The world’s largest retailer is getting into prestige beauty.
Walmart is the latest mass market giant to throw its hat in the ring in the ongoing market share battle for prestige beauty dollars. The Bentonville, Ark.-based retailer is teaming with Space NK, the U.K.-based specialty retailer, to bring high-priced beauty to its shelves.
Called BeautySpaceNK, the concept will launch on Walmart’s website on March 15. It will bow in 250 Walmart locations starting in early summer, with most locations consisting of a branded endcap and an adjacent aisle. Fifteen brands are participating at launch, and there will be more than 600 stock keeping units to begin with between brick-and-mortar and online extensions of the partnership.
The strategic advantage lies in each retailer’s strengths: On the one hand, Space NK’s cherrypicked assortment plays to its curative abilities; on Walmart’s end, scale brings brands across prestige beauty to its broad consumer base — purported to be 90 percent of Americans.
Walmart is entering a fierce battle for the prestige shopper. Key competitor Target Corp. has a partnership with Ulta Beauty — opening 100 shops-in-shop last year with another 250 slated for this year — while Sephora and Kohl’s teamed up and are opening what is expected to be 800 shops-in-shop within the next three years.
What differentiates BeautySpaceNK, both Walmart and Space NK told WWD, is a tighter assortment of products tailored to the speed of the Walmart shopper.
“We’re able to provide our customers with both mass and prestige beauty products in one simple and really convenient shopping destination,” said Laurie Tessier, merchandising director, prestige beauty, Walmart. “Space NK does an incredible job at curation, which is really at the forefront of our strategy: offering consumers that curated, elevated experience with products overall.”
For both retailers, the pros are myriad. Aside from opening a new market to Walmart, it also increases Space NK’s footprint. The latter shuttered its stand-alone doors in the U.S. in 2020 to focus on its “wholesale” business, which only includes department stores Bloomingdale’s and Nordstrom.
“We’ve seen a shift in the market in the U.S., blurring the lines between specialty and general retail, along with huge growth we’re seeing in our wholesale business with our existing partners,” said Andy Lightfoot, Space NK’s chief executive officer. “We supply marketing, we supply expertise, we supply curation. In each of those spaces, we look to put together a collection of brands and a support level that provides growth.”
In its first iteration, the partnership is testing as many segments and brand types from prestige beauty as space allows. Heritage brands such as Slip Beauty, By Terry, Philip B. and Lancer are accompanying indie brands like Patchology, PSA, Foreo and Ameliorate. Other brands include Goldfaden MD, Babe Original, Eyeko, Grow Gorgeous Mio, Mama Mio, and Summer Camp, a Walmart-exclusive brand from the same founders as Soleil Toujours. Mario Badescu will take up the endcaps.
“It’s really about giving the brands the opportunity to express themselves,” Lightfoot said. “It’s about having a broad mix of brands of different ideologies, creative stories, price points and offering all of those to the customers. We were fortunate to have a wealth of data from walmart.com, so that gave us a good guide on the sorts of brands customers were looking for and demanding.”
Despite the tight edit, the partnership still allows Walmart to see which categories, segments and brand types in the prestige arena appeal the most to its shoppers.
”We’re not leaning into just one category, we’re bringing all categories: skin care makeup, hair care and body. From there, we’re really testing different types of prestige brands long term,” Tessier said.
Speed is also of the essence for the Walmart shopper, who looks to the retailer for ease and convenience.
“It comes down to our strategy on curation,” Tessier explained. “It’s big box, and our consumer doesn’t have tons of time, running from grocery to baby. They probably only have a few minutes where we need to catch them in the beauty aisle.
“What we’ve done is create an edited destination of all these categories, all in one space. You see hair care next to skin care, next to makeup, next to body and in that moment, you’re able to see the best of the best,” she continued.
Part of that speed, too, is digitally integrating the space. The retailers are leveraging technology like scannable QR codes for customers to learn more about products, rather than train specialized sales associates, à la Ulta Beauty at Target. A wider array of products will be available online.
