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eve.com: Looking Out For Serpents in the Online Beauty Market

While Eve may have been the world's first woman, the biblical book of Genesis indicates that she fumbled her first-to-market advantage in a one-sided strategic relationship with the serpent (who, rumor has it, was really a lawyer working for Microsoft).

But a new Eve -- eve.com founded in November 1998 -- intends to avoid those front-runner stumbles in its quest to own the online market for prestige women's cosmetics. Both Goldman Sachs and Paine Webber estimate that United States women spend more than $6.5 billion a year on upscale cosmetics and skin-care products, 60% of which are replacement purchases. Jupiter Communications thinks that online sales will account for about 25% of that total by 2002

While drugstore-level cosmetics like Oil of Olay and L'Oreal are available all over the Web, upscale brands from Givenchy to Urban Decay are mostly still unavailable on the Web because the manufacturers are extremely choosy about how they are presented and also because they are concerned about offending their brick-and-mortar retailers.

Regardless, the Web is an ideal venue for these products because, according to Jupiter Communications analyst Mike May.

"Advertisements for these products are national, but their reach is local." And the Web, he said, may be the only way women outside major cities can obtain the products.

But founders Varsha Rao and Mariam Naficy have finessed those problems, signing exclusive Web deals with more than 60 of these exclusive manufacturers -- evidence of just how valuable a first-to-market advantage can be. They have also inked an exclusive pact with women's portal, women.com.

In addition to exclusive Web deals, eve.com has taken advantage of its first mover status by creating personalized shopping experiences for its customers, free streaming video beauty advice, free samples with every order shipped, free shipping, postage-paid returns, expert beauty advice and chats.

eve.com closed $17.5 million in third-round financing earlier this month led by Weiss, Peck & Greer, and including previous investors Charter Venture Capital, Menlo Ventures and idealab!. The company's initial $200,000 in seed financing came from idealab!.

But a multi-billion-dollar market of this size attracts competition which means that eve.com's smooth sailing is likely to get choppier in the next two or three months as two other competitors -- gloss.com and Sephora ready their own sites. Sephora is likely to be the toughest competitor since it is part of global luxury goods company Moet Hennessy Louis Vuitton which, in addition to its corporate muscle, has its own venture capital operation.

"They've the only player in this space this week," said Jupiter's May who emphasized the threats posed by Sephora and by traditional retailers such as Macy's which has finally awakened to the Web.

There have always been a lot of snakes in the grass in the cut-throat world of cosmetics, but eve.com seems poised to stay ahead of the pack if it continues to step carefully.


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