The beauty and wellness industries, traditionally reliant on offline retail, are witnessing a significant shift towards digital-first brands. This change is driven by consumer demand for personalized and technologically advanced solutions.
Oddity Tech is at the forefront of this transformation. The company is blurring the lines as a consumer-tech organization, specializing in building and scaling digital-first brands in the beauty and wellness sectors. Known for notable brands like Il Makiage and SpoiledChild, its success has been driven by its advanced technology platform, which utilizes data science, machine learning, and computer vision to enhance the online shopping experience.
Catering to tech-savvy consumers seeking personalized beauty and wellness products, the company’s approach is unique in the industry. It uses cutting-edge data science and artificial intelligence to understand consumer needs and preferences, creating tailored product recommendations. Instead of creating products that customers would need to try in a store, Oddity uses its data to make to spawn a shift from traditional in-store experiences to a more personalized, online interaction.
The company’s innovations include everything from AI-driven data matching of consumers, a creator-powered media platform, along with advanced computer vision technology that captures images in more detail than traditional techniques. By leveraging its technology suite not just for its existing direct-to-consumer (DTC) brands, which are surging, but also by helping third parties exploit the advanced data available, Oddity aims to disrupt the market, traditionally dominated by legacy retailers.
Launched in 2018 by brother and sister duo Oran Holtzman and Shiran Holtzman-Erel, the heart of Oddity’s business model is its proprietary technology and the billions of data points it has collected from its tens of millions of users. The Holtzman siblings foresaw the potential of a tech-driven approach in an industry largely governed by conventional retail methods. By prioritizing data-driven insights and digital marketing strategies, they have adeptly positioned Oddity as a leader in a new era of beauty and wellness.
The company’s journey began by focusing on developing a platform for a portfolio of beauty and wellness product brands, leveraging advanced data mining techniques in its DTC marketing efforts. Oddity builds out new products and brands by using its tech to figure out what customers are looking for. Then, it goes to its suppliers to create the tailored products.
Il Makiage and SpoiledChild have experienced rapid growth and have a substantial online following. However, the company’s IPO in 2023 marked a significant milestone, aligning with its strategy to expand its portfolio by introducing new brands and collaborations.
The Holtzman co-founders have played and continue to drive pivotal roles in the company’s evolution and success as chief executive and product officer. In addition to their strategic vision to transform Oddity into a technology-centric company, the business has seen substantial growth under their leadership.
Oran, with his background in business management and accounting, brings a strategic and financial acumen that has been crucial for the company’s robust financial performance and market expansion. Shiran, with keen product insight and understanding of consumer preferences, has been pivotal in developing Oddity’s unique product lines.
Together, they have successfully balanced the demands of technological advancement and rapid growth, with synergy that continues to drive the company’s success.
Oddity is reshaping how consumers interact with and purchase beauty products through its DTC business model. The company has made significant strides in integrating technology, specifically in machine learning, computer vision, and biotech, to develop its unique brands.
Oddity’s first brand, Il Makiage, works to select the perfect foundation match for any skin type with its “powermatch quiz”, an AI-driven product recommendation algorithm. The quiz takes customers through a series of questions about their skin type and tone and then scans a picture of their face. The algorithm then determines the correct shade with a 90% accuracy rate, which keeps customers coming back repeatedly. Furthermore, with detailed data from over 40 million users, Oddity’s models are getting smarter all the time.
Targeting a new generation of consumers with a personalized approach to beauty care, the company launched SpoiledChild in 2022 as a wellness brand that matches consumers to their perfect hair and skin products based on their unique profile. The proprietary machine learning engine provides tailored recommendations for each consumer, matching them with the exact product or sequence of products that fit their needs and preferences. With an initial range of 17 products, including hair and skin serums, SpoiledChild caters to a broad customer base aged 25 to 55, formulating products and providing recommendations based on data points gathered from focus groups and the company’s original Il Makiage brand.
The company’s products are designed to cater to a diverse range of beauty and wellness needs, appealing to a broad spectrum of consumers. This inclusivity and focus on personalization have made Oddity offerings particularly attractive to a digitally savvy clientele, which includes a new generation of consumers that are moving away from the industry’s incumbent views on getting older. Oddity is neither anti- nor pro-aging, deviating from traditional incumbent marketing strategies, but instead allows consumers to find what is right for them by offering an individualized approach to age-control.
