By DermPRO

You might have noticed the hype about the explosive growth of e-commerce that has been triggered by COVID-19. Forbes reported in 2020 that "the pandemic accelerated e-commerce growth four to six years," and in 2021 that "the shift in online shopping triggered by the pandemic isn't slowing down." TechCrunch reported that "the pandemic has accelerated the shift to digital shopping by roughly five years." Most experts agree that the increase in online shopping is expected to be a permanent shift in shopping behavior. Everyone from major retailers to small businesses is seeing increased online sales, and the aesthetics industry is no exception.

DermPRO, a provider of e-commerce solutions exclusively for aesthetics providers, has released a number of reports that evidence similar pandemic-induced growth trends in aesthetics e-commerce, beginning in the summer of 2020 and expanding during the 2020 holiday shopping season. While the data is compelling, it's important to recognize that certain aspects of your business will set your practice up for success (or failure) in seeing a return on investment in online sales.

Is e-commerce a good fit for your medical spa? Let's look at some of the key success factors for e-commerce to help you determine if your practice is in a position to take advantage of selling online.

Before getting into whether or not your medical spa is ready for e-commerce, let's look at some fundamentals of the aesthetics industry. Aesthetics practices today generate a significant amount of their monthly revenues from "consumable services," such as neurotoxins and fillers, aesthetician services such as chemical peels and facials, and skincare product sales. Injectables often account for as much as 40% – 60% of the monthly revenues for an aesthetics practice.

How is your practice valued on pure financial considerations? At a very basic level, a practice must be able to acquire a patient at a cost that is relatively small in comparison to the lifetime value of that patient. Typically, the ratio of customer acquisition cost (CAC) to lifetime value (LTV) must be at least 3:1, but increasing that ratio even further will lead to better financial health for the practice.

Consider these two examples to draw out a stark contrast:

Aesthetics Practice One advertises on Facebook and Google Ads, but the leads are poorly managed, the conversion of revenue is inefficient and the cost per acquisition is very high. The patient has a poor experience at the practice and never returns. In this example, the CAC to LTV ratio is very poor.

Aesthetics Practice Two acquires patients by converting patients to cosmetic services from their medical dermatology practice. These patients return for both medical and cosmetic services over a period of years. During this time, the patient is on an injectables regimen and occasionally purchases additional services, such as CoolSculpting. In this example, the CAC to LTV ratio is very high and the practice demonstrates strong metrics.

Going a little deeper on the LTV side of the equation, valuation of your business can be measured in key performance indicators (KPIs), such as how many times a Botox Cosmetic patient comes in per year, or how many times a patient repurchases their skin care from the practice that introduced them to that skin care line.

A Tale of Two Patients

Let's take two hypothetical examples to draw out a stark contrast.

Scenario 1: A patient buys a skin care product from the practice and never buys again. The LTV is very small. Rent, labor (education, consultation) and commission will result in material CAC for that one-time skin care sale. That one-time purchase will not make a healthy CAC to LTV ratio. Repeated over multiple patients over months and years, the result will be significant suboptimization for the aesthetics practice.

Scenario 2: A patient starts a Botox Cosmetic regimen and the practice incorporates a bevy of tactics to retain the patient. The practice targets the patient for their "neurotoxin membership," which offers the patient a slight discount for coming in four times per year for treatment. The practice also re-markets to existing patients, with periodic offers such as discounts on complementary skin care products, and tactics such as an annual "bank your Botox" promotion, all of which are available for purchase online.

In Scenario 2, the practice's efforts to engage and re-market the patient leads to better retention and significantly higher LTV than in Scenario 1. Increasing the frequency per year is much more impactful than keeping the patient for a longer period of time, but a combination of both tactics will lead to an outsized return.

Let's assume you buy into the consumable model and the power of re-marketing and retention and the implications for LTV. Is your practice ready for e-commerce?

Defining E-commerce in the Aesthetics Industry

If you think Aesthetics e-commerce means "shopping carts for selling skin care products," think again. Today's most successful aesthetics providers are using the online channel to engage with their patients at all levels, with e-commerce serving as the engine behind virtual events, memberships, specials and promotions, and, yes, product sales and replenishment. Today's online stores for medical spas, dermatologists and plastic surgeons afford their patients a convenient purchase channel for all things offered by the practice.

Today's aesthetic practices are employing e-commerce as a convenience for their patients to replenish skin care regimens and to facilitate the purchase of other services, gift cards and memberships. While online stores can acquire new patient revenue, the most effective way to generate fast return on investment (ROI) is for the aesthetics practice to market to existing patients, recognizing the "consumable" model of aesthetics businesses.

Headwinds and Tailwinds

Tailwinds are factors that will help your business benefit from e-commerce. Headwinds are factors that may hinder you from reaping the benefits. Let's break down some of the characteristics of your business that may be tailwinds or headwinds in your pursuit of selling online.

Maturity and Size. As e-commerce success often correlates to engagement with existing patients, factors such as the maturity and size of the practice should be considered when determining if your aesthetics practice is ready for an e-commerce solution. Maturity may be measured in the installed base of patients buying skin care, or the number of patients that want to purchase their injectables online or through memberships. Newer practices or small practices may find their lack of installed base of patients on skin care or injectables regimens to be a headwind that challenges their ability to see a fast return on investment from e-commerce.

Reach and Channels. If your practice has maturity and ample patients that are on skin care, injectables or other treatment regimens, but you have not focused in developing channels of reach such as email lists, social media channels or in-office promotions that help to re-market to existing patients, you may have some work to do before you'll see a strong ROI from e-commerce.

When you consider open rates for emails today, having a list of 1,000 patients may result in a meager 1.5 patients clicking to learn about offerings (1,000 x 15% open rate x 1% clickthrough rate). While these stats are purposely at the low end of the range, it underscores the point. Similarly, if you ignore other channels, such as social media or online marketing, you may not reach your installed base in a consistent manner. Healthy reach and channels are important tailwinds for the practice's results with e-commerce.

Marketing and Promotions. Marketing cadence is another important consideration. Having an email list of 10,000 patients is only as good as how often those patients are engaged with your brand. If you never market to that list or only do it occasionally, the list's effectiveness will decline. Practices that engage their patients regularly with monthly promotions, virtual events, memberships, Black Friday sales and the like are going to have a better response when regularly using these tactics.

The metaphor of building a muscle comes to mind. If you don't engage and continually update your list, you will suboptimize conversion on your marketing efforts. Regular and consistent email marketing is a powerful tailwind for e-commerce success. Email campaigns that include "shop now" links for convenient online purchasing of promotions generate high-converting traffic to your store and meaningful results for your business.

Other Factors. Other factors to consider when determining the fit of e-commerce for your medical spa may be patient demographics (old versus young), practice brand (patient engagement and loyalty) and location (competition). For example, a practice in Manhattan may have many competing avenues for luxury skin care, while a practice in Bentonville, Arkansas, may not.

Conclusions

One thing is certain: Over eight years of providing online stores for aesthetics practices, DermPRO has seen a clear trend of more practices of diverse sizes and locations getting higher revenues from their online stores. An alignment of maturity of the aesthetics industry and of online shopping behavior has made online stores a very popular endeavor for dermatologists, cosmetic surgeons and medical spas. If your business has a healthy baseline of patients on skin care or treatment regimens and engages with your patients regularly through email or other channels, now is a great time to add e-commerce to your arsenal.