The natural beauty segment is getting a retail concept of its very own.
The brainchild of Shashi Batra, the former president of Victoria’s Secret Beauty and N.V. Perricone MD who helped establish Sephora in the U.S., Credo is being designed to provide an alternative to natural grocers and conventional stores for shoppers seeking natural beauty brands. Already launched online, it is scheduled to enter brick-and-mortar retail in May with a 1,300-square-foot store on San Francisco’s Fillmore Street.
“At least for the last 40 or 50 years, we have divided the beauty space into natural and everything else. The primary channel for natural beauty is the natural food market by far,” Batra said. “We are going to differentiate ourselves with merchandise, education and the physical environment, and create a specialty beauty destination. We are looking for it to be a destination where people can go to look and feel beautiful. It will curate natural brands that are beautiful, safe and effective. It is nothing more than what the natural food markets have done for grocery shopping, except in beauty.”
Batra is diving into the natural beauty segment at a time when consumers are increasingly interested in making healthier choices. Globally, natural personal-care sales climbed 10 percent last year to almost $33 billion, according to Kline & Co. Going forward, the research firm projects the natural category will proceed at a compound annual growth rate of slightly less than 10 percent to hit $50 billion by 2019. Responsible for 40 percent of sales, skin care is the largest category in the segment worldwide, although sales of natural makeup advanced the most in 2014.
The idea for Credo percolated for a while, but Batra set it into motion a year ago, partially because he determined there was finally the critical mass of natural beauty brands needed to pull it off. The store will stock some 100 brands, and Credo’s Web site sells 60 or so of them. “Ninety-nine percent of those brands are not in natural food markets because they can’t see their value proposition recognized in that environment,” Batra said.
Brands available at Credo cross the skin care, makeup, hair care, men’s, and bath and body categories, and include Vapour, Ilia, Tata Harper, One Love Organics, W3ll People, Kypris, Lily Lolo, Coola, RGB, Acure, Juara, RMS Beauty, Intelligent Nutrients and Whish Body. In a feature called healthy swaps, Credo recommends natural beauty replacements for mainstream products. Ilia’s Wild Child red lipstick, for example, is a suggested exchange for Nars’ Heat Wave lipstick shade.
Credo chooses brands that adhere to its underpinning philosophies. Batra emphasized they should be transparent and inclusive. Beyond those basic principals, brands are evaluated based on what they don’t have — ingredients such as parabens, synthetic fragrances and formaldehyde — and what they do — stunning packaging, good-for-you ingredients that work and compelling backgrounds. Credo spotlights brand founders on its site in videos.
The objective is for Credo’s stores to be physically interwoven with their communities. “The neighborhood apothecary [in the U.S.] still doesn’t exist in the way that perfumeries or pharmacies do in Europe. I always thought there was more that could happen in neighborhoods than there is now,” Batra said. Discussing Credo’s upcoming location in San Francisco, he continued, “We want to be in a place where we have optimal traffic. I like Fillmore Street because there is a good amount of conventional beauty brands that have opened there over the last few years. So, it creates an environment where the mind-set is right and, clearly, there is enough discretionary income for first adopters to the brand and retail concept.”
Batra described the store, which was designed by Boor Bridges Architecture and will contain a mini-spa, as intimate, energetic, welcoming, warm, modern and feminine. Educating customers will be a huge focus of the store. “Introducing brands to people who have never heard of them requires storytelling. We may know they have a reason for being, but that has to be articulated,” said Batra, adding, “If you consider that Sephora has 300 brands and we will have somewhere around 100, we are going to be able to speak more intelligently about what we have simply because of having less. It’s probably less about being fashion and hype driven, and more replenishment driven.”
If the store reaches Sephora’s estimated $1,200 in yearly sales per square foot, it would generate $1.56 million in annual sales. However, Batra said, “You don’t have to go that high to be successful. They [Sephora] are amazingly profitable.”
Before fleshing out Credo, Batra considered implementing the concept through an acquisition. That proved to be too problematic. “We found some lovely retailers in the beauty category, but they didn’t have a belief system nor a community that was really engaged. They had real estate. They had a collection of brands, but the legacy that they brought to the table was something that we would have to completely erase,” he said. “There was no value in pursuing existing businesses. That forced us into saying that, ‘We have a pure vision for something, let’s just do it.’”
Along with Batra, fellow Sephora veteran Annie Jackson, Credo’s vice president of merchandise and planning, and Cathy Arens, the customer relations and operations manager, are charged with carrying out Credo’s vision. Backing them are Credo’s investors Next World Group and the Eren Group. “They are patient long-term capital, which is completely counterintuitive to the private equity companies that have been preying on the beauty business,” Batra said. “You look at great brands like Philosophy that have been flipped. That is not what I was looking for. If you build a brand, you need to have a belief system and a community that buys into that, and that takes time to build.”