Software entrepreneur Alice Chang has convinced most of the beauty world to offer her virtual try-on technology to shoppers. Now, her newly public company is scouting opportunities in jewelry, apparel and even plastic surgery and dentistry.
IIt’s 9:30 am And Alice Chang wore her favorite color, pink, today, but didn’t bother to wear makeup. She logs on to her computer in her office in a high-rise in Taipei, complete with pink walls, large portraits of pink roses and framed photographs of Audrey Hepburn. With the click of a button, she can apply virtual makeup to her entire face, including pink lip gloss, blush and lilac eyeshadow. It was so convincing that no one on the other side of her video conference that day was smarter than her.
Meet the godmother of virtual makeup. Zhang, 60, is the creator of the virtual try-on technology, which has been adopted by beauty giants including Estee Lauder, Shiseido, Chanel and Revlon. Shoppers who used to have to guess which shade of lipstick, foundation or eyeshadow would suit them can now increasingly test options online and in-store before buying.
“We let them know exactly what products are best for them,” Zhang said, running her fingers through her long black hair. “Instead of you having to try, try, try. Or buy and return.”
Her company, Perfect Corp., has quickly become a dominant player in virtual try-on technology, an emerging area of investment for retailers looking to increase sales and reduce returns, especially for online purchases. Backed by $130 million in funding from investors including Goldman Sachs, Snap, Alibaba and Chanel, the seven-year-old company has trained its technology on hundreds of millions of users who have used it to complete dozens of tasks. A billion virtual try-ons.
Perfect Corp.’s client list includes 17 of the world’s 20 largest beauty companies, spanning more than 450 brands. “On top of that, she owns 85 percent of the important companies,” said Clark Jeffries, an analyst at Piper Sandler. “Usually, you don’t get that type of market share so early on.”
Tech giants such as Meta, Google and Snap are also licensing their technology to let users try and buy products on their platforms. 19 million consumers, a small percentage of whom are paying subscribers, use the company’s virtual try-on and photo-editing apps. All told, subscription fees have driven $47 million in annual revenue over the past 12 months, with a gross margin of 85%.
Chang, whose 14 percent stake was valued at $250 million after a volatile public market and a SPAC in October, is eyeing opportunities beyond cosmetics. Next up: pitch the product to hairstylists, clothing brands, and even plastic surgeons and dentists.
CHang was born in Taiwan In 1961, during the decades-long martial law, her parents served in the military before becoming government bureaucrats. “It’s a very normal family,” she said. Her parents wanted her to be a teacher, but instead she studied business administration at National Taiwan University and got a job at a bank. To look like the character, she started wearing suits and experimenting with makeup, for the first time in her life, trying to teach herself in a pre-YouTube era. Her mom doesn’t wear makeup and can’t help much.
Still not sure what she wanted to do, Chang went to UCLA in 1986 for business school, where she met her husband, Jau Huang. They returned to Taiwan together, she got an investment banking job at Citibank, and he became a computer science professor. Two years later, she joined antivirus software company Trend Micro, helping them restructure and prepare for an IPO. She eventually took over not only finance, but also operations and marketing.
In 1997, she took an 80% pay cut to start a business with her husband called CyberLink, a rare software company in a country best known for making computer chips and other hardware. They created a program called PowerDVD, which eventually became the default software used by many people around the world to watch movies on DVD on their computers. The couple won business from PC giants such as Dell, HP, and Lenovo, and their software ended up being pre-installed on 90% of all computers shipped worldwide. Chang, who served as CEO for 18 years, took the company public in 2000 and expanded into other types of multimedia software, such as ways to burn CDs and edit photos. Annual sales climbed to $150 million in 2010.
However, as PC sales began to slow, Chang began to think about how her company could expand into smartphones. She’s increasingly enjoying taking selfies to share with friends and family, but there’s no great way to retouch them. In 2014, she created YouCam Perfect, a free app that lets users “beautify” selfies by whitening teeth, removing acne or removing dark circles. In its first year, it got 17 million downloads despite zero marketing.
“If you try more, you buy more.”
Requirements are being verified. “My belief is that the pursuit of beauty is a basic need of every human being,” Zhang said. She released a second app called YouCam Makeup, also free, that lets users add lipstick, mascara, eyeshadow and other virtual makeup to photos.
However, the fledgling business is still struggling to figure out how to monetize its growing success. In 2015, Chang took away 80 employees (mostly engineers) and spun off the company from CyberLink, naming it Perfect Corp. She began pitching the technology to beauty brands, traveling 19 times in a year to New York, Paris, Tokyo and Shanghai, insisting she could drive sales by giving shoppers more confidence to press the buy button.
