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What do the Ulta/Target and Kohl’s/Sephora partnerships mean for the future of beauty retailing?

Kohls and Sephora
Kohls and Sephora

By Faye Brookman, Beauty Reporter, WWD and CEW

By now everyone is up to speed on the seismic announcements that Sephora will open  850 locations within Kohl’s over the next three years and Ulta will roll out more than 100 shop-in-shop concepts in Target.

What isn’t known is what prestige brands will make the journey into a more masstige/mass environment. Also, there is a buzz over whether competing mass merchants will seek to hammer out similar deals that can help them stave off online competition while attracting higher priced brands. Does this also signal the final permission premium beauty brands need to open in mass or masstige retail doors—especially since many of these retailers are deemed essential?

Everyone also wonders which of the two collaborations will perform best.

Chats with prestige brands presented with the opportunity to open in one of the new formats reveal thumbs up—with reservations. While there is applause overreaching more foot traffic, especially for Sephora as malls are still avoided by some, there is concern over price protection and proper service levels. But in reality, most brands agree it is time to go where shoppers are, whether that is a chain like Target or online.

Ulta Beauty at Target

Some of the brands see the chance to sell curated stock-keeping units—the briskest movers or entry price points that can ignite discovery that leads to replenishment online or in a store. The full assortment could be reserved for specialty or department stores. One statement was repeated by all—La Mer isn’t going to be in Kohl’s.

But a former retailer was quick to point out a painful truth: “If a customer goes to a Sephora in Kohl’s and doesn’t see her brand/item, she’s going to be annoyed.

Independent brands, who have fueled a fair amount of growth in mass and class, could also find greater pressure as bigger brands vie for the same shelf space. The heritage or multinational companies with deeper pockets could squeeze some up and comers out. On the other side, several executives said they had just signed to expand in Kohl’s. With Kohl’s strategy changing, those lines could seek distribution in mass stores like CVS or Walmart.

Which of the formats has the most potential? Kohl’s/Sephora has a slight edge.

The pandemic accelerated the need for mall-based merchants to seek options. Kohl’s and Sephora is genius for many reasons. One Kohl’s accepts Amazon returns which opens up opportunities for those who maybe haven’t been Sephora consumers. But Kohl’s also has curbside pickup so shoppers can order from Sephora and pick up without entering a store.

Kohl’s has tried for years, dating back to its partnership with Estee Lauder’s American Beauty and Beauty Bank collections to carve out a piece of the beauty puzzle. Sephora might finally do the trick. And for Sephora, although JCPenney served a purpose, Kohl’s offers better locations to build new customers. The biggest question is if Kohl’s is a retailer that entices Sephora fans (although with the setup, they don’t need to ever venture into Kohl’s).

Even with the Kohl’s/Sephora edge,  that’s not to say Ulta/Target doesn’t have its fans. Many experts think to two “cool” merchants together create an even more compelling shopping environment. Because it is a small installment in Target stores, it is a chance to attract and trade consumers up and experiment with new brands.

Now that Sephora and Ulta are spoken for, are there other beauty specialists retailers can attract? Experts were hard-pressed to identify any other major partners. CosBar is too upscale for the retailers left. Family-owned Beauty Collection appears to do just fine on its own. The ailing Beauty Brands might strike up a deal. Aesthetics bars like Alchemy 43 might want to carve out space in drugstore’s walk-in clinics.

With subscription box volume soaring, there could be more deals ala Birchbox and Walgreens—despite the fact that appears to be on pause. There are also many DTC beauty companies that could benefit from foot traffic with retail alliances.

Rite Aid Beauty

Beyond the mass chains, supermarkets are on the hunt for companies they can link up with—perhaps some of the clean beauty retailers—to leverage the synergy in clean assortments. Teaming up could give Follian, The Detox Market, and Credo opportunities.

But with few outlets to link up with, odds are many retailers will continue to try to build their own more upscale boutiques under their roofs. CVS, for example, has a huge opportunity to benefit from the wellness revolution in its HealthHUBS format. These stores not only have pharmacies and clinics but dietitians and space for yoga and wellness classes.

Rite Aid’s new Store of the Future puts its muscle behind wellness and clean products. The chain is adding a bevy of cleaner beauty options and using its pharmacists to help bridge wellness and beauty.

The next few years should be very interesting to watch as these new formats are revealed, and shoppers show how their habits have changed from the pandemic.

About Faye Brookman

faye_brookman_blogFaye Brookman has reported on the beauty and personal care industry for more than 35 years. She contributes to beauty industry publications including Women’s Wear Daily and CEW Beauty News. Her articles have also appeared in USA Today, The Wall Street Journal and The Washington Post. She also is a frequent moderator for discussions of the beauty business and retail industry.

A graduate of Syracuse University’s S.I. Newhouse School of Public Communications, Brookman resides in Skillman, N.J.

In case you missed it, check out Faye’s previous article about Retailers To Watch In The Beauty Space.

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