strange shadow
Politeness: Weird
On Tuesday, a short seller claimed that the beauty and wellness company Odd Technology has been misleading investors and is not the pure online retailer it claims to be.
The company, Ningi Research, Published a 50-page report The filing details a series of allegations against the newly-listed retailer, including that it operated a chain of stores in Israel and engaged in deceptive billing practices. Ningi holds a short position in Oddity but did not disclose the size of the position.
Oddity Tech, the parent company of cosmetics brand Il Makiage and skin-care brand Spoiled Child, is pitching investors on the premise that it is disrupting the traditional beauty industry by changing the way people buy cosmetics online. The company positions itself as a pure-play digital retailer that sells products directly to consumers and says it has achieved huge profits and growth that its peers have struggled to achieve.
Oddity shares fell more than 10% in early trading Tuesday. Oddity did not immediately respond to CNBC’s request for comment.
Ningi Research claims that Oddity is not a purely digital company and its Il Makiage brand has more than 40 stores in Israel, where the company is headquartered. Ningi further claims that most of Oddity’s profits come from the region, not the U.S.
Ningi Research also stated that it has visited the Il Makiage store in Israel and purchased two of the company’s best-selling products from different locations. The company said the stores are not franchised but owned by the company.
Short sellers also claimed that the “secret” to Oddity’s digital growth lies in subscriptions, with Ningji claiming that it would be difficult for consumers to opt out or cancel subscriptions.
“Sellers tout ODDITY’s ‘impressive’ 100% repeat purchase rate, but we don’t believe that. Our research shows that customers are unknowingly signing up for non-cancellable plans, allowing ODDITY to Repeat purchases were identified in subsequent quarters even though the customer did not want the product,” the report said.
The report also details numerous complaints to the Better Business Bureau and social media from customers who say they were wrongly charged.
In October, an analyst asked the company about the complaints and whether the problem was occurring on a “large scale.” In response, CEO Oran Holtzman said, “It’s important to understand the size of the claims, and we’re talking about a small portion.”
Oddity previously told CNBC that more than half of its business comes from repeat customers.
“It’s going to happen with any online company that operates anywhere near the size of our sales, like there’s always going to be a certain percentage of people who are dissatisfied,” Holzman said. He said that for a “small percentage” of customers, said they were easily confused by card pre-authorizations associated with Oddity’s “try before you buy” option, which allows customers to try cosmetics.
“Right now, I don’t think it makes sense to take away this huge customer benefit because only a small percentage of users don’t fully understand how it works and are confused,” Holtzman said. “We will continue to work hard to educate these users , and we have invested heavily in related technologies.”
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