The power of naivety

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Aaron Chatterley tells Emily Moore about how online beauty retailer Feelunique became that market’s version of ASOS

WHEN you consider the traits needed to succeed in business, naivety is unlikely to feature on that list.

And yet, as Feelunique co-founder Aaron Chatterley admits, were it not for that very characteristic, the online beauty retailer may never have existed.

‘The original plan was to set up a web design agency but then we got side-tracked looking at the way in which play.com had disrupted the market by selling CDs and DVDs online and we realised that while we could only scale a design agency so far, the potential to emulate play’s success in another vertical market was super interesting,’ he reflected.

‘At that point, the concept of buying items online was still relatively new and within beauty it was almost unheard of. Even a lot of the big brands and department stores didn’t have their own websites but with our knowledge of ecommerce, we felt there was tremendous potential in this area.’

Potential there might have been but, as Aaron admits, he and fellow co-founder Richard Schiessl had significantly underestimated the barriers to entry.

‘While we knew about ecommerce, we knew very little about beauty,’ Aaron smiled. ‘We assumed that if we built a great ecommerce platform, we could then go out and get the brands. In reality, it took many years to secure all the brands we wanted and if we had known then everything we know now about cracking the world of online beauty retail, the barriers to entry would have seemed unsurmountable, so our naivety was actually very helpful.’

Feelunique Picture: JON GUEGAN (35324412)

Helpful it may have been in the long run but, in those early days, Aaron admits that the requirements of many of the prestige brands pushed Feelunique in a direction far from that which they had originally intended.

‘We soon discovered that the luxury brands have very selective distribution models which meant that we couldn’t sell their products online unless we also sold them in a physical store,’ he recalled. ‘Having set out to create a purely ecommerce business, the last thing we wanted were physical shops, but we ended up with multiple outlets in Paris and the Channel Islands, as well as spas and hair salons just so that we could secure the supply that we wanted.’

And the men were ambitious in their desire, wanting to sell ‘everything from Rimmel at one end of the market to Dior and Chanel at the other’.

‘We wanted to become the ASOS of beauty,’ Aaron said simply. ‘We wanted Feelunique to be the obvious choice for anyone, anywhere in the world, to go to buy their beauty products.’

But, as the market became increasingly competitive, Aaron started to become a little nervous about achieving this goal.

‘For the first six or seven years, we were well on the way to reaching that status, securing the brands we wanted and seeing sales growth of north of 100% each year,’ he said. ‘But gradually more and more players were entering the market and I started to become nervous that if we didn’t become the ASOS of beauty by a certain time, ASOS themselves, Boots or anyone else who came out of the wings could take that position.’

With the business’s upward trajectory having attracted a lot of interest from potential trade acquirers and investors, the men seized a ‘window of opportunity’ in 2012 and sold half the company to private equity.

‘When we founded Feelunique in 2005, the environment, and particularly the funding ecosystem, was very different from today,’ Aaron explained. ‘Whereas it is now quite common for businesses to raise huge amounts of money at an early stage, that approach didn’t apply to Feelunique and, indeed, if such funding was available at the time we launched, we certainly weren’t aware of it.

‘Instead, we put together a business model and financial forecasts and predicted that we needed £70,000 to get the business off the ground. We then had to make that £70,000 take us to a point where the business became profitable and, thanks to a combination of luck and smartness, we pretty much got there.’

While Aaron says that venture capital became more prominent over the next 15 years, making it easier for businesses to ‘fuel exponential growth by raising significant amounts of money’, that cycle is beginning to wane.

‘That approach tended to raise company valuations and investor expectations quite dramatically and, while the availability of money has been great for innovation, it has seen many valuations get out of hand,’ he reflected. ‘Now, with the financial markets as they are, money is harder to come by and venture and private equity investors are more careful about how they deploy that capital.

‘As a result, while we have not necessarily seen a lack of investment in start-ups, we have seen a depression in valuations which is good in a way because it means that businesses need to focus a lot more on the quality of their financial forecasting and on developing a more robust path to profitability.’

From the Feelunique perspective, the 2012 move was designed to enable the firm to scale ‘quickly enough to secure that dominant market presence’. But, while the business grew quickly, Aaron still has some doubts over whether selling to private equity was the right decision.

