Sustainable Value Chain Development in Medical Aesthetics

Victoria Leighton-Clark, Natalie Drew, Kate Byng-Hall , Marisa Palacios , WINDOME BANKING PARTNERS SAS thank you for your support and contributions.

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Business Model Evolutions

A product or service that has inelastic demand, consistent supply and inexpensive escapism (something pleasurable) would withstand any economic recession. Beauty, hair and skincare products; healthcare and hygiene services are the first among the list of recession-proof businesses. Business to Business to Consumer (B2B2C) model is where manufacturers (via distribution channels) delivery their products to service providers in turn combining the product with services to consumers as illustrated below. Medical aesthetics fits nicely B2B2C model since the products or devices are sold to service providers (clinics or centers), the practitioners then offer their treatments to consumers.

In addition to that, emerging Direct to Consumer (D2C) model is also transforming the way manufacturers are operating. According to Twilio Segment, Allergen, (industry leader in medical aesthetic space), launched their D2C channel via Allē app and resulting to $400million new revenue and more than 3 million loyalty user in 2021.

Another example of B2B2C model adaptation would be, Hydrafacial. In an interview with Amy Juaristi , Chief Marketing Officer of BeautyHealth (owner of Hydrafacial), Hultgren learned about Hydrafacial conventional B2B business model and their recent B2C marketing approach through various channels online and offline. While raising consumer demand and interest and combining both D2C and B2B integration of service providers online, enable Hydrafacial to direct customers to their partnering centers. This is a good example of strategic partnership thinking with Hydrafacials device owners (B2B customers) by creating demand for them.

Bullish Demand Ahead

In order to illustrate the bullish demand ahead, referred to the Jansen et la, out of 1756 respondents of the existing medical aesthetic consumer survey, only 7% expressed intention to stop their aesthetic treatment in case of recession as illustrated below graph. The rest intent to retain their aesthetic treatment spending with same product or lower cost or different treatment options as published in this table. This means 93% of existing users intent to continue their aesthetic treatments.

In terms of new users acquisition, it is estimated about 9% of global population reported had received one aesthetic treatment in 2023 in my 2nd article. Based on Rossi et la the consumers could be categorized into six different personas (illustrated in the table below) based on frequency of procedures and functional or emotional needs and briefly described as:

1.??? The Growth Catalyst - the new users, which is expected to double in conjunction of the societies embracing medical aesthetics as lifestyle choice.

2.??? The One-Timer - potentially fence sitter or young consumers who wants an occasional aesthetic experience, usually low budget.

3.??? The Deal Hunter – young and new consumers of aesthetics with specific concerns but limited budget.

4.??? The Glam Extrovert – generally higher income group with passion for their appearance and love to be great for the occasions.

5.??? The Reluctant Ager – people who started seeing signs of ageing and wanted to “control” it.

6.??? The Beauty Routiner – generally upper middle-class group who embraced medical aesthetics as part of their lifestyle even before social influencing started and keen to look for “something new”.

As summary, with at least 93% of existing medical aesthetic users intending to continue and more than double the rate of new customers acquisition projected, these are indications on how bullish the demand is. This would enable the industry to accelerate development of products and services and fuel consumers’ need.

Growing and Consolidating Value Chain

Referring my first article, medical aesthetics was an underdog flourished through accidental application discoveries among plastic surgeries, pharmaceuticals, medical devices and cosmetics industries. What made medical aesthetics so interesting? Let’s analyze the relative industries around medical aesthetics in terms of estimated market size, cumulative average growth rate (CAGR) in the coming years. The collective information is tabulated as below:

Among these branches of life sciences industry, other than healthcare, the rest of the industries are hovering around 4 or 5% CAGR growth. Medical aesthetics is an exception with more than double the rate of growth. McGuireWoods summarized the industry characteristics as below, which attracted investment appetite:

1.??? High profit margins

2.??? Low exposures to both commercial and government payors

3.??? Ability to reach down market (affordable price range), including non-medical services

4.??? Recurring service opportunities

5.??? Potential expansive service line growth (with different products and services)

6.??? Highly fragment market

Raise of Brand Owners

This diagram illustrates that, more and more manufacturers are switching to private label and concentrate in producing for other brand owners. While brand owners are focused on distribution and brand development with significant investment into sales and marketing, service co-ordination, regulatory compliance, open media communication among B2C and C2C channels.

The industry is further segmenting into mass or niche market. It is an advantage for existing market leaders as the brand awareness is established would have advantage on volume negotiation with suppliers but also bigger investment into sales and marketing activities. Any new entrants will need a much bigger and longer investment consideration to create an impact if they are after international market.

?Other specializing services such as 4PL logistics, marketing agency, end to end online consultation platform, e-commerce, Buy Now Pay Later (BNPL) financing partner are additional value propositions to the medical aesthetics industry. This are value added services that can enhance the growth rate of the industry. Such specializing services that could be outsourced to accelerate growth and raise the quality of services. They are becoming another new business model within the industry. Evidence of that is the quote of Nada Ali Redha , founder and owner of PLIM (BNPL service) in UK and Switzerland intended to help centers or clinics are grow new customer base. She explained in UK alone, clinics or centers are losing around 27% customers due to payment concerns.

?

With these new value-added players in medical aesthetics, one may ask how are they being regulated? According to Tseng, medical aesthetic is focused on improving people’s (consumers’) cosmetic appearance and not preventing disease. Due to scattered knowledge, personalized habitus to institutionalized or regularized this industry could be extremely difficult at least in Taiwan elaborated by Tseng. Considering the growing demand, dynamic value chain and proliferating services, here are some considerations for sustainable growth:

1.??? Leveraging regulation for consumer facilitation

2.??? Resource and talent management

3.??? True innovation vs “something different”

We will dive into the specifics, and potential path forward.

This is an extract of the full article.

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