physical restrictions have also given the GlamBox team cause for concern specifically when it comes to deliveries.

Oknayan explains: “Another thing is the landscape, whether it’s how expensive things are, how reliable, or issues with crossing borders. Here it’s still a P.O. Box-based system, using a courier who has to get directions.

“People tend to go with Aramex but they are expensive and really kill my margins. A lot of e-commerce businesses are starting to use their own fleet, but I don’t want to be a logistics provider – I want to find the best brands and offer the best service on the business side of things.

“This is a cry for help to logistics companies to help SMEs. Work with them. Offer better rates.”

Logistics, payments and investments aside, you won’t get very far in business without the right team. Starting with the initial quartet, GlamBox had to grow its staff roster fairly quickly, which brought its own difficulties.

Oknayan explains that convincing people to join an unproven start-up company wasn’t easy.

“Finding talent is hard, especially talent that’s willing to take such a big leap of faith. In the UAE we’re relatively lucky because there’s a decent pool of talent, but the problem is they’re already in good jobs that pay well.

“I made a point to only hire an A-team. We need to execute properly and that requires the right people. We can’t offer them job stability and we might not even be able to pay them a salary, but we can offer them excitement.”

Previously employed by Google, Oknayan has experienced a particular working environment and is keen to both praise the company, as well as take lessons from it.

“Google is a fantastic company that really encourages entrepreneurship,” he enthuses. “Of course they want to ensure you’re not doing something that they are doing, but other than that they are very encouraging.  They knew I was doing GlamBox and they were happy to allow it.

“Since we’ve had investors on board, one of their conditions is that one of the board members go full time. So I was the one. The guys at Google were fantastic and said I was living the dream.

“It’s so great that such a big company can go back to its garage start-up roots and say that if you’re helping people get what they want, then go for it.

“The most interesting thing I learnt from Google was to put the end user first. It’s not about money but about creating a service that’s so good and well loved. The money will follow. I also learnt that you can be serious without a suit, which is very refreshing. I like that a lot. It’s a fun working environment. They say people are ‘Googley’. We talk business, revenue, data and so on, then we have a game of foosball.”

With a fun working environment in place, and having navigated the rocky early days, Oknayan is hopeful about GlamBox’s future.

With plans to both expand the company’s range and its reach, the next few years could be ones of serious growth in terms of geography and profit.

“We’re looking at two kinds of expansion,” says Oknayan. “The first is geographic. We’re only in the UAE at the moment and people are asking when we’ll be offering a service in Saudi Arabia, Qatar, and elsewhere. Once we have a foothold in the UAE we’ll look at how to approach this.

“Secondly we’re looking at vertical expansion. Currently we’re only looking at women’s products, but some women are saying their husbands would like products, so we’re looking at doing a GroomBox, and even a BabyBox.

“We’ve got to walk before we can run though, so let’s make sure we get the GlamBox service right first. We want it to be exceptional. In fact, we try to call our customers and make sure we’re getting it right and giving them the brands they want.

“Data is king and data from our customer really helps. Making factual decisions is very important, so you’ve got to have data. You can put your gut into it as well, but data is vital. It speaks the truth.”

While trials and tribulations are surely an unavoidable part of the life of a start-up, based on the data provided by Oknayan, it seems GlamBox is destined for success.