Wendy 00:09

Hello, everyone. I'm Wendy Liebmann, CEO and chief shopper at WSL Strategic Retail and this is Future Shop. This is where I talk to innovators disruptors and iconoclast about the future of retail. Today, we're going to talk about beauty retail. Now, for those of you who are not in the beauty business, please do not turn off the podcast because I promise you, there is much to learn here that will cause you to reflect on the dynamics of what's next in your business, whether it's a category or a channel, because beauty retail, really over the last decade has exemplified this shifting dynamics of the new retail ecosystem. My guest today to reveal all is Noah Rosenblatt. Noah is the President North America of SpaceNK the UK founded specialty beauty retailer that first arrived in the US he'll tell us about 15 years ago, I think what makes SpaceNK so fascinating. And the work Noah has been doing is that it has an incredibly unique distribution model one that makes my eyes roll and here catch on fire. Noah joined the company in 2015, after many years in both beauty experience at the high end luxury world of LVMH. And some 20 years or so in retail at large across the US helping emerging brands really grow their business. So he has much to teach us here today. Welcome Noah

Noah 02:03

Wendy, it's great to hear you too.

Wendy 02:05

And so soon. Noah and I were in Las Vegas 10 days ago, our first meeting. We were at Cosmoprof the large global beauty event Expo in only 106-degrees temperature and had a great conversation on the stage with several other retailers about the state of retail. And so I just wanted to hear even more about this conversation. So I'm delighted to have you here. So to get us started just to sort of ground us in context, tell everybody about the company and the approach that Space NK has taken over the last few years,

Noah 02:41

as certainly well as you know and as many of the listeners will know and will viewers will know is that SpaceNK was founded in the UK originally by a woman named Nicky Kinnaird who was a globetrotter and was finding goods not only in beauty, but throughout many different categories and brought them back to her first location in Covent Garden. That was some 30 plus years ago. And today the company is still very much the leader in discovery and innovation in beauty only with more than 90 plus stores in the UK market freestanding stores in the UK market. But our mission here in the United States and throughout North America is connecting consumers to the most iconic and emerging brands through the world's or nation's best retailers including Bloomingdale's, Nordstrom, Hudson's Bay up in Canada, and of course, then our partnership, our recent partnership with Walmart here across the US.

Wendy 03:37

Yeah, I remember, I thought it was the first Nicky Kinnaird store in London. I know it wasn't that although it could have been you never know. I remember that store and how intriguing it was, or one of those stores. And then I remember when she first came to the US and there was a store, I think it was in Soho, Tribeca. And it was that same sort of adventure of you know, oh, look at that, you know, a fascinating model, because it was a little after Sephora arrived in the US and with it sort of dark trendy gothishness of black and red and white or something. And here was the SpaceNK concept which felt light and bright and happy and intriguing. So not to show any preference, but it was very interesting to me. So that notion when you came here or when the company the brand came here of somewhere for discovery around beauty, was there an intent early on in the piece to go from kind of what I might call selective retail spaces, more luxe spaces into that more broadly available, what's become the you call I think prestige beauty space at Walmart? Was that part of the intent or did that evolve over time?

Noah 04:49

That certainly evolved over time when we initially came to the States. We came with the boutique model and so very similar to that first location that you visited down in Soho, we thought there was a need for boutique beauty. And to your point, there was really this race in regards to who could build it bigger, faster, better. And a few of those retailers Sephora being one of them to grow quite quickly, Ulta being one of those also to grow to the real scale. And so we realized very early on that partnerships with some of these best retailers was going to be integral to our success. And so we started that partnership with shop-in-shops at Bloomingdale's was our first partner. And since then we've gone on to become their top rated brand and beauty floor and digitally. So we're super proud of our partnership with Bloomingdale's, and the longevity that we've shared with them. And of course, then it evolved to our Nordstrom concept, which were there. And then of course, then during the pandemic, we decided that there was a diversification need of our portfolio to enter into other markets across North America. And so we did a partnership with Hudson's Bay, all of which was really focused predominantly around that luxury market that you talk about, but the pandemic shifted things. And so that's how we really evolved in regards to looking for other partnership models that were really about servicing broader communities than just these luxury retailers.

Wendy 06:15

It's really interesting, because I think about how not to focus on Sephora and Ulta, but how they have now come your way with originally Sephora and Penney's and now in Kohl's and obviously, Ulta at Target. And that very interesting play that what you've done, it feels more European. And by that I mean, or maybe even Canadian, here, we've always had the luxury of scale. So to me retail in this country, and you've worked in retail, over the years, has always been kind of real estate play, you can say how we're gonna grow, let's open another one, 500 Macy's, whatever it is 8000, 9000, Walgreens, CVS, all of those things, the model that you have embraced of sort of right partners, right place, follow the shopper, am I putting words in your mouth?

Noah 07:03

Yeah, no, you're exactly right.

