Oddity’s AI-Powered Product Development Spurs Repeat Purchases

On Monday (Oct 2), Oddity Tech reported third-quarter results that showed revenue growth of 29% to 31% and attributed this to repeat sales in its Il Makiage and Spoiled Child brands.

In June, PYMNTS reported that the Israeli firm, founded in 2018 by siblings Oran Holtzman and Shiran Holtzman Erel, had planned to go public on Nasdaq with the ticker symbol ODD. In July, the retailer commenced trading.

The company uses artificial intelligence (AI) for product development and had earlier projected sales growth of about 20.5% for the three months concluding on Sept. 30.

The company now expects a higher gross margin of 68.5% (up from 67.5%) and an adjusted EBITDA margin between 21% and 21.5% (revised from 20% to 21.5%). This year, sales have grown by about 58%, with an adjusted EBITDA of at least $89 million, according to Oddity.

The Tel Aviv-based firm refrained from disclosing the precise sales figure for the quarter. However, according to finance chief Lindsay Drucker Mann, in the same quarter a year ago, they reported $68.9 million in revenue, as conveyed to CNBC.

Where Oddity Is Different

At the core of its business model is its proprietary technology, which integrates advancements pioneered by a former Israeli defense official. The company has reportedly accumulated billions of data points from its user base. Furthermore, Oddity not only has concentrated on new product development but has also evaluated the effectiveness of beauty products.

In late April, Oddity made a $100 million investment to acquire Revela, a biotech startup, and establish a laboratory in the United States to address problems like hair loss and wrinkles. The lab is using AI to create new molecules — a tool used in the pharmaceutical industry to develop drugs but not widely used in the beauty and wellness industry.

The company reportedly anticipates that Oddity Labs will have 10 products prepared for the market by 2024. Over the coming five years, Drucker Mann stated, they project Oddity Labs to contribute 30% or more to the company’s total revenue.

In 2021, Oddity finalized the acquisition of Voyage81, a deep-tech startup specializing in AI-based computational imaging. Voyage81 had been established in 2019 by a team of experts, which included Niv Price, who held the position of head of research and development in a technological unit within the Israeli Defense Forces. The other founders of Voyage81 were Boaz Arad, Rafi Gidron and Omer Shwartz.

Beauty Players Leverage AI

Other players like L’Oréal are looking to AI to instill consumer confidence when making purchases through virtual try-on (VTO) solutions. Meanwhile, other players like Laneige and Charlotte Tilbury have looked to AI to venture into the metaverse.

Read more: Virtual Try-On Software Searches for Competitive Advantage as Big Tech Steps In

These developments occur as AI, with the use of machine learning algorithms and data analysis, can examine extensive datasets encompassing factors like skin types, concerns, and preferences. This enables the delivery of precise and tailored recommendations, enabling shoppers to conveniently access personalized experiences from their homes, challenging the conventional requirement of physical presence for personalization.

Moreover, AI in the beauty industry has broadened the concept of personalized experiences by providing customized recommendations on a larger scale, as AI algorithms possess the ability to process extensive datasets and produce tailored recommendations simultaneously for numerous individuals.