Luxola to Sephora online: Opportunities in beauty

• Main Authors: Reddi KOTHA, BHATTACHARYA, Lipika
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2018
• Subjects: Sources of Innovation; E-Commerce entrepreneurialism; Exit strategy; Startup financing; Marketing channels; Fund raising; Fashion Business; Sales and Merchandising
• Online Access: https://ink.library.smu.edu.sg/cases_coll_all/228; https://cmp.smu.edu.sg/case/3746
• Institution: Singapore Management University

In 2011, Alexis Horowitz Burdick founded Luxola, an e-commerce platform selling branded cosmetics online in Singapore. By 2015, Burdick was able to expand her venture across 12 markets in Asia Pacific region and was acquired by Louis Vuitton Moet Hennesey (LVMH) under its cosmetics arm of Sephora. However, the initial years of Luxola had been fraught with several challenges. The primary challenge for Luxola had been attracting funding from venture capitalists. Luxola had been established by a solo woman founder, and typically venture capitalists avoided investing in start-ups established by women. Another unexpected challenge for the company was the ‘lack of trust’ reputed cosmetic brands had on e-commerce platforms. Burdick used a lean business model and customer centric strategies to cope with these challenges. After the acquisition, Sephora retained the senior staff including its founder. Burdick now focussed her attention on more sophisticated channels of marketing and implemented digital analytic tools and behavioural messaging to drive customer conversion ratios. These strategies had begun to produce results, and Burdick was hopeful that she could further grow the company in the region fairly quickly. Luxola had tapped on an unmet user need of women in Southeast Asia – sourcing branded cosmetics from an online platform. The unmet user need had stemmed from a demographic transformation wherein the young women in the region were becoming increasingly independent and liked to splurge on themselves. Other than demographics, what other sources of innovative opportunity had Luxola satisfied? Was exiting through acquisition the right strategy for Luxola? This case looks into the sources of innovation in entrepreneurship and exemplifies how demographic changes in an existing market can create avenues for new ventures to be successful. The case also helps students gain an understanding of how a start-up firm can tap on the lean start-up methodology to expand their business. The case also reflects upon some of the challenges faced by women entrepreneurs in establishing and growing a venture, and how some of these disparities can be overcome by focussing on the company’s product offerings, and making customer centricity a priority.