“The luxuries of today are the necessities of tomorrow” – Ludwig von Mises
Luxury is typically the function of technological advancement, and since technology is deflationary, the exclusivity of today’s luxury goods & services eventually evaporates. All the while our ego constantly redefines what is actually a necessity, as necessity is seemingly defined on a relative basis. Shoutout to the hedonic treadmill. Combined, these two forces propel consumers to adopt new products and services in unison with the rest of society, as we do our collective best to keep up with the Jones.
Humans are social beings, but we are also selfish towards our own self interests. This is manifested in our perception of peers, as we generally prefer to socialize with peers whom we believe will be accretive to our end goals of surviving and thriving. Even the most open minded individuals are prone to the cognitive bias that is the Halo Effect; we elevate our baseline expectations of others when they are good looking. Evolutionary biologists support this idea as good looks signal physical and mental health to potential mates. Studies reveal this signaling still boosts the quality of life in modernity as good looking people may be more likely to receive a promotion, or even serve less jail time. This is an objectively ugly fact of society, but the lesson has been internalized by the masses.
The desire to enhance one’s appearance is constant throughout human history. This is not a novel idea or concept. Tattooing the body is a practice that dates back 5,000 years. The powdered wig may be viewed as a quirky fashion item, but it was really used to cover up patchy baldness that resulted from having syphilis. The Maasai tribes use weights to elongate their earlobes, as the oldest members of the tribe typically had the most screeched ear lobes, signaling wisdom. The list of potential body modifications is endless.
Most enhancements to one’s physical appearance cost money. With the innate belief that favorable physical appearances beget favorable situations many can rationalize the expense of enhancing their appearance. However, the line between what is a necessity and what is luxury is defined by the disposable income of the individual.
Items in the appearance enhancing toolkit are spread across a spectrum of cost & effort. On one end there are the basics like nail polish, hair dye, special clothing like push-up bras, and jewelry. On the extreme end you find steroids, liposuction, and plastic surgery. In the middle are tools like tanning booths, teeth whitening procedures, dental braces, and tattoos. The middle is where the most appealing investment opportunities lay. The middle can offer dramatic results that are both quick and cost effective.
I started thinking about why any of this mattered after reading through @jayvasdigital pitch on InMode. A company that offers “cutting edge medical devices for minimally-invasive & non-invasive procedures that provide amazing results for the patient and the practice.”
Their Instagram page outlines the story. It is a new take on an old industry, cosmetic medical procedures. The pitch is that they have technologies that are superior to the alternatives. Quick and effective. The machines look futuristic and are seemingly magical. Do note this is also a tired story, a lot of treatment innovations have come and gone. But if this technology really is that exceptional then it unlocks a new level of treatment. This is basically the democratization of the magical toolkit celebrities have; the subtle tweaks that make people wonder if the celebrity got plastic surgery or not.
Celebrity endorsements of non-invasive treatment help destigmatize the procedures and outline the playbook for those seeking to have comparable bodies. Social media has thrown everyone into a hypercompetitive game of signaling health and fitness. Influencers are in fact influencing people.
Search #FatRemoval on Instagram and you will quickly discover there are medical offices across the globe promoting their use of machines similar to InMode’s. These treatments are all quick and easy. “Remove stubborn fat in just 25 minutes.” This is a thematic trend and InMode is a category leader.
While InMode and its competitors offer a wide range of treatments my optimism is focused on only one of InMode’s products. The Evolve machine and its associated attachments- Tite, Tone, & Trim. These non-invasive radio frequency treatments primarily focus on two body parts; abs & butts. Instagram is all about abs and butts. Don’t overthink this.
I excited by the prospect that the TAM for appearance enhancing procedures is massively understated. Using the 80/20 rule I will assume that 20% of active gym members are receptive to the concept of further enhancing their appearance through non-invasive procedures. The belief is that the 20% cohort is currently most receptive to products that promise to enhance your appearance. Stuff like nutritional supplements, photo editing apps, and tools like tanning booths and teeth whitening procedures. This 20% figure may actually be somewhat conservative considering that studies often find >40% of gym members consume supplements.
Of the 68 million active gym members in the United States, the 20% cohort would equate to a serviceable market of 13 million people.
Looking forward that number is set to increase. Between 2010-2020 the fastest growing cohort of gym members was those under 18 years old, increasing 70% in that span. Overall Gen Z and Millennials account for about half of active gym memberships. I believe it is fair to assume these are the two demographics most effected by the hypercompetitive status game of social media. It is also important to account for the growing number of people who don’t have a gym membership but instead workout in their living room.
I contend that we can reach a point in time where Evolve machines are as commonplace and accessible as tanning booths are today. I make this analogy because 1) tanning booths are cheap, quick, & effective and 2) because you do not need a doctor to assist you in a tanning booth. A quick demo video reveals the minimal training needed to administer treatment with the Evolve machine. I suspect the technology is only in physician offices today due to the high cost of the machine and the consumer trust associated with medical offices. This can quickly change and I believe it will.
Today these treatments are a luxury reserved for those with enough disposable income. I called medical offices around Boston to discover that treatment costs are pretty opaque but will generally cost about $650 per session with 6-8 sessions needed. Some places even offer monthly membership program for maintenance where you come in twice a month. While expensive it is interesting to note that most places did offer financing.
Core to the investment thesis is the notion that technology is deflationary and these treatments will in turn come down in cost to become more accessible. We have witnessed this increase in accessibility with other discretionary treatments like LASIK eye surgery and dental braces. There are a number of demand led tailwinds that will enable non-invasive treatments like InMode’s Evolve to experience something similar;
- The desire to enhance is one’s appearance is an innate desire further fueled by social media.
- The proliferation of Buy Now Pay Later allows consumers to finance treatments, increasing accessibility.
- It is not facetious to believe there are network effects at play here. As more people obtain ‘perfect bodies’ the need to obtain your own ‘perfect body’ increases if you wish to compete on a looks basis.
- The product serves both genders as treatments cater to those who want to not only want to look better but also those with a desire to be more fit. The treatment stimulates muscles, making it a product pro athletes can endorse.
To wrap this up I believe we are in the early innings of a global thematic trend where individuals become ever more motivated to enhance their physical appearance and in turn seek to buy their way to a ‘perfect body’. Some thematic trends are so large that there can be many winning investment opportunities. While I am excited by InMode one obvious questions remains, what is the efficacy of InMode’s treatments? My excitement around these treatments rests on the vision that these treatments are a major game changer. If so, the challenge now shifts to educating the consumer.
At it’s current size I have no problem saying that I believe InMode can become a 10 bagger.