“If you try more, you buy more,” Chang said. “Solve the pain points of every beauty lover.”
ricewoman They were all very aware of the pain points she was referring to. For example, I’ve been procrastinating buying new foundation for months. Even though I chose the product after doing some online research, I knew I would still have to go to the store and ask a salesperson for help in finding the right color. So I put off. Then, while covering the story, I started playing around with Clinique’s virtual try-on tool. It asks to access my camera and asks if my skin is warm or cool. I don’t know anything, so it offers a hint: if the veins on your wrist look greener, your skin is warmer, and you look better in gold jewelry. Cool if you have more purple veins and you like silver jewelry. it is hot.
Seconds later, it came up with recommendations for my perfect shade (bone) and two accompanying lipsticks (blush and red hot). I checked my before and after images on the screen and added both products to my cart without thinking. The promise of a free sample with my purchase, plus free shipping, sealed the deal.
Many shoppers are being affected. Clinique says people who use its virtual try-on tool spend four to five times more time on its site and are 2.5 times more likely to buy. The value of orders soared 30%.
In a company case study posted on its website, Clinique technology chief Jeremy Harris said the tool was “so lifelike” that shoppers actually had fun using it.
This type of return has prompted hundreds of brands to add virtual try-on options to their stores and websites in recent years. Nars found that shoppers using the tool tried an average of 27 lipsticks, quadrupling conversion rates. After Benefit Cosmetics started letting shoppers try on their own brow looks — raising the arch, adjusting the thickness or toning down the color — purchases of brow products jumped 113 percent. Aveda noticed a fivefold increase in traffic to the site locator after people tried on different hair colors virtually.
The technology is also making its way into stores. Estée Lauder has installed 8,000 smart mirrors around the world, where shoppers can see the reflection of their own face and easily try out products with a tap. Previously, customers could only try on a few colors of arms with the help of a salesperson.
Efforts to create a more personalized online experience for shoppers have accelerated during the pandemic with stores closed, but are increasingly expected by shoppers. According to market research firm InsightAce Analytic, beauty brands will spend $2.7 billion on artificial intelligence technology in 2021, a figure that is expected to rise to $13 billion by 2030.
“Right now it’s like stakes,” Chang said.
PAdvantages of the perfect company The key lies in its face tracking technology, which creates a three-dimensional network by identifying 200 facial attributes in real time. This means users can turn their heads and the makeup stays in place. Its technology can recognize more than 90,000 skin tones, which it says makes it the most inclusive in the industry. It has over 500,000 products in its database and can come in different textures such as glossy or matte.
“This is not something anyone can replicate overnight,” Zhang said at a conference last year.
The company does face very little competition. Its closest competitor, ModiFace, was acquired by L’Oréal in 2018. Ulta Beauty has also developed its own makeup trial tool GlamLab, but it feels more crude.
Privacy concerns lurk because the company is handling sensitive information about people’s faces. Perfect Corp.’s technology has been the subject of multiple lawsuits alleging its customers collect biometric data from users without proper consent. A Perfect company spokesperson said that by company policy, the company cannot comment on ongoing litigation, but the company is committed to protecting personal data and never sells data to third parties.
Economic headwinds also loom. Many companies are cutting costs ahead of a potential recession, which could mean Perfect Corp. has trouble convincing customers old and new to approve new spending on its technology. Piper Sandler analyst Jeffries said the stock has been selling poorly, with investors concerned about the company’s growth as economic conditions worsen, e-commerce spending normalizes and consumers spend less. Growth will slow. That has weighed on the stock, which has lost a third of its shares in Perfect Corp. since the company went public.
Still, the company forecasts sales of $100 million by 2024. The forecast is premised on existing customers adding more products from the sister brands. It’s also trying to wrest business from smaller independent beauty brands.
It also sees growth opportunities in new verticals. For example, it is exploring expansions into plastic surgery and dentistry, where it can help patients see how they will look after various procedures like nose jobs, eyebrow lifts or lip fillers. Not only does this help with sales, but it can also help increase customer satisfaction by setting expectations up front, according to marketing materials.
Chang asked if I had seen the recent announcement about its jewelry launch, where users can try on rings, bracelets, watches and necklaces. She says it’s one thing to see a product on a model and quite another to see it in person.
Giving shoppers the ability to preview purchases before pulling the trigger drives sales, so it will become a regular part of online commerce, she reckons. No guesswork, store visits, or sales clerks required. “It democratizes the decision-making process,” Chang said. “Let them try, let them make up their minds.”