Space NK Goes Its Own Way With ‘Wholesale-Plus’ Model, Personalization
LONDON — The beauty competition is increasingly cutthroat in Britain with Sephora buying its way into the U.K. via its purchase of Feelunique; Harrods rolling out stand-alone H Beauty stores across the country, and online pure players such as The Hut Group building retail scale with the purchase of Cult Beauty earlier this month.
One homegrown beauty player, Space NK, remains undaunted by the ferocity of the competition and has been devising its own growth strategies, focusing on a new “wholesale-plus” model in North America, committing to bricks and clicks in the U.K. and internationally, and cultivating close relationships with its online and offline customers.
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Space NK, which is owned by Manzanita Capital, was founded in 1993 by Nicky Kinnaird as a glossy destination for niche, international brands that were difficult to find in the U.K. Kinnaird, who’d begun her career in real estate, had wanted to create an alternative to the department store makeup counters, and to Boots, which all carried the mega-brands.
In a video interview, Space NK’s chief executive officer Andy Lightfoot, said that while the company shuttered its eight stores in the U.S. last year, it has found unexpected success at department stores with a hybrid wholesale model it now uses at Nordstrom and Bloomingdale’s.
“The U.S. business had been around for a good 10 years, with our eight [stand-alone] stores selling skin care and makeup, but the competition is big, and we needed a significant amount of investment to scale to the size where we’d be able to compete,” said Lightfoot, who previously worked at companies including Amazon, Arcadia and Tesco.
At its 25 Nordstrom stores, Space NK had begun developing a “served” wholesale model that saw it curating the brand mix, training, educating and supporting the staff. The staff were employed by Nordstrom, and the store owned the merchandise.
Image Courtesy of Space NK
“We saw that was where the growth was coming from, so we jumped into that model which we’ve named ‘wholesale-plus.’ The pandemic wasn’t the cause, but was really the catalyst for it, and we’re fully committed to it. It means we can offer these stores — and the brands — our expertise, curation and management.”
At Bloomingdale’s, Space NK originally had 22 concessions, but the British brand quickly pivoted to the wholesale-plus model, with staff transitioning from the Space NK to the Bloomingdale’s payroll.
This month Space NK is adding a third North American retailer, Hudson’s Bay Co., to its roster of wholesale-plus partners. Initially it will be present online, and then in three HBC stores later this year. Lightfoot said another big North American partnership is in the works, and will be revealed early next year.
Lightfoot said the model is a win-win for both sides, saying it would be unwieldy and inefficient for the big retailers to take on 60 small beauty brands at once. “But we can do that, with just two or three members of staff,” he said.
He said Space NK’s focus on smaller “in-demand brands” has been working: Its Olaplex special set, created for Nordstrom’s Anniversary Sale last month, was the top seller in the whole of the store last month, according to Lightfoot.
Image Courtesy of Space NK, Pixelate Imaging
Space NK has not given up on its stand-alone store strategy. While it may be pursuing wholesale in the U.S. it is still operating 76 stores in the U.K., with a flagship set to open at London’s Battersea Power Station development in the first quarter of 2022.
The 2,000-square-foot space will be Space NK’s biggest store to date. The Power Station is still under construction, and will include 253 residential apartments, more than 100 retail shops, restaurants and cafés, and event spaces.
As reported, Apple is taking 500,000 square feet of office space across six floors of the development for its European campus headquarters.
Lightfoot said Space NK is on a perpetual hunt for new real estate opportunities in the U.K., and said the brand remains committed to its “high-touch, high-service” approach.
“We are the only place that provides beauty that is specific to your needs. We are about consultation and unbiased, expert advice. We work across brands, and have never been more committed to the importance of touching and feeling product,” said Lightfoot.
Image Courtesy of Space NK
He added that Space NK also puts great faith in its staff and customers alike with a no-quibble guarantee that allows customers to return used product if they are not satisfied.
“Even if you come back with half of the tub empty, there is no judgment — we want to own that,” he said.
Lightfoot said he wants online to work seamlessly with the stores. During the pandemic, online sales growth was 130 percent “and we’re keeping hold of all of that growth. We’re still seeing high single-digit to low double-digit growth in the online channel, even though our store customers have returned to brick-and-mortar.”
As reported, during the pandemic Space NK witnessed an explosion in demand for online consultations — and it responded quickly.
The site began offering makeup advice as part of a new digital platform, #TogetherAtHome, to connect and provide at-home experiences for its customer base. It offered masterclasses focused on wellness and skin care, and one-on-one consultations for makeup advice.
Currently 51 percent of business is online, with 49 percent coming from physical retail, and Lightfoot said the former will easily outpace stores in terms of growth.
Online is also driving the international business, as Space NK no longer has any stores outside the U.K. The brand ships to Europe, China and the U.S.
Space NK replatformed its e-commerce site over Christmas, and launched the latest iteration in March of this year. Lightfoot said the site was designed to compete with pure players such as Cult Beauty.
According to Space NK’s latest Companies House filings, turnover grew to 125.7 million pounds in the fiscal year ended March 28, 2020. EBITDA rose to 7.8 million pounds while profit was 2.6 million pounds.
Among its bestselling products (in addition to Olaplex No. 3, 4 and 5) are Ultra Violette, the Australian sun care brand that launched exclusively with Space NK in April; Aesop’s Resurrection Hand Wash; Paula’s Choice BHA Liquid exfoliant, and Hourglass Unlocked, which Space NK said was the fastest-selling mascara launch ever.
Drunk Elephant’s Sukari Babyfacial and Protini are also difficult to keep in stock, as is Diptyque’s Baies scented candle.
Space NK will be the exclusive U.K. stockist for Rose Inc., the new, clean color cosmetics brand by Rosie Huntington-Whiteley that launches next week. The brand will launch with Space NK in stores and online from Aug. 26.
“We are incredibly excited to bring Rose Inc. to the U.K. as the brand’s exclusive retail partner, and we are uniquely placed to deliver Rosie and her team the passion to enable customers to discover, touch, test and try the exceptional range,” said Lightfoot.
Asked about the challenges of supporting influencer or celebrity-driven brands which already have strong traction online and on social media, Lightfoot said Space NK has a specific role to play in “amplifying, and giving real authority and expertise” to those brands.
“We can educate the consumer about them, open them up to a new audience, give them physical distribution” and help them scale, he said.
Lightfoot said he’s energized by the growing retail competition — from Harrods, The Hut Group, Sephora and even Flannels, which has unveiled a new beauty concept that wants to bring new luxury shopping experiences to regional customers across the U.K.
“It’s a healthy, buoyant market, and beauty is recession-proof,” said Lightfoot. “It’s down to you to grab your share of the pie, and we certainly have not tempered our ambitions for the future.”
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