In a tough brick-and-mortar retail environment, beauty services are becoming a tactic to drive customers and clients to stores. Venture capital firm Index Ventures is now focused on how it can support the growth in beauty services through investments.

Index Ventures previously invested in hair-dye brand Josh Wood Colour, and on Tuesday, salon and spa booking software provider Boulevard received an $11 million Series A round from the firm. According to the market research group Ibis World, hair salons represented a $46 billion dollar business in 2018. And the U.S. is responsible for the lion’s share of the $11 billion-dollar global med spa market, according to Allied Market Research.

Damir Becirovic, principal at Index Ventures, spoke to Glossy about the rise of service-based beauty businesses, the reason Index is less interested in investing in consumer brands and the new models of product distribution.

What does your investment in Boulevard signify about the industry?
One of the areas we’re spending a lot of time on at Index is understanding how offline retail is evolving. There’s a big debate going on around what types of retailers will survive and, increasingly, we believe that physical product retailers are starting to disappear. What is taking their place is experience-driven businesses or service-driven businesses. When we looked at the data, we noticed that personal care services are the fastest-growing segment of retail, and that encompasses everything from hair salons and barbershops to med spas and flotation chamber therapy businesses.

Where do you see the future of beauty heading?
We’re looking for what’s innovative and what we think has the potential to be a large business with a billion-dollar or more [exit]. In the brand world right now, there are so many upstart brands, and there are limited distribution opportunities. It’s really hard to build a multi-category defining brand. Glossier has kind of crafted a very unique and hard-to-replicate direct-to-consumer strategy, and in many ways, we think Emily Weiss was very predisposed to building the company, just given her background and the types of relationships she had access to. But it’s hard to find someone who can bring a fresh brand to the world with a unique and innovative angle, and then properly execute. [Index previously invested in Glossier in February 2018 and March 2019.]

On the traditional retail brand side, you’re seeing some pretty significant success with Drunk Elephant getting acquired. It’s so hard to get into those distribution channels and so hard to get noticed in those distribution channels. We’re always on the lookout for what we think is a visionary founder who has a unique view on what’s changing, but we haven’t seen too many of those in the past few quarters.

What opportunities still exist for physical retail and distribution?
A problem historically for brands has been that it’s been really hard to get access to the salons to distribute a product, although it’s a highly strategic distribution channel. The brands that have been able to do it well are Redken or L’Oréal, which can afford to have hundreds of sales reps that are knocking on doors to sell products. Boulevard enables a digital marketplace opportunity, because it handles all the appointments and also handles product transactions, which are about 25% of any salon’s revenue. They know how much inventory is in a given store, how quickly it is selling and what brands are selling well. It could be a really interesting channel for new brands to tap into as their network grows.

What are you avoiding as an investor?
We’ve invested in companies like Glossier and Josh Wood Hair Colour, but now we’re kind of shying away from color cosmetics. It has never been so competitive in that world, and at the same time, we’ve never seen so little innovation. Frankly, you can kind of see it in the earnings calls for Ulta and Sephora, as well.