The innovative products are backed up with sustainable refillable packaging and an auto-refill system that is made to last and reduce waste in line with modern customer expectations. Reusable dispensers and recyclable capsules enable consumers to replenish their routine and ensure the formula’s efficacy from start to finish.
By offering a seamless online shopping experience and growing the brands from zero to over $250 million in online revenues in only three years, the company has categorically disrupted the vast beauty and wellness market, which is valued at over half a trillion dollars.
Oddity is delivering a highly differentiated proposition with its innovative approach to product development and market strategy in the beauty and wellness industry. As a digitally native and purely DTC retailer, it is setting itself apart by leveraging its technology and analytics to not only meet consumer demands, but also offer a unique opportunity to scale brands both internally and externally.
A significant portion of Oddity’s workforce comprises technologists, bringing fresh perspectives to an industry traditional focused on efficiencies rather than data. This approach allows Oddity to use technology to discern what customers want, leading to highly specific product briefs for suppliers. This specificity ensures that new products are based on extensive data analysis and tailored to meet consumers’ evolving preferences.
Active engagement with customers on social media drives brand awareness and gathers valuable consumer insights to fuel further innovation. This customer-centric approach, combined with high margins and strong profitability, bode well for a sustainable growth trajectory.
In addition to continuously improving its intelligence capabilities with ever-increasing data, the company is also seeking complementary advanced technology to bolster its offerings. The acquisition of Voyage81, a deep-tech AI-based computational imaging start-up, is allowing the integration of functions like mapping and analyzing skin and hair features, detecting facial blood flows, and creating melanin and hemoglobin maps using a regular smartphone camera. This technology is being integrated into Oddity’s Il Makiage powermatch quiz, aiming to enhance accuracy, which could potentially replace traditional dermatological assessments by human doctors.
In April, the company also made a $100 million strategic investment by acquiring Revela, a biotech start-up, and establishing Oddity Labs in the United States to address problems like hair loss and wrinkles. The lab’s focus on creating new molecules, a technique borrowed from the pharmaceutical industry, represents a novel approach in the beauty and wellness sector. By 2024, Oddity Labs is expected to introduce ten new products, projected to contribute significantly to the company’s revenue over the next five years.
Since its U.S. launch in 2018, Oddity’s gross sales have not only delivered impressive year-over-year growth to reach $324 million in total revenue in 2022, but the company has also achieved profitability.
Its momentum is showing no signs of slowing either. Oddity’s latest quarter was its best third quarter ever, exceeding guidance and spurring management to increase its sales and profit outlook for the full year. Sales for the first nine months of 2023 have already exceeded $411 million, following 60% growth, driven by both Il Makiage and SpoiledChild brands across markets and products.
Adjusted EBITDA came in at $91 million as investments in technology and data capabilities over the past five years are enabling the company to continue to grow quickly without damaging its high margins and strong profitability.
Oddity is also in a strong financial position with $164 million of cash and short-term deposits and no debt on the balance sheet.
Looking ahead, management is forecasting to close out FY23 with total revenue between $493 million and $497 million, representing year-over-year growth of close to 53%, matching consensus expectations. Management also boosted earnings per share expectations to $1.23, also in line with analysts’ estimates and more than double the prior year at $0.54.
Oddity is standing out in the industry as both a DTC retailer and a tech-centric company. Its unique business model, which currently relies entirely on online sales, places it in direct competition with established giants such as Unilever, Estée Lauder, Shiseido, Revlon, Procter & Gamble, L’Oréal, and Avon. These competitors dominate the market with their extensive product lines and strong customer loyalty, posing a significant challenge for a rising brand like Oddity. Particularly, when considering a lack of physical stores could hinder its ability to gain brand recognition and appeal to in-person shoppers.
Conversely, the company’s focus on being a tech and data-driven company that operates cosmetics lines has proven to be a valuable key differentiator. This approach has enabled Oddity to resonate deeply with a tech-savvy customer base and leverage advanced data analytics for personalized offerings. With its unique positioning and potential to scale its technology, the company is carving out a distinctive niche in the market, bridging the gap between traditional cosmetics and the digital age.
Oddity Tech is pioneering a paradigm shift in the beauty and wellness industry with its digital-first, data-driven approach. With innovative use of technology, strategic investments consistently enhancing its product offerings, and a customer base that is responding strongly, the company looks well-positioned for continued success and growth.