Retailers on this side of the world should breathe a sigh of relief that Jo Horgan lives on the other. Over the past seven years, she has built Mecca Cosmetica into the premier niche cosmetics chain in Australia. With same-store sales growth of over 20 percent per annum, Horgan has decided to spread her wings even further. She recently launched a second retail concept, called Kit, with plans to open 10 stores over the next two years. Horgan, whose modesty belies a fierce intellect and killer business instinct, says her goal is to become Australia’s third established chain of distribution for beauty. Those who know her business—which industry sources estimate will reach sales of $30 million by the end of 2006—would probably say she’s already there.
Beauty Biz: How is the overall retail climate in Australia currently?
Jo Horgan: After quite a few years of very healthy growth, it’s going through a stagnant period, with department stores forecasting flat sales over the next 12 to 18 months.
BB: Did that give you pause when deciding to launch Kit?
J.H.: No. We launched Mecca Cosmetica at a time when retail was tough and the Australian dollar versus the U.S. dollar went through the floor. Launching in that climate really made us think through every single decision in an incredibly conservative and frugal way. It teaches you to be a much leaner start-up.
BB: What’s the premise behind Kit?
J.H.: In terms of positioning, it is New York loft meets student digs meets Amsterdam cafe meets underground garage rock band. It’s accessible, approachable and appealing to a broad base of consumers, men and women and teenagers. It focuses more on body, home fragrance and color and natural skin care and doesn’t represent the more serious side of cosmeceuticals and what I call blockbuster niche brands with huge offers.
BB: What was the genesis of the concept?
J.H.: At the last WWD Beauty CEO Summit, two figures really stuck out: The first was that niche cosmetics now make up 12 percent of the U.S. market; the second was that specialty retail had gone from a very small base 15 years ago up to 27 percent today. With Mecca, we have a clearly defined positioning that works well. I started brainstorming with Robin Coe-Hutshing [owner of Studio at Fred Segal] on what could be interesting in this market. From those early discussions, the concept was born.
BB: How did you select the brands for Kit?
J.H.: Once we had the concept it was quite obvious what the brands should be. In color, we looked at brands that celebrated color as opposed to a full application, such as Pop and Scott Barnes; in skin care, we were looking for simple, but effective formulations, like Mario Badescu and Aesop. We want Kit to feel like the candy store of cosmetics, so there had to be a significant offer of self-spoiling, as well. Korres was a key brand from the beginning, too.
BB: From an operational standpoint, you have a unique structure—what do you ask for from your brands and what do you give them in return?
J.H.: Our model was born out of need rather than any strategic planning early on in the business. My first step in recruiting brands for Mecca was to listen to their concerns. What came across loud and clear was that they didn’t have the resources to manage the Australian market. I went to the brands and said I’ll take the brand from you and will manage every aspect, organizing the shipping, the warehousing, the duties and taxes, the p.r. launch, the training, the visual merchandising, ongoing marketing and animation. I’ll send you your sales figures monthly and turn up twice a year to show you how I’m managing your brand and present a plan for the next six months, to which you can say yea or nay. I don’t actually see myself as a retailer. I see myself as a distributor of brands, yet at the same time, I happen to have the retail outlets the brands go into.
BB: What do you ask from them in return?
J.H.: Basically, what we ask from them is a flat discount and exclusivity in the Australian market.
BB: You work with Australia’s two largest department stores—Mecca has concessions inside of David Jones, while Kit will open concessions in its arch-competitor, Myer. How did David Jones take the news?
J.H.: In this market, Mecca is a proven formula. David Jones is delighted to be associated with that brand. Kit is a broader offer with a more accessible price point targeted to both men and women. It makes sense to go with Myer and they are being extremely supportive.
BB: How do you stay on top of product trends and industry goings-on from Australia?
J.H.: I travel to Europe and the U.S. at least twice a year. Over the years, I’ve met an extraordinarily interesting group of people within the cosmetics arena and it’s always such a pleasure to catch up. I gain an enormous amount of information and insight that way.
BB: You’re partners with the department stores, but also competitors. How do you manage that relationship?
J.H.: It hasn’t really been an issue until recently, because their focus has always been the major prestige brands. At this point, they’re diversifying into brands that wouldn’t have historically been of interest to them. As part of the informal information network I have around the world, when new interesting brands come up, I’m one of the first to hear about them.
BB: What’s next for you?
J.H.: It’s really a case of get this right, make it sing, make it resonate with the customer. The cosmetics market is one of the most innovative markets imaginable so there’s always opportunity.
This article appeared in Beauty Biz, a special supplement to WWD. Click here to subscribe to Beauty Biz.