National Post (National Edition)
COSMETICS
LUSH UPSIZING STORE FORMATS IN MAJOR EXPANSION.
TORONTO • Beauty retailer Lush Cosmetics is tripling its average store size over the next three years, bucking the downsizing trend of many bricks-and-mortar storefronts across North America.
The retailer, known for showcasing its unwrapped rainbow-hued like baked goods in baskets and on shelves at its 250 stores, is grappling with an enviable business problem: after seven years of double-digit same-store sales growth, many of its locations have become too crowded during peak shopping times.
“With the volume we’ve had, we were too often at the level where staffers were complaining about having too many customers crammed into the store,” Mark Wolverton, chief executive of Lush North America, said in an interview from the company’s Vancouver headquarters. On the revenue side, Lush was “starting to get capped by the size of the store.”
The retailer’s average North American store size is 800 square feet and it takes in an average of $2 million annually. Two years ago, Wolverton and his management team drew up a list of 120 Lush stores that they thought would fare better in spaces of 2,000 to 2,500 square feet. Now, given the continued strong sales, the list of stores destined for larger operating areas is “more up in about the 200-store range,” he said.
The retailer, which has 52 outlets in Canada and whose overall sales are growing at a staggering 50 per cent a year, will have 40 of the expansion projects completed by the end of its fiscal year in June, when sales are expected to hit $750 million.
Lush’s U.K. founders were early developers and suppliers of beauty products to now-rival The Body Shop before they opened up their first store in 1995.
One of the likely reasons Lush is outperforming the overall beauty market is its youthful focus and heavy social media presence, experts say. It plays into entire communities of users on YouTube, Instagram and Snapchat who routinely post videos of day-glo bath bombs seeping into bath water or peeling off a face mask.
The global market for cosmetics, including skin care, hair care, oral care and perfume, is growing at an annual rate of 6.4 per cent and should hit US$460 billion by 2020, according to the Irish market research firm Research and Markets.
“Lush has done something that is fun and different and very hard to replicate,” said Maureen Atkinson, at Toronto-based J.C. Williams Group. “It is a natural for social media activity and you couldn’t create that look or concept elsewhere without it being a ‘me, too.’ ”
Beauty seems to be performing much more strongly than other retail categories, she added. “It is a good time to secure better space inside malls. (Landlords) are happy to have high-traffic retailers in there these days.”
Wolverton, who splits a 50-50 stake in Lush North America with Lush’s U.K. operation and opened the retailer’s first store in 1996 in Vancouver, said the retailer’s target market is 18-to-35 year olds.
And while beauty retailers’ biggest threat is the Internet, and Amazon in particular, Wolverton believes Lush’s strong sales growth has been helped by its experiential store environment — the lack of product packaging allows customers to smell and sample some goods — and its continuous flow of new product varieties.
“The Internet plays a really important role in terms of exposure to the brand and repeat shopping, but that experience we have in the store will never get lost with the Internet taking it over,” Wolverton said. Lush’s online division accounts for about 10 per cent of sales and is growing at 40 per cent a year. “We want to keep it really interesting for customers in terms of their shopping experience.”
Dave Lackie, beauty expert and founder of the digital publication Beautytheguide. com, said novelty is critical for attracting a younger customer base. “For a brand that has been around for 20 years to (expand retail stores) when none of the others are doing it is surprising. Everyone else is driving the business toward e-commerce.”