LONDON — Beauty is booming and so is Space NK, which will add seven more stores to its UK retail portfolio this year, enriching its service offering and becoming a leader in fragrance.
Sales at the Manzanita Capital-owned retailer have increased 30 percent annually over the past three years, growing two and a half times faster than the U.K. prestige premium market, Space NK CEO Andy Lightfoot said.
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Demand at the new Covent Garden store was so high that Space NK decided to move to larger premises after just 18 months.
The new store, at 6-7 Neal Street, will open in July and will span 3,152 square feet (up from the current 2,000 square feet). It will offer a wider range 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 Britain is strong,” Lightfoot said in an interview.
He believes the retailer’s success comes from its wide and curated range of products ranging in price from £6 to £600, and the close relationship between its sales assistants and customers.
He said Space NK’s offering “is not about age or demographics. It’s about the question. People who love beauty want to find, touch, play with and experience these brands” and the stores are ready to meet those needs.
Given its 30 percent annual growth and bullish retail rollout strategy, there are reports that Manzanita plans to sell Space NK, which it had first attempted in 2018. It partnered with Goldman Sachs before deciding to take the retailer out of the market to get.
Earlier this month, Sky News reported that Manzanita was in talks with potential bankers over a deal worth between £300m and £400m. Lightfoot has declined to comment on the speculation.
Space NK, which has 74 stores in the UK, has invested heavily in its store rollout. By 2023, the company committed to opening eight stores a year and hasn’t looked back. The team continuously monitors demand and uses sales trends on the e-commerce site to determine where to have a physical presence.
In addition to Covent Garden, Space NK also plans to open two stores in Manchester, at Trafford Center and Arndale Centre. It will also open in the Westquay Shopping Center in Southhampton and in Dundrum city centre, near Dublin, in the Republic of Ireland.
A few weeks ago, Space NK expanded and relocated its store in Kingston, southwest London, and more openings are planned this year. The new stores range in size from approximately 1,200 square feet to more than 3,000 square feet.
The rollout plan is part of a broader 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, making marketing more targeted and allowing store associates to provide more personal attention to customers.
Lightfoot says it is quite a task to keep up with customers, who are well educated in the field of beauty. They are also curious and want informed answers and advice from staff.
“Service is essential and is in our DNA,” says Lightfoot, adding that sales assistants must be “chameleons” and adapt to the different needs of customers.
Space NK was founded in Covent Garden in 1993 by Nicky Kinnaird as a glossy destination for niche, international brands – many of them skincare products – that were difficult to find in Britain
Kinnaird, who had started her career in the property sector, wanted to create an alternative to department store make-up counters and Boots, all of which carried the mega brands.
The first stores were intimate and arranged almost like sculpture galleries, with experts ready to serve customers. Manzanita Capital invested in 2002 and Kinnaird stepped back a decade later to set up her own brand consultancy.
“What we see today is that customers are becoming better educated. They are subject matter experts and they have often done a huge amount 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 enthusiasm for products and quickly building trust.”
Keeping up with customer demand is a huge undertaking for a company like Space NK, which generated a turnover of £147 million in the fiscal year ending March 31, 2023, according to the latest filings at Companies House.
EBITDA, or earnings before interest, tax, depreciation and amortization, was £6 million, while profit was £1.4 million, compared with a loss of £621,000 in the previous year.
In addition to its retail network in Great Britain, it operates in North America with a ‘wholesale-plus’ model, in stores such as Bloomingdale’s, Nordstrom, Hudson’s Bay and Walmart. Space NK manages the brand mix and trains, manages and supports the staff employed by the larger retail partner.
Lightfoot said it’s a challenge to keep up with the growth.
“When I started in this role, our largest stores had 20 employees and one shift in the warehouse. Now some stores have 60 employees and three shifts in the warehouse operate 24 hours a day. It would be easy to sit back and enjoy the growth, but you have to work behind the scenes to ensure that the foundations continue to be laid” so that you can continue to grow.
The competition is fierce.
In May, Sephora will open its third UK location at the Trafford Center in Manchester, after entering the market last year with a 6,000 sq ft unit in London’s Westfield White City.
Harrods’ standalone beauty concept H Beauty has five locations across the country, while Boots continues to expand its beauty offering. Online players Beauty Bay and Cult Beauty continue to pose a threat to brick-and-mortar and omnichannel players, offering slick websites with an editorial touch.
Space NK also stays ahead by investing in its omnichannel offering and by paying close attention to the brands it carries. It has become a go-to retailer for launches in Britain, offering new brands across the country and generating the equivalent of millions of pounds in advertising for brands across its retail footprint.
After expanding its skincare and cosmetics offering, the next step is the fragrance sector, which represents half of the UK 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.
Phlur is scheduled to launch in a few weeks, adding to a lineup that includes DedCool, Byredo and Diptyque. Adding more scent to the store floors should make Space NK more attractive to potential buyers, should Manzanita decide to launch a sale.
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