‘It’s a tricky question because I don’t know what would have happened if we hadn’t done it,’ he admitted. ‘However, I think we could probably have grown more quickly and more efficiently if we hadn’t done the deal. Having said that, the important lesson is that you have to look at the start and end points and, ultimately, Richard and I launched a business, from Jersey, with £70,000 and, 16 years later, that same business was turning over £110m and was sold to Sephora for £132m.

‘When you look at it from that perspective, all the pain, the ups and downs and the questions over whether we made the right or wrong decisions fade into insignificance. You can always look back and say that certain things could have been done differently but the intention was always to build a business to a point of exit and that was what we did.’

While setting out to build a business that would be large enough to sell in that way required a ‘massive amount of self-belief’, Aaron admits that there were several moments when his inner feelings did not match his external confidence.

‘If you had caught me at 3am on one of the many days when I woke up full of doubt, regret and fear and asked me whether I thought the business would really work, I would have said “no but we’ll have a really good go at it”,’ he said.

And, having invested in several ventures since selling half of Feelunique in 2012, he believes that ‘imposter syndrome’ is essential in any business founder.

‘When someone pitches a business idea to you, there are several areas you look at, not least of which are the quality of the team, the quality of the idea and whether it is solving a problem,’ he said. ‘However, if the founders don’t have a degree of imposter syndrome, an amber/red flag automatically pops up. While you have to believe in your product or service, I believe that all the people who have done super well in business have a degree of humbleness and self-doubt.’

As he credits his family for helping to keep him humble during the heady days of Feelunique, it is perhaps fitting that it was his daughters who provided the inspiration for his latest venture, which is due to launch this summer.

‘As we were unwinding Feelunique, a lot of people asked what I was going to do next and what the next idea was and my answer was always “nothing” because nothing had captured my imagination and ignited my hunger,’ he said. ‘But, in August 2021, we were on a family holiday in Majorca when, over a lunch of chicken nuggets with my then 12-year-old twin daughters, we got into a conversation about fashion and how they learnt about different brands.

‘Perhaps naturally, I then asked about teen beauty brands and which brands they were aware of, to which they answered “there aren’t any teen beauty brands”. My first thought was that’s nonsense but, the more I thought about it, the more I realised that there weren’t really any holistic make-up and skincare brands designed specifically for teenagers.’

Indeed, a look through his daughters’ toiletries bags revealed a range of products from brands including Charlotte Tilbury, Superdrug and Too Faced.

‘It was a real mix and many of the products were aimed at an older demographic both in terms of formulations designed for adult skin and in terms of the product names and brand positioning’, he said. ‘As an example, Too Faced has a Better Than Sex mascara. With many teenagers faced with genuine challenges about their self-image, is that really the right messaging for them to be exposed to?’

As the conversation continued, Aaron jokingly said: ‘If there isn’t really a teenage skincare and make-up brand which kids think is cool and adults think is positioned appropriately for their children, then that’s quite interesting. Maybe we should set one up.’

But while those words may have spoken in jest, as he sat by the pool after lunch, the idea persisted.

‘I then spent the next couple of weeks validating the idea, talking to people in the beauty industry about whether they thought it had legs and getting feedback from the senior managers at brands such as Benefit and Estée Lauder, all of whom said they would love to get involved or invest if we launched something,’ he said.

Thus encouraged, Aaron spent the next 18 months building a team which included a founder of Benefit, founder of Elemis, the former president of Estee Lauder US, the general manager of Sephora UK and the head of product development from Trinny London.

‘It’s a really strong team and the skincare has been designed with one of the formulators between many of Elemis’s products,’ he said.

And, with his own children having inspired both the concept and the name – Indu – it is no surprise that young people aged 11 to 17 have been involved in the product design.

‘The premise is that kids want make-up but need skincare and so the whole range has been designed alongside the audience,’ he said. ‘About a year ago, we appointed a specialist research agency called Kids Know Best and went out to 2,000 kids in the UK and America, asking them what brands, colours, smells and texture they bought. Then, as we started to develop the brand identity and product mix, we went back to the audience to get their feedback. We are still working with around 100 youngsters who are receiving the end samples and giving us their views.’

It is a very different approach from the one which gave birth to Feelunique but the one thing which hasn’t changed is Aaron’s conviction in the concept that commitment to building the right team and confidence that the business offers a solution.

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