Wendy 07:05

Yeah, feels a very different approach, which I guess some of these other specialty retailers, not just in beauty, are coming to understand. Am I leading you to somewhere you don't want to go?

Noah 07:17

No, not at all, I think you're spot on. What I'm super proud of both for ourselves as a total company. But also the people that I work with and who work with us on a regular daily basis is we've been able to respond quite quickly to how the market has evolved to that way. And so we didn't necessarily participate in the growth race that, you know, some of those other retailers you mentioned, really were there, too. But we were really listening to the consumer. And so I think the pandemic was a great example of that. We saw massive shifts from people outside of big cities into more suburban areas, or rural cities. And so that beauty consumer was really looking to find ways where, when and how they wanted to shop for the convenience and accessibility of beauty goods. And so that was really, our thought was, where did they go? And how do we really continue to service those communities where they were looking for these excellent products and brands?

Wendy 08:15

Yeah, I think that whole notion, I think I might have used the example when we were on the stage together in Las Vegas, about this assumption that people make that if somebody shops in a Walmart or Target, an Aldi, fill in the blanks, they either don't have the money to spend on more premium price products, or that's just not the category they spend on. And I learned that a long time ago walking the stores with a Walmart executive where I said, “Why don't you have a professional haircare” and the day when that was a big deal, said Oh, no, our shoppers won't our people won't spend on that. And I said you're wrong. They'll make choices, but they will. And luckily enough, we walked out of the store, I saw the same shopper whip in to a Sally's Beauty Salon and come out with a $20 styling product from Paul Mitchell or something and prove the point. But that feels to me like that's part of when I think of you and department stores versus a Walmart that you've sort of uncovered some of that insight around beauty and how people shop for beauty regardless of their income level, for sure.

Noah 09:22

And convenience plays a major key in that as we've seen with other retailers bringing beauty and luxury beauty to the masses has been come one thing that we've seen across the board and so we felt like it was a great partnership to find someone as big as Walmart, the world's largest retailer to participate in really looking to build upon that venture.

Wendy 09:46

Yeah, so accessibility, convenience, affordability. I get that. What role do you then play in a Bloomingdale's or a Nordstrom or Hudson's Bay Company? Where do you fit in there sort of either pricing hierarchy or discovery? I mean, where do you fit there? Is that similar or different to the role you play at Walmart? How do you figure out living in those two worlds?

Noah 10:11

So accessibility and availability of the assortment is always our key component. So, in the luxury channel, we see people really looking for the consumer really looking for those items that are harder to find. And so what we want to be is that dependable location for them to be able to say, I know I can find this at SpaceNK within any one of our retail partners. On the luxury or more masstige areas of the prestige division that we find at Walmart and our partnership there, we find that value is very important introductory sets are very important. And so again, if we have that accessibility to the assortment that a brand brings us whether it's an iconic brand, or whether it's a new emerging brand, continuing to have the teams really evaluate what works best in those retailers is one of the key components. And then of course, the onset of all of that is then the availability of those goods on any shelf. So whether that's the digital shelf, or again, those store shelves, the digital shelf plays a big component in regards to availability and assortment for the accessibility consumer.

Wendy 11:18

Yeah. And do you find within both those environments, I mean, you've got service in both environments, and how critical is that in a, you know, I'm assuming it's critical in a department store, how critical is that in a mass environment?

Noah 11:34

That's a great question. And we spent a lot of time trying to understand the variables in regards to what the consumer is really looking for in those markets. So like you said, in the luxury environment, we find that the one to one service, education has always been at the top of the service model for us. And so we want our employees to be just as educated as the consumer is. Let's not forget, the consumer has all of that information on their phone, and probably one or two devices with them at any given time. And so our education and the availability of that and the amount of time that we spend with our employees plays a huge role. But what we were looking for is how do we really give that same kind of level of knowledge and expertise that SpaceNK is known for to the masses. And so through technology, we've really found a new way of being able to do that your QR integration in store, through chat through our portals or websites, those have been kind of those immediate availability assets that we've been able to give the consumer before making that choice in store.

Wendy 12:43

So to me, as I started to sort of unravel, not the strategy, but the relevance to other categories, other channels, those are some of the things I first looked at, there's so much learning when I walk into that more mass popular price space, which you know, looks lovely, but the use of digital as a way to inform, engage, build a sense of connection in that space, versus you know, the bodies necessarily the extensive bodies in the store at Bloomingdale's, or Nordstrom, or whatever, gave me that first insight that said, Yeah, this is about beauty. But what other categories might I apply that knowledge and where digital really can play an effective role, as opposed to just sort of throwing another QR code somewhere, and that level of learning. So that to me was a really interesting tick one here for other categories who are trying to inform and build out that knowledge base within a more or less serviced retail environment. That was really interesting to me the way you built that.

