Beauty e-commerce platform GlamBox raises $1.36 million to expand into Saudi Arabia

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GlamBox, the Dubai-based online beauty product retailer, has announced a $1.36 million USD in investment from STC Ventures, the venture capital arm of Saudi Telecommunications Company (STC), MBC Ventures, the venture capital arm of MBC media group, and newcomer R&R Ventures. More than half came from STC Ventures, and the rest was split between MBC and R&R.

It's a big moment for the young startup, which launched in January 2012 along with sister companies in BrazilDenmark, and Norway, run by a network of founders who met in business school. Receiving over $1 million USD in investment marks a pivotal moment for its Middle East team: can it successfully expand throughout the Gulf with a model that's seen wild success in more developed markets?

GlamBox Middle East, like its sister companies, is a local version of a model pioneered by BirchBox, which launched in 2010 in New York, to offer customers a box of trial-size beauty products every month. BirchBox, which also has an e-commerce store and an online magazine, surpassed 400,000 subscribers this year, after quadrupling sales since last year. Although the company is known for its boxes, a major portion of its growth is driven by customers who don't subscribe to the boxes, but merely discover products in its online shop, through its content portal. Those customers now comprise 15% of e-commerce orders, cofounder Katia Beauchamp told Mashable

Rocket Internet's clone, GlossyBox, has also found success in emerging markets, hitting 200,000 subscribers this July, among its properties in 15 countries across three continents. In January of this year, after a year and a half of operation, it shipped 2 million boxes. It then doubled its output, hitting 4 million boxes by July this year. With a price of $13 per box, that's easily over US $26 million in revenue.

GlamBox has adopted a similar model, offering a box that contains five to seven makeup products, which customers receive every month, for a $20 monthly fee. The site also has an e-commerce store, which launched this summer, and a blog that offers advice on using the products, where customers can ask questions and discuss items. "Try, Learn, and Buy" describe the company's philosophy; "Try [the box] and Buy [the e-commerce site] are our two revenue streams, and Learn [the blog] brings them together," says Founder and Managing Director Shant Oknayan. 

Debuting a new idea in an complex emerging market, GlamBox has not yet hit the numbers Rocket is seeing, but thousands of boxes have been sent out to date, says Oknayan. The company isn't yet profitable (what regional e-commerce site is?), but it will be investing in growing its revenue streams this year, especially its e-commerce arm, following BirchBox's success and the e-commerce opportunity the founders see.

"This will help us position GlamBox beyond just the Box. With this new funding, the idea is to carry on this subscription model, and invest more in the e-commerce side of the story," says Oknayan. The e-commerce site already features 25 brands, with over 1,000 SKUs, and "we'll carry on to reach 10,000," he says, noting that the store is adding brands two to three times a week.

By scaling quickly, GlamBox hopes to become the go-to site for beauty products buyers in the region. "The beauty market is growing 10-12% every year, and there's no e-commerce company today that has a good offering when it comes to beauty," Oknayan points out. Sites like Mumzworld might cater to mothers, and catch-all online retailers like Souq.com might offer Beauty items, but none focus on a complete experience.

The company is also, naturally, looking to expand its operations into Saudi Arabia, as "the primary market in the region." The team soft launched two weeks ago, using Aramex as its logistics partner, operating out of its Dubai warehouses. Oknayan believes that Saudi shoppers will embrace their product because it's unique in the market. “The appeal of our three elements will be very strong in countries like KSA where women are underserved online,” he says. After Saudi Arabia, they intend to expand to the rest of GCC.

Initially, before securing funding, the company had decided not to invest as heavily in marketing, choosing instead to spend on its hiring, says Oknayan. “We managed to build some brand identity over the past year, but in term of converting that brand equity into sales, we need more money for targeted paid ads,” he explains.  

Now, the team plans to launch a large marketing campaign in both the UAE and Saudi, to build up its customer base. The startup is also working with some of the region's most popular content portals for women, to offer exclusive promotions and revenue share deals for subscriptions.  "We did a content for traffic [deal] with Layalina and we are still ironing out details for special promotions with some other portals," Oknayan reveals.

MBC Ventures and STC Ventures may potentially also assist customer acquisition by leveraging the strengths of their parent companies in TV and mobile. 

Sharing intelligence with its other arms will also help growth. "We share best practices on a regular basis and leverage economies of scale, for example, in building the site and sourcing boxes. It's great to have a support network and lessons from other markets," says Oknayan. 

Although it will be one of the year's more successful startup investment stories, other startups might want to note that getting funded took persistence; even a startup working with a local version of a wildly successful global model can't shortcut the funding process in the Middle East. “We knocked on the doors of about ten to twelve VCs and at the end three of them gave us funding,” Oknayan recalls. “For both the investors and for us, the market is still nascent, and it takes time to understand what works and what doesn’t in this part of the world."

Especially when it comes to tailoring the model to the Gulf, it pays to focus on what works locally, says Oknayan. Although Glambox will have the support of two of the largest companies in Saudi Arabia, its campaign will take finesse. "There are local specificies that have to be taken into account," he says. "We can't just copy and paste." 

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