The health and cosmetics markets are so saturated with different brands that it seems almost impossible that a start-up could stand out from the crowd.
However, Mark Power has taken a brave stab at offering a point of difference with his business Organic Island, which he launched in 2007.
The company produces lip balm sold in real shells that people can open up.
He talks to StartupSmart about how he has overcome initial derision and a tough year in the export market.
What inspired you to start the business?
I started the business with a partner, who has since left. My background is in marketing, whereas hers is in swimwear.
We noticed the marketability of Aussie products overseas. Whether it was apparel, equipment or the health sector, Australian products seemed to do very well, especially in North America.
We wanted to offer something that was sharp, not gimmicky, that would sell well overseas.
It took about a year to develop the product. Originally, we wanted to put this skin moisturiser within a coconut, as we felt that would really stand out.
But it was difficult to source coconuts, so we narrowed it down to shells.
How did you go about doing that?
We got shells from wholesalers. They are black and need to be sandblasted to give them their natural colour, as well as be sanitised with chemicals.
But why shells?
We knew that shelf space is at a premium with retailers. The only way to get listed is to differentiate yourself. It has got great traction and feedback so far.
What did you do next?
The business cost $30,000 to start – $15,000 from the each of us. We targeted women’s beauty and fashion magazines overseas as we didn’t think there was a domestic market for it.
It wasn’t until we got coverage here that retailers became interested in Australia. It was our mistake, which took us about a year to realise.
It must’ve been difficult to get this unusual product ready for retail, surely?
We started with the Yellow Pages and contacted everyone we could to find a cosmetic manufacturer. We would call companies like Visy to ask who they worked with.
We eventually found one in Melbourne and another one in Brisbane. They said we were crazy – they laughed us out of the door.
We hadn’t got much experience in the industry, so we didn’t realise that as shells aren’t manmade, they are all different sizes and this is a problem. It’s hard to automate a manufacturing process when the sizes aren’t the same – it adds huge cost.
The company we eventually went with had foam moulds which kept the shells stable on the production line as the cream is put into them.
The manufacturer was a young start-up like us. They had a lot of experience in the industry and were excited by the opportunity. They’ve been fantastic through the whole process.
We now sell the product online and wholesale to retailers. I started by going out in the car and promoting the product.
So, you actively sought the advice of lots of people?
Yes, I wrote letters to the large retailers asking for advice on how to get the product and they were more than willing to help.
They told me “you should contact this person” or “do this differently”. There was a lot of scepticism, some people thought it was too crazy, but the advice of others really helped.
Did you ever have doubts?
Yes. I think every day I woke up and thought “why am I putting lip balm in a shell”?
What was the breakthrough?
The product was mentioned in two of Canada’s leading fashion magazine and a distributor got in contact with us. It was then represented at a trade exhibition, which got it great exposure.
Magazines in Italy and the Netherlands also covered the product. It was a challenge to upscale to Europe, cashflow, freight providers and currency conversions were all issues, but we did that in 2009.
Where is the product stocked now?
Canada, Korea, the Netherlands and the UK. Around 80% of the business is still wholesale. It has been the slowest year so far due to the high Aussie dollar.
We lost around 25% of sales this year because of the Aussie dollar. We need price points so that we can pass that on to the retailer, but the Canadian market has suffered badly, in particular. Orders really dropped.
What have you done to remedy this shortfall?
In March, we decided to refocus and get more Australian retailers on board. We sent packs to surf and apparel outlets, especially in tourist destinations.
The product is an excellent gift and impulse buy. Initially we saw it as a beauty and health product but neglected it as a gift, which was a mistake.
You see it at the counter and see that it is very different to everything else and you buy it. Once we were honest with ourselves about what the product was, we could tailor ourselves to the market. We’re now in 250 outlets in Australia.
We focused a lot on the ingredients, spending a lot on making sure they were certified organic. It cost a lot more, but we’ve had great feedback. We have women writing to us all the time.
But we’ve realised that we have to focus on the ingredients in Australia and the packaging overseas.
Aussies like to know what is in a product, while overseas, the first instinct is that “wow” factor.
What are your ambitions for the business?
We’ve picked up a bit of the slack in New Zealand, we’ve got into the largest surf chain there and the cost of freight is low too.
The high Aussie dollar has knocked us around, but I remain positive. We are launching 20 new products in March next year – a skin and body range and a baby range too.
I’m confident that we will get back to where we were by mid next year. We’ve reduced costs in things like our suppliers, printing and packaging. We’ve negotiated better deals so that we can give the retailers some margin.
We’ve subsidised the Aussie dollar, in a way.