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Space NK Bets on Experiential Stores, Viral Brands for Growth

Following a sales spike in FY2023, the British beauty retailer hopes to capture a bigger share of the UK market.
Space NK store.
Space NK store. (Courtesy)

The British beauty market is notoriously difficult to crack. There’s intense competition between the many players, which include department stores, digital mainstays and drugstores, making for a more fragmented landscape than in the US, where behemoths like Sephora and Ulta Beauty dominate.

To distinguish itself in a high-stakes space — UK beauty sales reached £12.9 billion in 2022, according to Euromonitor International — homegrown beauty retailer Space NK has levelled up its brick-and-mortar presence and added buzzy new brands like Selena Gomez’s Rare Beauty to its mix.

That approach may be starting to pay dividends: Space NK’s sales were up 24 percent in its 2023 financial year, ended March 31. Revenue was £142 million ($174 million), up from £119.1 million in 2022 (and £108.9 million in 2019, pre-pandemic). In-store sales rose 31 percent year-over-year, while online sales grew 16 percent year-over-year. Active customers (defined as shoppers who made at least one purchase in the year) increased 33 percent to over 1 million.

The brand has built out a strong store fleet, opening five new locations in the past year, with two more on the way; it currently operates 73 storefronts across the UK and Ireland.

Historically, Space NK operated mostly small neighbourhood shops that were sized at about 800 square feet on average. Last year, the company shifted gears, adding two new large-format stores, in London’s Westfield and Battersea Power Station shopping centres. Both are over 2,000 square feet and are equipped with designated trial spots, lounges, treatment rooms and areas for consultations. The upsized Westfield outpost — which is located in the same shopping centre as Sephora’s first UK flagship in almost 20 years — is triple the size of its prior Westfield shop. In turn, the company has tripled sales at the location, said Andy Lightfoot, Space NK chief executive. By September, Space NK will roll out large-format stores in Liverpool and Cardiff.

“We’re now at a tipping point for the brand,” said Lightfoot. “These bigger scale stores are going to be the future of the business.”

Those stores actually help the online business too, he added. When the company opens a new store it sees an uptick in digital sales in the area.

That growth comes at a price: in 2022, EBITDA, or earnings before taxes, interest, depreciation and amortisation, was £2.2 million compared to £92.7 million in 2021 (a figure largely powered by the sale of wholesale subsidiary Space Brands Ltd. for £83.1 million). Lightfoot declined to share Space NK’s profit for the 2023 fiscal year, but said it roughly doubled year-on-year.

“We’re certainly not at a point where we’re looking to profit optimise. We’re very much focused on growth and having a healthy delivery to the bottom line allows us to invest that back,” said Lightfoot.

Key is attracting new brand partners. Space NK’s roster now includes Rosie Huntington-Whiteley’s Rose Inc., Milk Makeup, Tatcha, Drunk Elephant and Sol De Janeiro. Its significant distribution network, local marketing expertise and price positioning are what attract founders, said Lightfoot.

“We are brand-building, we are brand accretive. We’re not driving from discount or competing to the bottom line in terms of getting sales,” he said.

Snagging those new brands is key to solidifying Space NK’s position as a leader in British beauty retail. They also help bring in younger, more internet-savvy consumers from different backgrounds and regions, Lightfoot said. While still a fraction of its base, Gen-Z is the fastest growing cohort of the company’s demographics.

“It’s great to acquire customers [early] in their life cycle. Then, we can think about nurturing customers over a decade or two decades as they mature,” said Lightfoot.

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