Hours after Debenhams confirmed it would exit its five stores across Hammerson-owned shopping centres, Next unveiled details of an unlikely swoop.
- The Beauty Hall from Next is to launch in five former Debenhams locations
- Despite complexities of the pandemic, experts say the properties were “too good an opportunity to pass up”
- Next is playing the “long game” to build relationships with beauty brands with new bricks-and-mortar offer
- “Britain is crying out for a new beauty distribution channel,” says Floral Street founder Michelle Feeney
The fashion retailer has signed leases to take on the main floors of each of the locations – in Birmingham’s Bullring, Croydon’s Centrale, Silverburn in Glasgow, Highcross in Leicester and Reading’s Oracle – to launch its new beauty concept, ‘The Beauty Hall from Next’.
Next says it aims to create “a premium retail environment for beauty” with the new fascia complementing its existing online offer.
Chief executive Lord Wolfson stressed in the retailer’s most recent trading update that, although coronavirus has dented the retailer’s performance, it is continuing to invest “to take the business forward once the storm has passed”.
Nevertheless, snapping up more property and unveiling a new store format in the midst of a pandemic could be perceived as a risky play – particularly when, in a socially distanced world, the future role of beauty hall must-haves, such as sample testing and on-hand makeup artists, is so uncertain.
So, why has Next chosen to drive its expansion into beauty now? And can it really become a serious force in an already competitive market?
Positive opportunism
RAH advisory founder Richard Hyman believes the chance for Next to snap up aspirational retail properties on favourable lease terms, combined with the prospect of broadening its presence in one of retail’s most resilient and rapidly growing categories, will have been too good for the business to refuse.
“The word opportunistic has unfairly pejorative implications, but in Next’s case, this is really positive opportunism,” Hyman surmises.
GlobalData analyst Emily Salter concurs: “It is a strange time to be trying your hand at a new store format, but it’s clearly a sector that Next has been planning to expand its presence in for a while, so it was probably decided the property coming on the market was too good an opportunity to pass up.”
The biggest obstacle Next could face in a crowded market is broadening awareness among consumers. If the average beauty shopper was thinking about where to top up their makeup bag today, Next is unlikely to be front of mind, despite the fact the business has quietly built up its cosmetics offer in recent years.
“Aligning the store with Next is a bit of a bold decision given that Next doesn’t have a reputation to speak of in beauty retail at the moment”
Emily Salter, GlobalData
The company launched a beauty category on its own website in 2018 and acquired Fabled by Marie Claire from Ocado last summer. Today, the retailer sells more than 200 brands on its ecommerce platform including Estée Lauder, Elemis and Clinique, as well as a stable of more premium brands including YSL and Nars through Fabled.
However, Salter believes the decision to position the fascia as being adjacent to Next, in the mid-market fashion space, may not be a wise move and has reservations about whether The Beauty Hall from Next name will resonate with shoppers.
“Naming it that means the store is not its own thing or a Next store with a beauty concession, which would arguably make more sense. But aligning the store with Next is a bit of a bold decision given that Next doesn’t have a reputation to speak of in beauty retail at the moment.”
Salter adds that some of the most aspirational beauty brands, such as Fenty Beauty and Kylie Cosmetics, are firmly aimed at the 16-24 market – a demographic of shoppers who are not likely to be wooed by The Beauty Hall from Next branding.
It is also a sector of the market that is becoming increasingly crowded, with businesses ranging from vanguard Next to upmarket newcomer Harrods investing in beauty offers.
Hyman points to the fact that by taking over the beauty hall floors of Debenhams outlets, Next has immediate access to the local beauty shopper who will likely continue to buy their beauty products from the same location, regardless of whether it is under a Next fascia.
Salter agrees and says the new format is likely to monopolise on existing Debenhams customer and local Next shoppers, rather than rolling out a revolutionary new format that would lure shoppers away from other high street beauty retailers such as Boots or Superdrug.
Serious business
Even if Next does not intend to reinvent the wheel, Peel Hunt analyst John Stevenson thinks the move to launch a bricks-and-mortar beauty proposition will help it strengthen its position against upmarket beauty brands online.
“One of the fastest-growing sectors within retail online is health and beauty and it’s one of the fastest-growing sectors in the market in general so a good place to be,” Stevenson says.
“The issue is brand access – a lot of premium brands like retailers to have a dedicated physical space, so this is an opportunity for Next to learn how to merchandise and better understand the health and beauty market while going after the opportunity of getting a wider roster of beauty brands onto Next online.”
Stevenson points to the fact that the most upmarket beauty brands sold on Fabled are not available on Next’s ecommerce platform – a situation he believes Lord Wolfson is aiming to rectify through an upmarket physical offer.
“This is not going to transform Next’s P&L; it’s about the long game of beauty brand relationships and how they can deliver a serious health and beauty business within their own online portfolio,” he says.
“Britain is crying out for a new beauty distribution channel – we don’t have Sephora or Mecca… there aren’t that many options at the moment”
Michelle Feeney, Floral Street
Perfume brand Floral Street founder Michelle Feeney says that online prowess could give Next the edge against newcomers and more established beauty operators such as Boots.
“Britain is crying out for a new beauty distribution channel – we don’t have Sephora or Mecca and a lot of the department stores are struggling, so if you want to go somewhere that is not as mass-market as Boots or as niche as Space NK, there aren’t that many options at the moment,” she argues.
Feeney believes Next’s expertise in rapid online fulfilment, both through click and collect and home delivery could provide it with the credentials required to shake up the beauty market.
Hyman agrees. “Arguably the most significant thing Next has done over the last 10 years from a strategic standpoint is establish itself as a platform,” he says. “In doing so, it has proven itself to be really good at developing excellent brand relationships across all sorts of different sectors. I wouldn’t be surprised if they prove themselves a force to be reckoned with in beauty, too.”
As a new venture, it could take some time for Next to achieve that feat. But the retailer’s foray into beauty will leverage its existing tried-and-tested skills – and few would bet against Lord Wolfson making those work for the business once again.
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