How did Clarisonic Crack $40M in sales in Beauty Market?

Clarisonic Skin Cleanser Cracks $40M in Sales on Kudos From Oprah and YouTube Beauty Queen

The same people who invented Sonicare toothbrushes have another emerging hit on their hands. This time, David Giuliani and his team of scientists and engineers in Bellevue, WA, who make the Clarisonic device have created a sonic-wave powered brush that’s designed to give people a cleaner, healthier-looking face.

They’re marketing a $195 luxury consumer product in the middle of a recession — and it’s working. Their angel-backed company generated sales of $40.1 million in 2008, up from $1.7 million three years earlier. It has now turned profitable on an annual basis, and has grown to 150 employees after adding 20 new people this year, Giuliani told me last week when I visited his office. This year will be “considerably” better in revenue, although he wouldn’t disclose projections.

Clarisonic’s technology is new, but the problem it’s trying to solve is old. Anybody who’s walked by an American magazine stand knows there’s a powerful demand for products to help people look and feel younger and healthier. There’s also no shortage of late-night TV hucksters with overhyped lotions and potions, so it can take a while for a legitimate product in the skin care business to gain traction. But for those that do succeed, like Allergan’s anti-wrinkle product Botox or Medicis’s Restylane, the rewards can be huge. The U.S. market for skin-care products is estimated at about $20 billion a year, according to Impact Marketing Consultants.

The Clarisonic product has been around for five years, but it started gaining momentum in the past two. It started in 2007 when Oprah gushed on her TV show that it was one of her favorite things (that always helps). More recently, Courtney Cox confided on The Rachael Ray Show that Clarisonic is one of her beauty secrets. Cameron Diaz, Tyra Banks, and Justin Timberlake have all said publicly they are fans of Clarisonic. None are paid spokespeople, says marketing director Bill McClain.

Social media has been even better for Clarisonic. Back in June, a young woman with an earnest voice, Michelle Phan, posted a rave review of the Clarisonic product on YouTube. Within a few hours it had 15,000 page views. Three months later, the review has gotten more than 320,000 viewers, and Clarisonic didn’t have to pay a dime.clarisonicpic

“People who use the product love it,” Giuliani says. “The important conclusion that the market is drawing is that this thing really works. It shocks people. They’re used to things that don’t work. You should see customers when they hear about it. They say, ‘Oh, yeah, I’ve heard that one before.’ So we need to deliver for them.”

The story of Clarisonic began in 2001, a year after Giuliani, a Stanford-trained electrical engineer, became a wealthy man through selling his company, which developed the Sonicare toothbrush, to Dutch consumer-products giant Philips Electronics. The founding team had all worked together on the Sonicare. Robb Akridge brought immunology skills; Steve Meginniss was the mechanical engineer; Ken Pilcher, the electrical engineer; and Ward Harris, the chemist.

They set out to focus this science and engineering talent on coming up with something special for skin care. “It’s so big, and overlooked,” Giuliani says.

The original ideas were to try something with light technology, or chemicals, but ultimately the team settled on something right in their wheelhouse—sonic technology like what they’d used to clean teeth with Sonicare. Their key insight: Our skin tightens up when

it’s stretched longer distances. If Clarisonic could use sound waves within a short radius instead, gently jostling the skin with a brush rotating about 300 movements per second, the device could pop loose all the usual bacteria, oils, dirt, and dead skin cells that accumulate on the skin.

This action opens up pores, which improves the absorption of lotions into the skin, like sunscreen or moisturizer. Because this is a cosmetic device, not a medical device making claims that it can treat a condition like acne, it never needed to win approval from the FDA to enter the marketplace. Customers pay for it out of their pockets, so there’s also no need to hassle with insurance reimbursement.

Clarisonic has clearly put considerable thought into how to market the product — appealing to vanity while suggesting it has more substantial health benefits, without crossing the line and ticking off the FDA. “It’s a health-care product that delivers beauty,” is how McClain, the marketing director, put it.

I’ve never tested it myself, partly because I’m a guy. But one of my trusted former colleagues from The Seattle Times, Pam Sitt, once wrote, “My skin felt smooth as a baby’s bottom when I was done.”

The product didn’t cost a fortune to develop. Clarisonic got about $650,000 in seed funding during its first three years, mostly from Giuliani’s own pocket, according to this story in The Seattle Times when the company first surfaced in public in 2004. Since then, Clarisonic raised $10.5 million in April 2007 from San Francisco-based Rosewood Capital and angel investors. Giuliani wouldn’t say how much capital has been invested to date, or who the angels are, other than that a lot of them were the same people who made big returns on the sale of Sonicare, which had 600 employees and $175 million in reported revenues when it was sold in 2000.

“A lot of people who invested [in Clarisonic] were playing with the house’s money,” Giuliani says.

Clarisonic has added two new products to its lineup this year: one higher-end

$225 model that can clean the face and other parts of the body, and a lower-end $149 model that is “cute and tiny,” Giuliani says. The company maintains active R&D at its Bellevue offices, but Giuliani wouldn’t say anything in detail about any new products Clarisonic has in the pipeline.

The company has two distinct markets it is pursuing now. One is with professional dermatologists, who use the device to clean patients’ skin before they undergo ultraviolet treatments for acne, or spas like Gene Juarez that use it to prep customers for facials, or microdermabrasions. The other market segment is through high-end retailers like Saks Fifth Avenue, Sephora, and Nordstrom.

So far, no direct competitors have entered this market yet, and no big players have shown they are making a serious R&D effort, Giuliani says. It could be that these huge skin-care players, like Olay from Procter & Gamble, consider $40 million in annual revenue to be such small potatoes that it’s not worth their time, Giuliani says.

“The real competition is with how people are used to spending their money on facial care,” Giuliani says. “This is still a new way of treating the skin.”

Giuliani isn’t shying away from comparing his new company to the success with Sonicare. He noted that Clarisonic’s offices today are in the very same building from Sonicare’s early days, a 1970s-style, low-rise office and industrial area a few blocks from I-90.

He clearly has high ambitions for Clarisonic, and they appear to have grown over time. Back in 2004, he told The Seattle Times he planned to be less involved with the operations of Clarisonic than he was with Sonicare, and that he’d quit once the skin-care product was on the market for six months.

Five years later, he’s still the CEO. Now 63, Giuliani says he likes to skip from project to project at the company, getting personally involved in R&D, marketing, and manufacturing—whatever is needed at a given phase. When I asked if he plans to sell the company, he made it sound like he’s in no hurry to hand over the reins.

“We’re still at the beginning,” Giuliani says. “We’ve only reached a fraction of the potential.”

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