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The Battle for the UK Beauty Consumer

The $13 billion British beauty sector is heating up, with new entrants setting their sights on the market, including Farfetch and Sephora.
Beauty is seen as insulated from recession, but brands are still preparing for its impact.
The $13 billion British beauty sector is heating up, as more new entrants set their sights on the market. (Shutterstock)

Key insights

  • The British beauty market is fiercely competitive with a fragmented distribution landscape. Yet the pandemic has shifted the market dynamics and opened up opportunities for new players to enter the market
  • New entrants have been pouring into the space recently, including LVMH-owned beauty behemoth Sephora, which has returned to the UK after almost 20 years with a new strategy for success
  • As more players join the throng, all retailers will have to work much harder to fight for consumers and differentiate themselves from rival retailers and brand’s own direct to consumer channels

Everyone wants a piece of the British beauty market.

The past two years have seen flurry of new entrants into the UK beauty space, including luxury fashion players like Flannels and Farfetch as well as ultra-fast fashion retailer Boohoo Group, which acquired Debenhams — and its strong beauty business — in 2021 before launching its own cosmetics lines at its flagship brands. French clean beauty retail chain Oh My Cream recently opened its first UK store in London’s Notting Hill neighbourhood.

The most recent arrival is LVMH-owned beauty behemoth Sephora, which launched in the UK last month, rebranding the website of Feelunique, a British digital retailer it acquired last year. (For now the launch is digital only, but there are plans to open a small handful of stores, starting in London this spring, said Sylvie Moreau, president of Europe and the Middle East at Sephora.)

It was a re-entry into the market for the retailer, which first arrived in the UK in 2000, but struggled to gain a foothold and exited four years later. Since then, the company has flourished globally, with over 3,200 stores worldwide. While LVMH doesn’t break out revenues, Bernstein analysis estimates Sephora generated €10.6 billion ($10.7 billion) in revenue in 2019, with an EBIT profit of €700 million.


Now, it’s taking another crack at the UK market, which is estimated to reach $12.9 billion in sales this year, according to Euromonitor. Why?

“Simply, it’s a big market,” Moreau said.

But it won’t be easy. The British beauty market has long been fiercely competitive with a highly fragmented distribution network: while in the US, Sephora and Ulta Beauty are the go-to destinations for cosmetics and skin care, no comparable chains exist in the UK. As more players join the throng, all retailers will have to work much harder to fight for consumers and differentiate themselves from rivals — and brand’s own direct-to-consumer channels.

A Crowded Market

British beauty shoppers may not have had Sephora until recently, but there were always plenty of other options.

They could turn to drug stores like Boots or department store chains like John Lewis and House of Fraser on the high street. At the more premium end of the market, there were specialty retailers like Space NK and luxury department stores like Selfridges, Liberty and Harvey Nichols. Newer digital players like Cult Beauty, Look Fantastic and Beauty Bay also gained steam.

Many of these retailers began more heavily courting beauty customers after witnessing the explosion of the beauty market globally. Social media and the rise of direct-to-consumer companies created an opening for a new generation of indie brands to flourish and veteran players saw an opportunity to bolster revenues by evolving their approach to the category, bringing in new hot brands or revamping beauty halls.

“There’s been a bit of a sea change in terms of generally how business leaders, the government, and the public see our sector and the value it has,” said Millie Kendall, founder and CEO of the British Beauty Council.

Covid-19 upended the dynamics of the market, as lockdowns pushed many high street retailers to the brink. With stores closed, shoppers flocked online, supercharging growth at smaller e-tailers and making them attractive acquisition targets: last year, Cult Beauty was bought by e-commerce company The Hut Group for £275 million ($320 million) in 2021, while Sephora acquired Feelunique for £132 million ($150 million).


The demise of British department store chains like Debenhams and House of Fraser during the pandemic has left an opening in the market, said Kendall — particularly in cities outside of London, like Manchester, Newcastle and Bristol.

“That’s left a big gaping whole in the sector,” she said. “That’s where I think these other retailers are coming in.”

Even online, there’s still room for more players. While e-commerce beauty sales continue to outperform pre-pandemic levels, the share of sales is still relatively low, said Euromonitor analyst Ying Wai Cheung. About 17 percent of beauty sales happen online currently, compared with around 30 to 40 percent for adjacent categories like fashion and consumer electronics, he said.

“There’s clearly a ground to win for beauty retailers in the online space,” he said. “We are expecting growth for e-commerce sales in the future.”

Enter Sephora: Same Brand, New Strategy

Sephora is hoping to help fill that hole in the market.

“We are in very different times than 20 years ago,” said Sephora’s Moreau.

Operationally, the rise of e-commerce means that Sephora can grow its presence in the market before opening a limited network of physical stores, beginning with its first flagship next year, Moreau said. This time around, the retailer will also benefit from the know-how and customer network of local player Feelunique.

Meanwhile, the rise of indie brands has fundamentally changed the game, she said. When Sephora arrived in the UK in 2000, “indie brands didn’t really exist,” which meant its offering was similar to what customers could already find at Boots or Selfridges.


“Now, consumers are voting also for differentiation, great stories from founders and not over rewarding big brands [that are] well established,” she said. “As a consequence, our strategy of … Sephora exclusivity allows us to have a huge point of difference versus local competitors.”

But while Sephora has brought new brands to the UK market, including Gwen Stefani’s GXVE, ONE/SIZE by Patrick Starr and Makeup By Mario, other popular brands it holds exclusively in the US already have UK distribution partners. Fenty Beauty, for example, is stocked at Harvey Nichols and Boots, while Rare Beauty is sold at Space NK. As a result, Sephora will need to work hard to keep feeding its pipeline of buzzy exclusives — especially as brands have a plethora of retail partners in the UK to choose from.

Yet, the retailer has an advantage over competitors, said Euromonitor’s Cheung.

“Their brand awareness is massive, even among UK consumers [despite the fact] they were not here for many, many years,” he said. “Between their online capabilities, innovation, and their brand awareness, they are set up to be successful here in the UK. It is a saturated market, there are lots of players here, but it’s a very strong brand.”

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