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(Michelle Siu/The Canadian Press)
(Michelle Siu/The Canadian Press)

THE CHALLENGE

Sell skin-care products in-house or go retail? Add to ...

Each week, we seek out expert advice to help a small or medium-sized company overcome a key issue.

Over the past 16 years, Toronto-based Lege Artis Skin Care Inc. has built up a loyal clientele composed of customers who all want the same thing: beautiful skin.

The company was founded in 1996 by Irina Revo, an esthetician who graduated from medical school in Moscow with a specialty in dermatology but hasn’t obtained Canadian credentials. Lege Artis provides a variety of skin-care services – including removal of acne, age spots, spider veins and unwanted hair – with the aid of technology such as laser and LED light therapy.

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The clinic also sells a number of brand-name skin care products. But noticing some clients have found a few of the products irritating to their skin, Ms. Revo began to develop her own moisturizing creams and gels two years ago and started selling the products – five in total – in her clinic. The products, which are sold under the Lege Artis brand, are registered with Health Canada as cosmetic, non-medical products.

Last year, sales from the five products, which range in price from $50 to more than $100, totalled about $10,000.

“We’re kind of in trial mode right now, just testing how people will like the product,” says Ms. Revo, who says she hand-makes the products herself using natural ingredients with soothing properties. “So far, the reaction has been positive – once people try the product, they come back and ask for it.”

Ms. Revo is ready to step up sales of her products but isn’t sure whether she should sell them exclusively through her clinic or put them on the retail market.

Keeping the products in-house would create a competitive advantage for the clinic, says Ms. Revo, but this would mean catering to a very small market.

Selling the products retail would likely translate to much higher revenue but would require significant capital investment, Ms. Revo says. She’s also worried this would make it easier for another company to copy her products.

“The products we developed are not really patentable – our lawyer says it would only make sense to patent them for marketing purposes,” Ms. Revo says. “Should we decide to go big today, there’s a big chance of being copied tomorrow.”

The Challenge: Should the company sell its new line of products in-house or in the retail market?

THE EXPERTS WEIGH IN

Nicholas Scott, president of Ottawa-based business consulting firm Profit Plus Canada Inc.

The products should be sold in-house until a formal business plan is developed. Lege Artis needs to determine the in-house and external resources needed for this new business. These resources include financial resources, access to capital, access to expertise and much more. One particularly important resource would be the services of a company or person with a proven track record of getting retailers to sell their clients’ products.

It’s very hard, if not impossible, to prevent copycats. My best advice to Ms. Revo: Obtain the best legal advice possible from a specialist with a proven track record. This may be a lawyer who specializes in intellectual property.

The ambitious plan to obtain premium shelf space in retail stores is very complex. Ms. Revo may want to take a very close look at the option of optimizing all the revenue streams of her current business – the sales of her skincare services and of her products – before considering the complex and very demanding quest to persuade retailers to sell her products. Ms. Revo would be competing with very large companies for precious and very limited shelf space.

Delia Fiorante, assistant manager, Humber Spa, Humber College in Toronto

Having only six products, it will be a challenge for her to get into big retailers who usually require so many more units within a product line before they’ll even look at it.

I think what she needs to do first is create a buzz about her products. What’s the story behind them? She needs to be able to tell that story in a way that will intrigue people and make them feel they’re discovering something new and exciting.

Maybe she can start by focusing her sales and marketing efforts online and see if she can create a buzz that way. She can also try to generate awareness by getting her products into swag bags at events such as the Toronto International Film Festival. She should definitely approach beauty editors at magazines and invite them to try her products.

Ms. Revo should also consider putting her products in other skincare clinics. She may have a competitive advantage by selling them exclusively in her clinic, but she stands to gain more by selling them through other clinics as well.

Lee Graff, president and co-founder of Toronto-based cosmetic manufacturer Cover FX Skin Care Inc.

This made me think of the early days in my own business when I initially wanted my products only for my own patients. If she wants to take her products out of her clinic, then she needs to feel incredibly confident that there’s nothing like it in the marketplace. She needs to look at what similar products she’ll be competing against and what makes her products truly unique.

The other big question to ask is: can she afford to take her products into the retail market? I didn’t draw a salary for two years. With suppliers, once you start ramping up, they’ll want to get paid. And it’s important that you’re able to pay, because if you don’t, they’ll cut you off. The first question retailers ask you, especially the big ones, is: if we put you on our shelves, can you supply us? The kiss of death is not being able to supply.

Her products seem to be tied to her reputation; her clients buy them because they know and trust her. So perhaps the thing she needs to do first before expanding sales outside her clinic is to make her products hugely successful in her own business. To do this, she needs to become a brand herself and make her clinic the place to go to for skin care in Toronto. Let people clamour for her and her products, and when she’s built that demand, that’s the time to put them in retail.

Three things the company should do now

Create a business plan

Figure out what is needed to build the skincare products business and develop a business plan based on those needs and the company’s goals.

Build up the brand

Raise the clinic’s and Ms. Revo’s profile to make Lege Artis the go-to place for skin care in Toronto.

Create a buzz online

Market and sell the products through the Internet.

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