Skincerity Stanford 2015
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The document summarizes the evolution of a business model testing on-demand and group waxing services. It started with on-demand home waxing but had issues with cleanliness and safety. Testing "wax and wine" parties showed group dynamics helped with comfort and economics. This led to offering spa parties which had more customer interest. Learnings around customer and supplier archetypes informed improving incentives for hosts and establishing commission structures for estheticians. The document outlines plans to build out an MVP, test pricing models, and convert past customers to hosts to scale the business.
Skincerity Stanford 2015
- 2. BUSINESS MODEL & VALUE PROP EVOLUTION
- 3. We started out with on-demand hair removal at home for individuals ...
- 4. Demand Side: ● Increased convenience ● Reduced embarrassment ● Clueless hairy men would love this Concerns around cleanliness; did not necessarily reduce embarrassment if people have roommates. Conclusion: Not a painkiller! On-demand waxing at home for individuals Supply Side: ● More customers ● Extra income opportunity Concerns around safety, risk of liability; did not seem worth their time and effort. What we learned “Waxing at home might be awkward..what about spills and messes in my bedroom?” “I wouldn’t want to drive around and I’m worried about safety” What we thought “who wouldn’t want this?”
- 5. Then we tested it out...wax & wine party!
- 6. Demand Side: ● They might like at-home waxing after trying it for the first time ● Men are not interested ● Group dynamics encourage comfort around new behavior ● Introducing the “host” character in our business model ● There is demand for more than waxing Wax & wine party “Wax & wine is like a substitute for brunch with girls, but two birds with one stone” What we thought Supply Side: ● Group dynamic makes the economics worth it for the waxer ● Alleviates some of the safety concerns ● Group dynamics makes the extra effort more worth it, safe ● Supply willing to give discounts for groups ● Some estheticians are willing to go into the home..but which ones? “customers might change their mind after they try it” What we learned “my challenge is finding customers in different locations around the Bay and dealing with cancellations” PIVOT
- 7. We realized that the group thing works, but customers wanted more than waxing… Spa party!!
- 8. Demand Side: ● There is interest in the group spa party ● Significant interest in attending a party ● Less interest in hosting - so we needed to figure out how to incentivize hosts Spa party!! What we thought Supply Side: ● Estheticians and spa owners would be interested in servicing spa parties at home ● Many spa owners and workers were willing to work with us on spa parties ● Learning about commission structures at different spas ● How to coordinate different services at one party What we learned PIVOT
- 10. Suburban SalonCity Salon We learned about the supply side archetypes The Entrepreneur Independent esthetician open to anything (in-home services) The Newbie Recent beauty school grads The Spa Worker Work at salon; commission or hourly wage The Spa Owner Single location spa owner San Francisco Mountain View
- 11. We tried recruiting estheticians ● Craigslist ● Yelp postings ● Thumbtack ● Calling salons ● Walk-in salons How would we scale esthetician recruitment?
- 12. Commission: Up to 35% (~$30 / hr) Hourly: “$70 / hour” We learned about supply side economics ● Uber and Lyft charge 20% commission to suppliers. We should, too! ● Need group size to be at least 5 people for the esthetician to find party worthwhile What we thought What we learned Minimum: “$200 minimum” ● Estheticians make $15-20 / hour (including tip) in salons (including DryBar) We should be able to charge up to 35% commission and still give estheticians opportunity to earn more profit than they would in salons; need to have minimum TOV when booking (tilt model)
- 14. We learned about Customer Archetypes Individual Picky Girl (Dating): Picky girl who waxes every few weeks (bikini area) to feel sexy - Prefers comfortable, professional, specialized waxing experiences Heavy User (Female and potentially some male) - Heavy user who needs frequent hair removal across many body parts in order to maintain appearance - Tends to be more sensitive to pain Embarrassed Males Wants to groom but is scared of running into female friends at waxing salons - Currently uses at-home solutions that may not be ideal Group Young Professionals Busy individuals that are social and spend Social Groups Groups that already meet, seek new fun ways to interact Housewives / moms Moms with older kids (not young moms). Has space and spend Wealthy Students Has the spend but limited space (dorms)
- 15. Get a Free Service ● Most compelling incentive- based on Host Insight (interviews & landing page test) We learned about host incentives What we thought Get Paid to Host ● Facebook test show less interest vs. Free Service ● Interviews support - “Feels wrong to have financial benefit from friends” Get party supplies (wine, snacks etc.) ● Interviews of potential hosts suggest a strong interest in an all-in- one solution “Party” Messaging works best ● Facebook test showed “Rent the Spa” and “ Book Club. Try spa Cub” is better language to encourage discovery ● Landing page change What we learned
- 16. Multi-level Marketing - Getting Customers to Sell How it Works ● Independent non-salary participants authorized to distribute company’s products ● Rewarded with immediate retail profit and commission based on volume sold ● Additionally compensated not only for sales they generate, but also for sales of recruits Notable companies with similar model Also known as pyramid selling, network marketing and referral marketing
- 17. We tried recruiting hosts Getting people to sign up if interested in hosting -- EASY Getting them to host an actual party --NOT SO EASY
- 18. MVP EVOLUTION
- 19. Evolution of our MVP
- 20. Evolution of our MVP
- 21. NEW UPDATES & FUTURE OUTLOOK
- 22. LEARNING THIS WEEK & FUTURE OUTLOOKS THIS WEEK: ● MADE MONEY !! (10%) ● Meet up hosts are interested (7%) ● ⅓ parties executed TAKE AWAYS: ● Hard to maintain contact without being managed through technology ● Hard to manage hours when competing with “in-salon” businesses ● Hard to count on demand without “flake fee” THE GOOD THE BAD THE UNKNOWN Significant supply side incentives Host recruitment Is it “Nice to Have” or a “Need” on Demand side ? Huge product opty Demand side scalability Suburban Moms / Housewives ? Low operating costs Customer acquisition Can our technology / app solve for scalability ? High margins Repeatability Can we run 150 K parties = in 3 cities = 140 parties per day after 3 years ? Interested Demand Safety & Quality CAC (need to test other options targeting moms / housewives).
