Wellness blog 2016-07-05

How to choose right business model to lead in Indian wellness space

In the complex Indian wellness industry, an effective market entry model helps faster to scale in comparison with market creation. Here is a list of business models for beauty and wellness startups to scale faster.

How to choose right business model to lead in Indian wellness space

Beauty and wellness space is often considered as the easiest game to foray in. However, with the rising competition, influence of global market and adequate room for opportunities unleashed by inventive business minds, wellness industry has managed to get its share of attention from the investors.

Often startups make a common mistake of re-inventing a new business model or making a new path for generating cash flow that has ‘Never Been Done Before’. It makes them clueless over why they were unable to impressive the financier. However, in reality, what they don’t understand is the fact that an investor won’t risk his money into an unproven model of business, which most likely won’t give him good return on investment (ROI).

Significantly, there are many proven business models which may generate good revenue. Being an inventor, a startup needs to figure out which one works best for your venture. Thus, here is a list of business models to consider for your startup that have proven to be successful for Indian beauty and wellness industry across the globe.

1. Turn to franchising

When Naturals salon has established its salon venture in India, they had no idea of how to swell from single outlet to multiple. The brand owners were approached by a franchise company and rest is history. Similarly, those with a desire to turn dreams into reality, but have no first hand experience of establishing a beauty business can take franchise of any successful brand and learn tit-bits of the trade first and once sure of making a bang on entry with your own brand, hit it.

Why it works: Becoming a franchisee gives experience from the horse's mouth and saves you from common startup mistakes of wasting funds. This model also gives a startup learn to keep a watch over quality control of the product or service they are planning to introduce in the market. Moreover, it gives immediate feedback from the franchisors to continuously develop a better product of their own. This model also allows for better control over contracts and negotiations with distributors, as well as building stronger relationships with suppliers.

2. Online marketplace

This is one of the ever growing business models that continue to prove beneficial for tech startups as well as beauty retailers. The model helps in bringing supply and demand at a common platform. UrbanClap reigns as one of the top successful brands to implement this business model. Providing a service is out, and becoming the marketplace is in trend at the ever growing e-commerce sector.

Why it works: There are several advantages of this model. Firstly, having zero to little overhead and no inventory, one can get a swanky office space if want or may run the company virtually. Zero risk and pressure of selling inventory or product as here you are providing a common platform to the sellers and buyers without worrying about manufacturing costs.

3. Business of subscription

Mobile payments continue to rise in popularity and consumers are trending towards a simpler, hassle-free kind of shopping experience. These trends are leading towards explosive growth in subscription based services that consumers can easily set up and then not worry about, knowing they will receive their product or service every month. Amway is one of those simple subscription services that made it much easier for men and women to not worry about running out of personal care products and save money.

Why it works: This business model provides an optimal balance of value to both the startup and the customer. This enhances the sell-ability of the company, increases the attractiveness to potential VCs and buyers, and often leads to valuations up to 8 times that of similar businesses with little recurring revenue. On the startup end, the value lies in being able to predict revenues through recurring sales, which is incredibly advantageous for a company’s valuation.

4. On-demand model

The on-demand beauty business has developed an appetite for greater convenience, speed and simplicity. Today, the Indian consumers have inclined towards instant gratification. Smartphones have driven transformational shifts in ancient buying behaviour of the consumers and on-demand startups are shaking up wellness industry by providing stead contracted work for consumers who want to become Solopreneurs.

Why it works: The on-demand market leaders know that this successful model is much more cost-effective, scalable and efficient than it’s ever been before. The model allows a startup to leverage new technology, while utilizing existing infrastructures. Another benefit lies in the use of freelance labour with its obvious advantages in cost cutting. There has also been an influx of VC belief and capital in this revenue model.

5. Virtual good model

Virtual goods are online only products users pay for normally in games or apps such as upgrades, points, gifts, or weapons. We all know the game Candy Crush and its addictive qualities that have wasted more hours than cost of us are willing to share. The maker of the game understands the power of the virtual good model and made a ton of revenues for digital products like extra lives or features like a ‘colour bomb’.

Why it works: Liquidity continues to increase as more market players live in virtual worlds. Virtual goods are also increasingly becoming a way for people to show affection and meaning as we continue moving into an app obsessed world.

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