Beauty Direct forced to change tack

By PETER GRIFFIN IT writer

Beauty products e-tailer Beauty Direct is revamping its business in an effort to stem losses and get around pharmacy franchising rules that prevent it from offering a full product line.

The company's online venture, Beauty Direct Operations, will in future be run by shareholder and director Gordon Ritson, who owns the Queensgate Life Pharmacy in Lower Hutt.

From April, Beauty Direct will receive monthly licensing payments from Ritson's pharmacy, which will wear the costs of running the website.

Ritson said several high-end beauty product makers were willing to supply only recognised pharmacies.

"In the pharmacy world, because of franchising rules, it's difficult to offer a lot of products online," he said.

"The end result of this is to stop the cash burn in terms of the parent company," added Ritson.

John Fanselow had resigned as a director and the remaining board members have agreed to waive directors' fees.

Beauty Direct will also close its La Parfumerie store on Lambton Quay and chief executive Bronwen Evans will go to work for Ritson, maintaining the website. She will remain chief executive of Beauty Online at a reduced salary.

With the costs stripped out of the business, Evans said, Beauty Direct would be left in a "not worse than break even" position.

Beauty Direct will now bide its time until proposed changes to the Pharmacy Act would aid the company's expansion as an operator of a "bricks and mortar" pharmacy chain.

The changes, which could still be years away, could allow non-pharmacists to take minority stakes of up to 49 per cent in several pharmacies, compared with the previous limit of 25 per cent in just one pharmacy.

Beauty Direct lost $241,000 in the six months to September 30, 2002, on revenue of $444,000. For the year ended March 31, 2002, it reported a further loss of nearly $500,000.