Yahoo Finance Space NK Conquers More Territory in the Hot U.K. Beauty Market
LONDON — Beauty is booming and so is Space NK, which is set to add seven more stores to its U.K. retail portfolio this year, enrich its service offer and become a leader in fragrance.
Sales at the retailer owned by Manzanita Capital have been increasing by 30 percent annually for three years, and growing two-and-a-half times faster than the U.K. prestige premium market, according to Andy Lightfoot, chief executive officer of Space NK.
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Demand in the new Covent Garden store has been so high that Space NK has already decided to move to bigger premises after just 18 months.
The new store, at 6-7 Neal Street, will open in July and span 3,152 square feet (up from the current 2,000 square feet). It will offer a wider array of brands, a dedicated treatment room and larger spaces for the names it already carries.
“It’s a good time for the market and premium beauty in the U.K. is strong,” said Lightfoot in an interview.
He believes the retailer’s success derives from its broad and curated offer of products that range in price from 6 pounds to 600 pounds, and the tight relationship between the sales assistants and customers.
He said Space NK’s offer “is not about age or demographic. It’s about demand. People who love beauty want to find these brands, to touch, play with and experience them” and the stores are ready to cater to those needs.
Given the 30 percent annual growth and bullish retail rollout strategy, there have been reports that Manzanita plans to sell Space NK, which it had first tried to do in 2018. It worked with Goldman Sachs before deciding to pull the retailer off the market.
Earlier this month Sky News reported that Manzanita has been in talks with potential bankers for a deal valued between 300 million pounds and 400 million pounds. Lightfoot has declined to comment on the speculation.
Space NK, which has 74 stores across the U.K., has been investing heavily in rolling out stores. In 2023, it committed to opening eight stores a year, and hasn’t looked back. The team is constantly monitoring demand and using sales trends on the e-commerce site to determine where it needs to have a physical presence.
In addition to Covent Garden, Space NK is also planning to open two stores in Manchester, at Trafford Centre and Arndale Centre. It will also open at the Westquay Shopping Centre in Southhampton, and in Dundrum town center, near Dublin, in the Republic of Ireland.
A few weeks ago, Space NK upsized and relocated its Kingston store in southwest London, and there are more openings planned this year. The new stores range in size from about 1,200 square feet to more than 3,000 square feet.
The rollout plan is part of a wider strategy to create a “seamless” omnichannel experience for the customer.
At Space NK every purchase is recorded in a central database, which feeds the loyalty program, and means that marketing is more targeted, and that shop assistants can offer more personalized attention to customers.
Lightfoot said it’s been quite a task keeping up with customers, who are well-educated when it comes to beauty. They’re also curious and want informed answers, and advice, from staff.
“Service is vital and it’s in our DNA,” said Lightfoot, adding that sales assistants have to be “chameleons” and adapt to customers’ different needs.
Space NK was founded in Covent Garden in 1993 by Nicky Kinnaird as a glossy destination for niche, international brands — many of them skin care — that were difficult to find in the U.K.
Kinnaird, who’d begun her career in real estate, wanted to create an alternative to the department store makeup counters, and to Boots, which all carried the megabrands.
The early stores were intimate, and curated almost like sculpture galleries with experts on-hand to tend to customers. Manzanita Capital invested in 2002 and Kinnaird stepped down a decade later to set up her own brand consultancy.
“What we’re seeing today is that customers are becoming more educated. They are subject-matter experts and they’ve often done a huge amount of research before they go to the store, so the relationship is much more peer-to-peer than it used to be. It’s about sharing our passion and excitement for products and building trust quickly.”
Keeping up with customer demand is a herculean effort for a company like Space NK, which generated turnover of 147 million pounds in the fiscal year ended March 31, 2023, according to the latest filings on Companies House.
EBITDA, or earnings before interest, taxes, depreciation and amortization, was 6 million pounds while profit was 1.4 million pounds, compared with a loss of 621,000 pounds in the previous year.
In addition to the retail network in the U.K., it operates in North America with a “wholesale-plus” model at stores including Bloomingdale’s, Nordstrom, Hudson’s Bay and Walmart. Space NK curates the brand mix and trains, educates and supports the staff, who are employed by the larger retail partner.
Lightfoot said keeping pace with growth has been a challenge.
“When I started in this role, our biggest stores had 20 staff and there was a single shift in the warehouse. Now some of the stores have 60 staff and there are three shifts running 24 hours a day in the warehouse. It would be easy to sit back and enjoy growth, but you have to work behind the scenes to make sure that the foundations continue to get built,” so you can continue to grow.
The competition is ferocious.
In May, Sephora will open its third U.K. location at Trafford Centre in Manchester, having landed in the market last year with a 6,000-square-foot unit at Westfield White City in London.
Harrods’ stand-alone beauty concept H Beauty has five locations across the country, while Boots continues to build up its beauty offer. Online players Beauty Bay and Cult Beauty continue to pose a threat to physical and omnichannel players, offering slick websites with an editorial feel.
Space NK also stays ahead by investing in its omnichannel offer, and by lavishing attention on the brands it carries. It has become a go-to retailer for launches in the U.K., offering new brands nationwide distribution and generating the equivalent of millions of pounds in advertising for brands across its store estate.
After building up its skin care and cosmetics offer, the next frontier is fragrance, which represents half of the U.K. beauty market. Lightfoot said he wants Space NK to become as big a destination for the category as it is for skin care and makeup.
It’s set to launch Phlur in a few weeks’ time, adding to a lineup that includes DedCool, Byredo and Diptyque. Adding more fragrance to the shop floors should make Space NK more attractive to any potential buyers, should Manzanita decide to trigger a sale.
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