While Web sites such as Net-a-porter and Peach & Lily stock scores of innovative and niche beauty products, many of those brands have long been surfing the waves of the Web without a place to call their brick-and-mortar home — until Urban Outfitters Inc. came along.

The merchandise that Urban is taking in isn’t the typical seen-at-Sephora stock, though some of them are also distributed at specialty beauty retailers. Think of quirky, innovative products merged with Brooklyn-level trendiness. One example: TonyMoly Panda’s Dream So Cool Eye Stick, a cooling eye cream that’s packaged inside a small, plastic replica of a panda.

This story first appeared in the February 10, 2016 issue of WWD.  Subscribe Today.

For beauty, Urban Outfitters curates the products instead of developing them in-house, a far cry from what retailers such as H&M, which plans to have private-label beauty stock in 1,200 stores by the end of this year, or Topshop, which also developed a private-label line, are doing. Urban’s strategy is unusual, and though Peach & Lily is also experimenting with bricks-and-mortar beauty (it opened an in-store shop in a Flushing, N.Y., Macy’s in November), there’s no one else diving into the category quite the way Urban is doing it. The store has a broad selection online, and dedicated in-store square footage in many locations for the assortment.

Urban Outfitters’ decisions can be game-changers for small brands, and the company appears to still be on the hunt for niche beauty products to sell in-store and online. Urban Outfitters and Anthropologie declined to comment for this article.

Urban approached Australian natural soap business Cedar + Stone after seeing the brand’s Instagram page, according to cofounder Kate Samson. The product is in 87 Urban Outfitters stores. Recently, the company was approached by Australian retailer Cotton on Body, which has started stocking the products, too.

“The buyers from Cotton On were actually in New York for a meeting with their ceo when they saw our products in an Urban Outfitters store, which led to them to contact us,” Samson said. “Being stocked in Urban Outfitters absolutely helped.”

Urban also went after hair-care line Briogeo. “The buyer had actually scouted my brand out at a trade show in Las Vegas and they reached out and told us they were interested,” said Briogeo chief executive officer Nancy Twine. “As Urban Outfitters really starts to put the beauty department in more stores and really grow it, I think we’re really going to feel the benefits.”

“We’re definitely growing a lot, but before Urban Outfitters, we didn’t really have the national exposure,” said Subhadra Terhanian, director at Uncle Harry’s. Before Urban approached the brand, the business sold its oils online and through the health food channel. Now, it has expanded geographic distribution across North America.

While experts say beauty is still a small category for Urban, in the future it could make up as much as 5 percent of revenues for Anthropologie and Urban Outfitters, estimates Stifel analyst Richard Jaffe. For Urban, that could mean more than $16 million in quarterly sales, and for Anthropologie, it could mean up to $17 million, based on the brands’ latest quarterly sales results. (Anthropologie’s sales numbers include wedding line Bhldn, which doesn’t sell beauty products.)

So far, the beauty push seems to be working. Anthropologie posted strong sales in the beauty category during the holiday season, according to Urban chief financial officer Frank Conforti. “We did our first beauty launch for the brand where we launched 70 pop-up shops during the holiday period in stores as well as an expanded offering online,” Conforti said at the ICR Conference on Jan. 13. “The customer feedback was exceptional, as well as the store associates’ — really leaves us confident that that’s a space we have permission to play in with our customer as a growth opportunity for us going forward.”

Anthropologie provides another outlet for brands to gain recognition. The chain reached out to beauty line Miyu for samples, which led to Miyu being stocked in stores and online. Anthropologie sells two of the brand’s beauty essence minis — hydrating products that act like a serum but spritz like a mist — plus tea, which Miyu founder Connie Tai said sold out in less than two weeks. Anthropologie was the first major retailer to stock Miyu, which has since generated more interest from other retailers, according to the brand.

Rosebud Perfume Co. Inc.’s salves have been distributed through Urban Outfitters since 2000. “When they first began to order, Rosebud had very little wide-scale distribution throughout the U.S., and very little abroad,” said Rosebud vice president Linda Pruitt-Michielli of Urban. “Today, nearly all of our products are ordered at least twice a month,” Pruitt-Michielli said.

“The point for us is really to get a wider audience,” said Hillary Mauer, director of sales for hair-care brand Reverie. “They have a demographic that shops with them that you may not see at a Sephora,” another Reverie distribution channel, Mauer said.

That demographic is one of the perks for niche brands. Urban basically serves up a quirky-cool customer on a reclaimed wood platter. “They’re really thinking about how you appeal to the person who might want things that are a bit edgier,” said Alicia Yoon, founder of Korean beauty products e-commerce and distribution business Peach & Lily. “Even in beauty, that person might be somebody who doesn’t necessarily want to shop Olay, or Estée Lauder, or what their mothers are using.”

Urban utilizes a distribution agreement with Peach & Lily from April 2014 as a way to pull in a handful of lesser-known brands. At the moment, they’re stocking products from Aromatica, Be the Skin and Mizon through the deal, Yoon said. “You’re not a trend follower, you’re a trendsetter when you’re using these products,” Yoon said.

Market experts see the dedicated effort toward boosting beauty stockkeeping units as dual-purpose for Urban — it draws more customers into the stores and pads their shopping bags with additional purchases. In that vein, it follows that the company is dedicating square footage in so many locations to the endeavor.

“We’re all very conscious of the fact that apparel for the last couple of years has been very soft as a category,” said Wendy Liebmann, ceo of retail intelligence company WSL Strategic Retail. “Beauty is the logical category that connects with that same shopper and is viewed as the accessory that would go with that fashion that [they’re] not buying now.”

Specialty beauty is among the fastest, if not the fastest, growing category, according to Karen Grant, global beauty industry analyst at The NPD Group. For the 12 months ending Sept. 30, prestige beauty, which includes specialty beauty products like the ones sold at Urban and Anthropologie, grew 8 percent. In comparison, apparel grew 3 percent, accessories grew 4 percent and footwear grew 5 percent during that time, according to Grant.

“With apparel being in the doldrums for 2015, retailers need to include categories that will give them growth — beauty is that category,” said Jane Hali, ceo of investment research firm Jane Hali & Associates.

For the two months ended Dec. 31, comparable retail segment net sales decreased 2 percent at Urban Outfitters and Anthropologie, according to a Securities and Exchange Commission filing. Across all of its brands, Urban announced about $825 million in net sales for the third quarter. “Everyone’s looking for ways to steal market share or find a new category,” said Lorna Hall, head of market intelligence at trend forecaster WGSN. “Beauty is a pretty easy one because the products don’t take up too much room in your store, and you have the option to increase your sales per square foot by doing it.”

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