E-Commerce Unicorns 2022: Oddity Leverages AI to Guarantee the Right Foundation Color

Online purchase of make-up has never been easy. But with the pandemic, that sector has also accelerated its transition to the internet. Virtual try-ons have become easier with brands like Dior and Charlotte Tilbury allowing users to see the impact of their products over Zoom. Chanel too launched an app, Lipscanner, that allows people to try on different shades of lipstick on their own face using augmented reality. There are several other niche players who have entered the market, and are doing phenomenally well in the recent past.

Oddity’s Offerings

New York-based Oddity is most known for its brand, Il Makiage. Oddity is a tech-driven prestige beauty brand that is shifting millions of customers to shopping for beauty products online. It uses its unparalleled technology to connect people with superior and painstakingly tested beauty products. Within makeups, it may still be easier to try the right color of lipsticks, eyeshadows and eyeliners. But one of the more difficult products to sell online is foundation where shade-matching becomes really critical. Il Makiage appears to have overcome the issue.

Il Makiage became viral when it launched a 10-second story on Instagram showing how its products managed to transform the skin with a seemingly perfect base product. Its successful marketing campaign helped deliver a direct-to-consumer online operation. It manages to send users a flawless shade match of its I Woke Up Like This foundation using an algorithm-based quiz. Il Makiage is so confident of its technology’s ability, that it allows for a full refund within 60 days if the foundation isn’t perfect.

Il Makiage has had a bumpy ride so far. It was initially set up in Israel in 1996 and operated through a chain of stores. But the store went into liquidation in 2013. Four years, later another investor, L Catterton bought stake in what remained of Il Makiage. Il Makiage’s parent company, Oddity, relaunched its online sales website under the brand name Il Makiage.

The online transformation was pivotal in the company’s growth. Its technology claims to achieve a 90% success rate in finding the most suitable shades for customer’s skin coloring. Today, it is one of the world’s fastest growing online brands with about 80% of its revenue coming from the US and 20% from England, Israel, Canada, Germany, and the rest of the world.

Earlier this year, Oddity launched its second brand SpoiledChild, a hair care and skin care product line up. Like Il Makiage, SpoiledChild will also use its machine-learning engine to recommend products or sequences of products for every customer based on their needs. SpoiledChild packages its products in reusable dispensers and recyclable capsules. The company plans to launch a line of supplements in the next few months.

Oddity’s Financials

Il Makiage remains privately held, but it announced that its revenue doubled to $270 million in 2021 from $135 million in 2020. The company did not report its profitability figures.

Il Makiage’s funding details are not widely known. It had raised $130 million in January 2022 at a valuation of $1.5 billion. Investors in the company include Thomas Tull, Franklin Templeton, Fidelity Management & Research Company LLC, and First Light Capital Group.

It competes with brands such as Fenty Beauty, Kylie Cosmetics, Urban Decay, Sahi Cosmetics, Makarizo, and Smashbox to name a few. Most of these companies also command stellar valuations. Rihanna-backed Fenty Beauty is estimated to be worth $2.8 billion and is expected to generate $570 million in revenues. While there are several players in the space, Il Makiage’s differentiation lies in its ability to find that right shade.

The make-up industry has seen significant action last year. According to a recent report, more than 407 deals were closed in 2021, growing 52% over the year. The interest in the industry remains prolific in the current year as well. In January this year, P&G acquired skincare brand Tula and haircare brand Ouai. Clean makeup brand Ilia was acquired by the Courtin-Clarins family in February this year. Analysts believe that companies with proven track records will continue to dominate M&A activity, and the industry will continue to boom. Oddity is counting on this boom to continue to deliver growth.

Photo Credit: Ichigo121212 from Pixabay

This segment is a part in the series : E-Commerce Unicorns 2022