Sabon, a small but growing Israeli-based chain of handmade, natural bath-product boutiques, quickly attracted a loyal customer following when it landed in New York City three years ago. The flagship store's unique environment of apothecary-style luxury—with its centerpiece sink made of a large stone water well from the ancient city of Jericho, chandeliers, world music mixes, rows of soap blocks sold by the slice, aromatic oils, rose petal mineral balls, and loofah sponges dipped in glycerin—immediately distinguished it from the growing flutter of beauty lotion-and-potion emporiums.
Sabon, which means soap in Hebrew, got its start nine years ago after entrepreneur Avi Piatok discovered a store that sold old-fashioned soap by the pound while traveling in New Zealand. When he returned to Israel, he found a man who could make natural soap using minerals from the Dead Sea and decided to open a store based on the concept. The outfit's brand of bath products, made using a 70-year-old process and produced on a kibbutz with natural ingredients like olive oil, sea salts, and lavender, became a hit. Soon, Sabon grew into a chain of 22 shops across Israel, including trendy places like Tel Aviv's Sheinkin Street.
But Israel, with its population of nearly 7 million, has a small domestic market. And as a result of regional hostilities, the country is all but closed off economically from its Arab neighbors. However, Piatok wanted to grow his business. To do so meant launching Sabon internationally. So, in 2003 he tapped his childhood friend Sharon Hasson, a Tel Aviv retailer, to open a New York flagship store.
CELEBRITY FOLLOWING. It was a pilot venture for the partners. If Sabon could work in Manhattan, they believed that they could replicate the concept globally. So confident were they, says Hasson, who moved to New York full-time that same year, that they didn't even bother to create a business plan (see BusinessWeek.com, 2/24/03, "Burn Your Business Plan!"). "I just knew I had to find a location," he says. "There wasn't really anything like us here, and I knew the reaction of our clients."
Hasson's instincts were on the money. Although the pair did not advertise, Sabon quickly became popular with celebrities like Julia Roberts and Susan Sarandon, who fell for what Women's Wear Daily called the company's "rough-hewn luxury"—giving the fledgling store star cachet. Relying only on word of mouth and sales clerks who offer product samples to passersby, Sabon earned several nods in beauty and fashion magazines like Vogue and Elle, whose editors did not fail to notice Sabon's celebrity attraction.
According to Hasson, within 10 months, Sabon's American flagship surpassed its sales goals (the private firm would not disclose numbers) and rolled out a second location. Currently, Sabon has six shops in New York, two in Chicago, and one in Boston. The company opened a shop in Toronto last year and another in Rome in May. The partners are now considering opening boutiques in London and Tokyo.
NICHE GROWTH. "I like the atmosphere, it's really linked to the product for me," says Leila Djemal, an organizational development consultant, who originally shopped at Sabon on trips to Israel and then noticed one in Manhattan. "I like the whole package of the store, the way they display things, the rich creams. It's always kind of luxurious."
Sabon's entry into the beauty market comes at a time when luxury niche brands is the fastest growing segment in the industry. Spurred in part by the wildly successful Body Shop (LRLCY) that began in England in 1976 and has expanded to include 2,100 stores in 55 countries (see BusinessWeek.com, 3/17/06, "L'Oréal's Latest Leap"), brands like America's Kiehl's and France's L'Occitane have attracted rabidly loyal customers who are flocking to natural skin and beauty care products. According to Karen Grant, a senior beauty industry analyst at the NPD Group, a Port Chester (N.Y.) consultancy, this particular area of niche brands has been growing in the double digits since 2002 without slowing down. Last year, it contributed $265 million of the total $2.2 billion prestige skin care category. "The one thing that is important," says Grant, "is that customers want product efficacy, service, a product that is different from something else."
Despite Sabon's nearly overnight success, Hasson concedes that as a foreign entrepreneur coming to America, he faced a number of challenges. Although Sabon had already proved successful in its native Israel, the company had to make some adjustments in order to duplicate that achievement in this country. "Being an entrepreneur in the U.S. was difficult initially," says Hasson. "I needed to figure out the system first as it's so different from Israel."
LOVE OF LAVENDER. For starters, he couldn't just arrive and hang a shingle. He needed to get a business visa and a Social Security number. As well, according to Hasson, it costs about $50,000 to open a new location in Israel, compared to $300,000 here. There were cultural differences, too. Hasson found that his American customers were much more interested in knowing how the products are made and what their ingredients are. He also notes differing tastes, like lavender-infused products being more popular in the U.S. than back in Israel.
But Hasson says he also discovered that in running a business here, "Americans work hard. The competition is enormous, and people know they have to give their all if they want to succeed. The work ethic here is unique—people don't complain about long hours and especially in New York, I think they expect to give 100%."
He also had to learn to adhere to America's more formal business procedures. "If you don't know the formula," he explains, "you will struggle. But once you learn it, you can get it to work well for you. There are also so many rules and regulations to take into account, which can be frustrating initially. But now that Sabon is growing rapidly, I appreciate that control. The standards here are extraordinarily high, which is impressive—maybe because there's so much competition. In Israel things take longer. It's a small country and a lot of business ventures are between friends and family. So, the trust is there, which is nice. But sometimes people are less professional."
STARTING FROM SCRATCH. Now that Sabon has a significant toehold in America, it is looking to expand its footprint. In September it opened a new store in Paramus, N.J., and is considering Miami and Los Angeles locations. Hasson says his ultimate goal is to roll out 100 shops across the country by 2012. And while Sabon has been approached by some department and specialty stores, Hasson says, at least for now, they don't want to dilute the personality of the store by opening mini-boutiques inside larger stores.
In hindsight, Hasson says: "Being a foreigner in the States is hard, obviously. There is nothing easy about it. There is a different language to learn, the culture is different, and in a way you need to start from scratch. I was fortunate in that I had some good Israeli friends and connections in New York from Day One. But looking back, it was one of the hardest things I've ever done."