“Curation is at the forefront of our strategy, but we still want the customer to experience that endless aisle,” Tessier said. “If we don’t carry a full shade range of an eye shadow or a foundation, how do we make sure that customers have the tech or the availability to look at different options? These are the things we’re thinking about now.”
The partnership has been met enthusiastically by brand partners, the two firms said.
“There were only a couple of brands that felt the timing wasn’t right, but we haven’t gotten any outright ‘Nos,’” Lightfoot said. “We’re going to come back and have more conversations through the summer and into the fall.”
Space NK has created a new division to support the partnership long-term, Lightfoot said, although neither party said they had pinned down how the partnership could expand.
Walmart has modernized its existing beauty offerings in recent years. Epitomized by the launches of makeup brands like Sharon Chuter’s Uoma by Sharon C., and the Gen Z-friendly skin care brand Bubble, the retailer has put new types of its brands on its endcaps to pull shoppers into the beauty aisles.
Musab Balbale, who led Walmart’s beauty business until earlier this year, said in 2021, “The beauty customer wants to always explore newness. What we can’t be is a specialty retailer or department store. So, we’re starting to experiment with how we elevate the experience while still doing what we do really well, which is being there for [shoppers] on a weekly basis.”
At that time, Balbale said beauty made up 2 percent of Walmart’s overall sales, citing an earnings call. More recently, the company’s overall revenues reached $573 billion for the 2022 fiscal year.
For brands, maintaining a prestige positioning while broadening reach, were the main advantages.
“There is this misconception about Walmart being a sort of lower-end retail, and that’s not the case. The 250 doors they are targeting here are in higher income areas,” said Chris Hobson, CEO of Rare Beauty Brands, which owns Patchology.
“Channel blending is something that’s happening in a big way. The consumer more and more expects you to be where she or he is shopping,” Hobson continued. “These partnerships are super innovative for us with Patchology. We’ve always believed it to be a very accessible luxury brand, and we’ve always leaned into the fact that our price points are really the gateway to luxury.”
The concept is also in line with Hobson’s broader strategy to democratize Patchology’s current distribution.
“This is an opportunity to expand the brand franchise from what started as uber prestige. We launched the brand at Bergdorf Goodman and Neiman Marcus,” he said. “It’s a misnomer to think that that Walmart customer, especially in these 250 doors they’re targeting, isn’t that consumer as well.”
Hobson, pointing to Patchology’s retail partnerships with Nordstrom and Nordstrom Rack, posited that success will also come down to geography. “With that Nordstrom Rack consumer, you get the affluent consumer who may not be going to a specialty store or a department store like Nordstrom every day,” he said. “This is going to be comparable. Space NK attracts that high-end urban consumer, but with this, you can still attract that high-end consumer who just may not be shopping in a downtown location, and is shopping in a more suburban location. It’s demographically, psychographically and socioeconomically a very similar consumer who’s just shopping in a different location.”
Other brands have been itching to break into the mass market, and Space NK’s authority provided a window of opportunity.
“We are a prestige brand with an affordable price tag on it,” said Joseph Cabasso, co-owner of Mario Badescu. “We know how many stores Walmart, Target and Kohl’s have, and when COVID-19 hit, those were the stores that were doing business. We know the capabilities, we know what they could do with our brand, but previously, we were only on the prestige side of the business.”
Accessibility was part of Cabasso’s rationale for joining the partnership, which complements Mario Badescu’s distribution in Sephora at Kohl’s and Ulta Beauty at Target.
“I knew Walmart was going to have to make the play when they saw that Target and Kohl’s each made a play. I knew it was coming, I just didn’t know who was going to bring that to life,” he said.
Cabasso and Hobson were optimistic about sales expectations, but did not quantify anticipated gains.
“Anybody who looks into a crystal ball ends up chewing glass from time to time,” Hobson said. “That’s a little bit of the experiment. But the Space NK team is very innovative and forward thinking, and Walmart is being very innovative and forward-thinking here as well.”
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