by LONDON – Beauty is on the rise so Space NK, which is set to add seven more stores to its UK retail portfolio this year, is looking to enrich its service offering and become a leader in fragrance.
Sales at the Manzanita Capital-owned retailer have been increasing by 30 per cent annually for three years, and growing two-and-a-half times faster than the premium UK premium market, according to Andy Lightfoot, chief executive officer of Space NK.
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Demand for the new Covent Garden store has been so high that Space NK has already decided to move to larger premises after just 18 months.
The new store, at 6-7 Neil Street, will open in July and span 3,152 sq ft (up from the current 2,000 sq ft). It will offer a wider range of brands, a dedicated treatment room and larger spaces for its existing names.
“It’s a good time for the market and the UK beauty industry is strong,” Lightfoot said in an interview.
He believes that the success of the retailer stems from its wide and curated offer of products with a price range from 6 pounds to 600 pounds, and the close relationship between the sales assistants and the customers.
He said Space NK’s offer is “not about age or demographics. It’s about demand. Beauty lovers want to find, touch, play with and experience these brands” and the stores are ready to meet those needs.
Because of the 30 percent annual growth and a bullish retail rollout strategy, there are reports that Manzanita Space is planning to sell NK, which it first tried to do in 2018. It worked with Goldman Sachs before deciding to pull the retailer out of the market.
Earlier this month Sky News reported that Manzanita was in talks with potential bankers over a deal worth between £300m and £400m. Lightfoot declined to comment on the speculation.
Space NK, which has 74 stores across the UK, is investing heavily in rolling out stores. In 2023, he promised to open eight stores a year, and he 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.
As well as Covent Garden, Space NK plans to open two stores in Manchester, at the Trafford Center and the Arndale Centre. It will also open at Westquay Shopping Center in Southampton, and in Dundrum town centre, near Dublin, in the Republic of Ireland.
A few weeks ago, Space NK opened its Kingston store in south-west London, with 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 plan is rolled out as part of a wider strategy to create a “seamless” omnichannel experience for the customer.
At Space NK all purchases are recorded in a central database, which feeds the loyalty program, and means that marketing is more targeted, and that shop assistants can offer customers more personal attention.
Lightfoot said keeping up with customers, who are well-educated when it comes to beauty, is quite a task. They are also curious and want knowledgeable answers, and advice, from staff.
“Service is key and it’s in our DNA,” said Lightfoot, adding that sales assistants must be “Chameleons” and adapt to the different needs of customers.
Nicky Kinnaird founded Space NK in Covent Garden in 1993 as a glossy destination for niche, international brands – many of them skincare – that were hard to find in the UK.
Kinnaird, who started her career in real estate, wanted to create an alternative to the department store makeup counters, and with Boots, which carried all the mega-brands.
The early shops were compact, and kept almost like sculpture galleries with experts on hand to serve customers. Manzanita Capital invested in 2002 and Kinnaird stepped down ten years later to set up her own brand consultancy.
“What we’re seeing today is that customers are getting more educated. They are subject matter experts and have often done a lot of research before going 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 a turnover of 147 million pounds in the fiscal year ending March 31, 2023, according to the latest Companies House filings.
EBITDA, or earnings before interest, taxes, depreciation and amortisation, was 6 million pounds and profit was 1.4 million pounds, compared to a loss of 621,000 pounds the previous year.
In addition to the UK retail network, it operates in North America with a “wholesale plus” model at stores including Bloomingdale’s, Nordstrom, Hudson’s Bay and Walmart. Space NK maintains the brand mix and provides training, education and support to the staff, who are employed by the larger retail partner.
Lightfoot said keeping up with the growth is a challenge.
“When I started in this role, our largest stores had 20 staff and only one shift in the warehouse. Now there are 60 staff in some of the stores and there are three shifts running 24 hours a day in the warehouse. It would be easy to sit back and enjoy the growth, but you have to work behind the scenes to make sure the foundations keep building,” so you can keep growing.
The competition is ferocious.
In May, Sephora will open its third UK site at the Trafford Center in Manchester, having landed the market last year with a 6,000 sq ft unit at Westfield White City in London.
Independent beauty concept Harrods H Beauty There are five sites across the country, and Boots continues to expand its beauty offering. 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 offering, and by highlighting the brands it carries. It has become the go-to retailer in the UK, offering to distribute new brands across the country and generating the equivalent of millions of pounds in brand advertising across its store estate.
Having expanded its skincare and cosmetics offering, the next frontier is fragrances, which account for half of the UK beauty market. Lightfoot said he wants Space NK to be as much a destination for the category as it is for skin care and makeup.
Phlur is set to launch in a few weeks, joining a lineup that includes DedCool, Byredo and Diptyque. Adding more fragrance to the shop floor should make Space NK more attractive to any potential buyers, should Manzanita decide to encourage sales.
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