Beauty startups find it difficult to survive

Within a year of inception, Amber Wellness an online beauty startup, has ended its services in Indian cities of Bangalore, Delhi and Mumbai. The startup which was launched in August 2015 decided to shut down due to low-profit margins; though the ticket size was Rs. 1,300 on average.

Founded by Ex Co-founder of Housing.com, Abhimanyu Dhamija, and IIT graduate, Saurabh Goel took the hard decision of winding-up because on-demand businesses are going out of fashion. “We are not shutting down the company. We are making a conscious call to get out of this business. And we will be coming up with a new concept and launching in the next couple of months,” says Abhimanyu.

Startups in the beauty space are still unique – it’s the most personalized service, highly capital-intensive and operationally challenging. Abhimanyu said, “On-demand models work in an environment where there is enough liquidity on the demand side and the supply side and there is localized match between the two. It requires a lot of capital investment on both sides.”

He further added, “We were not making local supply-demand match, and logistics costs go through the roof. On the customer side, this is not something completely new that people want to pay highly to try out.”

Amber Wellness had raised seed funding of about $1 million from an angel investor. The company has also hired a professional team of five in-house stylists and 20 freelancers. With 275 freelance stylists specializing in bridal makeup or events, March and April were seen as the most lucrative months for Amber. In addition, they had launched an app in association with few baby care brands as their target audience includes pregnant women and young mothers who stay at home.

“In Mumbai, areas of high demand are Andheri, Powai and Bandra, but the beauticians live far off. We used to take commission, but for repeat orders from far off places, they had an issue as they had to carry a kit and take local trains multiple times,” Abhimanyu says.

Amber Wellness is not only company to pull the shutter down. In the past few months, PepperTap and a beauty startup, Stylish had to shut down due to lack of demand and poor unit economics.

In 2015, risk capital worth $9 billion was invested in Indian startups across 1,005 deals. However, in Q1 2016 only $1.42 billion was elevated into startups across 307 deals. Recently, many startups have started talking about unit economics and profitability. It remains to be seen how many startups will be able to endure with limited risk capital.