Net Business
Online cosmetics stores making up for lost time
San Francisco Business Times - by Adam Feuerstein
For an industry obsessed with bits and bytes, there is an awful lot of talk these days among Internet folks about lipstick, eyeliner and mascara.
Online cosmetics stores are all the rage, it seems. San Francisco-based Gloss.com, a new entry into this suddenly crowded -- but oh so fabulous -- market, opens for business this week (insert air kiss here).
Seriously, there are some big bucks to be made here. We're not talking five-and-dime cherry-red lip gloss, but so-called "prestige" cosmetics -- a $6 billion market for tiny tubes of hoity-toity lotions, creams and powders for which women willingly shell out heapfuls of cash. Think Lancome, Estée Lauder and Clinique and you get the idea.
The value of these cosmetics comes from their exclusivity and their high price, so you won't see fledgling e-tailers like Gloss offering any two-for-one discounts. The online stores, like their department store competition, all charge full freight. That means fatter profit margins than the Amazons and Onsales of the Internet world.
No wonder then that male-dominated VC firms are tripping over themselves to fund these new cosmetics e-tailers. Gloss.com has picked up nearly $25 million from the likes of Bessemer Venture Partners, MediaOne Ventures and a private equity arm of BancBoston Robertson Stephens.
Gloss is not alone. Eve.com, also based here, is already up and running; as is Beautycare.com. Then there's Beautyjun-gle.com, Beautyscene.com and iBeauty.com, among others.
So can Gloss shine above its competitors? Co-founders Sarah Kugelman and Deanna Kangas think so. Both women are experienced retail and cosmetics industry veterans. Kugelman helped Banana Republic launch its fragrance business and spent time in the management ranks at Bath & Body Works . Kangas also worked at Bath & Body Works, but most recently helped launch the Michael Jordan cologne.
"Women want the convenience and selection that shopping online affords, but Gloss has to be visually exciting and fully reflect the quality and prestige of the brands we carry," says Kugelman.
The Gloss site will read more like a magazine, Kangas says, with editorial content directed by Dorothy Schefer, a former beauty editor at Mirabella magazine. There will also be chat rooms, celebrity appearances and live cybercasts of special events.
Competition is tough, however. Gloss isn't the only site to offer tons of content. Eve.com, for instance, offers much of the same, as do many of the other sites.
At the end of the day, however, the winner or winners in this fast-and-furious e-lipstick shopping war will boil down to the sites with the best selection of hot, trendy cosmetics. Gloss will launch with about 70 brands; Eve.com is about to roll out its 100th brand.
This is where my expertise ends, unfortunately, because I don't know the difference between a lipstick from Phyto Therathrie (Gloss) and a mascara from Vincent Longo (Eve). What I do know is that the above-mentioned Big Three of the cosmetics world -- Lancome, Estée Lauder and Clinique -- aren't offering their products to any of the online e-tailers. If one of the sites does land these major accounts, their competition will be turning red, and not from an overdose of blusher.
The Commerce One stock rocket takes off
Some Net stocks zoom right out of the blocks, others take a while to ignite. Commerce One, it seems, fits nicely into the latter category.
The Walnut Creek-based business-to-business e-commerce provider had one heck of a two-day run with the Wall Street bulls, beginning Friday, Sept. 17, and continuing the following Monday, Sept. 20. On Friday, Commerce One stock jumped $19.81 to close at $100.06, an all-time high.
On Monday, the stock zoomed another $24.81 to close at $124.88.
What's going on here? Analysts say Commerce One is hitting all its marks at the moment. The company recently announced several new major customer accounts and is expanding its global operations. And it doesn't hurt to be an active player in the red-hot business-to-business market.
Commerce One's rocketing stock may be fleeting, especially given the volatile nature of Net stocks in general. But for now, the competition between it and rival Ariba Technologies is much more interesting.
Surprise! It's another Internet IPO
Digital Impact, the San Mateo-based direct e-mail marketing firm, has filed for an initial public offering.
The company seeks to raise $65 million, according to its filing with the Securities and Exchange Commission. Neither the number of shares nor the price per share were disclosed yet.
Led by founder and CEO William Park, Digital Impact helps traditional and Internet retailers use e-mail to boost customer loyalty and increase sales. Customers include the Gap, Tower Records and eToys.
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