- 23. NEXT STEPS - Technology + Housewives Housewives + Suburban Mommies WHY ? (Hypothesis) ● Less price sensitive ● Live in suburbia ● Cheaper CAC ● Available for non-peak salon hours (symmetry) ● Live in a good space ● Reputation sensitive ● Hosting expertise to be leveraged 1. Build MVP out to manage: negotiations; load suppliers; deploy invites & manage payments.
- 24. BUSINESS MODEL CANVAS Host Incentives and repeatable business
- 26. APPENDIX
- 27. ESTHETICIAN SALARIES DryBar GlamSquad Independent Salons Skincerity 4 hours per party 30 min. commute 2 estheticians $335*65% = $218 service commission $335*20% = $67 tip $80*20% = $16 product sales commission Gas = $10 Cost of Products = $3 per service*6 = $18 $273 / 4.5 hours = $61 Hourly Salary $15 - 17 $20 - 25 $15 - 20 $61 / 2 estheticians = $30
- 28. Assumptions: ● 1 Host (+ 5 guests) = 6 people ○ Average Spend = $60 in services ○ Free service for host = $25 value ○ 65% service commission ● Product upsell = $80 ○ 20% Commission ● CAC = $25 ○ Customer LTV = 2 parties DIAGRAM OF COSTS Esthetician acquisition $25 Service Commission 65%*$335 = $218 Payment Processing 3%*$415 = $12 Customer acquisition $25 Unit Costs $311 Gross Margin $104 Revenue 6 x $60 = $360 + products $80 - free service $25 $415 Other Costs: Unit Economics - One Party Product Commission and COGS (20% + 50%)*$80 = $56 Gross Margin (2nd Party) $129 Rent Server Costs Corporate Employee Salaries
- 29. ASSUMPTIONS FOR SCALABILITY GP ASSUMPTIONS ● 2 estheticians per party ● $415 gross revenue per party ($80 product sales) ○ $104 - $129 gross margin per party ● 4 parties per week (2 parties per esthetician per week) ● 5 new estheticians per week per city Q3 2015 SAMPLE CALCULATION ● 180 estheticians on platform ● 180 x $129 x 2 estheticians x 12 weeks = $556K Gross Profit ● CAC: $75K ($25 CAC / $600 LTV) ● Esthetician: $1.5K ($25 EAC*60 new estheticians) ● Employees: 5*$80K/4 = $100K ● Rent: 3*$5K = $15K ● Server Costs: $150 ● $191K Total Opex OPEX / EBITDA ASSUMPTIONS ● $25 CAC for estheticians and hosts ● 5 employees at average $80K salary per employee ● $5,000 / month office rent ● $50 / month server costs EBITDA: $365K
- 30. 3-YEAR INCOME STATEMENT - Quarterly
- 31. 3 YEAR INCOME STATEMENT - Annual
- 32. Finance / Operations / Fundraising Timeline
- 33. MVP - New Landing Page
- 34. Google Analytics 34 93 unique page views last week, 16 this week approx. 13 potential signups* 0 clicks on “I want to host” / “I’m an esthetician”
- 35. WHAT WE ARE GOING TO NEXT WEEK 1. Convert party attendees into hosts ○ Mass email / offer for past & future party attendees & hosts 2. Run parties to test margin scenario pricing ○ 3 parties scheduled for next week with outside hosts ■ party type: cross vertical / hair first time / sugar first time ■ pay model: hourly, high Skincerity cut ■ host incentive: getting free service 3. Test up-selling products in MVP 4. Update MVP ● Incorporate new messaging (SPA Party) into landing page ● Incorporate “planning package” as add on / up-sell 5. Get more hosts in the pipeline ○ Done (backlog)