Noah 13:47

Thank you. And absolutely, I think you're onto something there. From a sense of that, we've seen the evolution of technology and the integration of that continue to build. So what started with reviews and ratings became in store technology became then try-on sessions. And now it's really become this thing about where the consumer is really wanting to know, what does this product do for me, what is its benefits? And how can I integrate it into my beauty routine? And so we've found that bringing all of those points together is really this important piece to the platform that we look to launch or continue to launch into our prestige channel.

Wendy 14:26

Yeah, so I was thinking that's the learning that can go the other way, right. And these days when it's hard to find good staff, or educate well informed and people who appreciate being in a service role. I was thinking, Oh, that's the other learning it can go the other way now and go from you know, more mass to more prestige, luxury space as you integrate and learn from technology on both sides.

Noah 14:49

Sure. I think that's a very viable comment and where we used to be very much in person learning so it required a trainer going to an individual location. Now there are many platforms that allow brands, retailers, partners, you name it, to be able to reach a broad spectrum of employees, while also ensuring that there's that retention component that is there for them to be able to relay that to the consumer. So I would agree that the technology component to retailing has become a very important piece.

Wendy 15:19

The other thing I was thinking about is how you think about I think about you, in some ways is kind of the curator, par excellence. As I said, in the very beginning, the complexity of all this we'll get to in a minute, but how you juggle all of these different distribution models, in some ways. But there's so much new coming to play in beauty, particular, it's almost like a beverage category where there's something new every other minute, how do you think about that, evaluate it move things in and out of both models or any way you're distributing? How do you think about that now, that criteria, and deciding what goes where and how long it stays all of those things, particularly and with sort of this discovery platform, that so much part of the SpaceNK business.

Noah 16:01

Newness has long been an important part to our model, as I mentioned before, and our goal from newness, regardless as to whether it's coming from new brands that we're introducing, or even new products within some of the best brands is that we like to see newness represent anywhere between 15 to 20% of a total. So at launch, so we're looking for newness to be really good. And so our buyers placed quite a few criteria on the discerning elements of making sure that that newness is there, I would say the way that the market has evolved, though, is that trends are becoming even faster. So we're seeing that trends coming in really hot and heavy through either TikTok or any other social platform. And then it's kind of having its moment. And then of course, then there's a new trend that's coming even quicker. So the important piece for brands is to really find number one efficacy in their product is probably the most important. And then of course, staying true to who they are from a brand perspective. And again, this is in any category, as you alluded to, at the beginning, is don't chase the trend as much as you are kind of working to find yourself within what is important to your brand. That's truly what I think the consumer is looking for. And we do a great job with founder led brands. And so founders always tend to be very unique to what they is important to them. And so that works pretty well for us in our category.

Wendy 17:26

And then even within that, I mean, I think about the categories themselves, the more sort of skincare health oriented, the more color oriented, I'm always intrigued about what's in the store in your store in say Bloomingdale's, and what's in your store in Walmart, that mix… so I'm constantly thinking about with all that newness, and all those innovative brands and then the ability is sort of figure out yeah, we've got enough skincare in the mix, we probably need a bit more hair. So how do you think about that as well, the 15 20% of newness?

Noah 18:18

Well, we always look for something that has a unique point of view. And so it's always important that someone has come with either a unique packaging integration, or they've come with a unique ingredient that's there that could potentially catch on. One of the big trends that we're finding is that biotech beauty is starting to really come up quite intensively in regards to how does the consumer kind of see the benefit to biotech beauty through either hair regrowth or we're finding it now included in skincare, and the way that the actual product is formulated. And so we're finding that that is tending to become one of those things. So that's one of the categories that we see as quite interesting as the future. But first and foremost, again, it comes back to really what is unique about that brand, and of course, then the efficacy of the product and its use for the consumer, I would say the other thing that's super important to us is it's very rare to find a space in beauty that's not already been tapped into. But what we look for is also the inclusivity factor that's there. So we're brands previously may not have been making shade ranges or products that were unique to skin tone, we're really focused on ensuring that across whether it's in the luxury sector or in the prestige sector, that the availability of that product to the consumer is there on a regular and so that's those are two of our areas that we're focusing on when making decisions

Wendy 19:44

and then you have some confinement to your space particularly well in both places because you're borrowing some but not borrowing of course but renting the house right so is that also the place where ecommerce where the website plays in? Because it feels to me like if you can't fit it all on the shelf, how do you fit it in? Is it that extension of the true Omni proposition?

Noah 20:08

We went through a period of time where digital was the only platform that people could shop? If we all remember not too long ago, actually. And I think everybody did an excellent job pivoting to what that was. But there were three major things that played into that. So I would say selection was a big choice element for the consumer, speed was another one, how fast can I get that product? And of course, then service. So how well did you service. The entire process of purchase and selection to your point, the breadth of assortment being available online became a really good, important key indicator for us to ensure that we're continuing to do that, while we can continue to now as the consumers going back into stores, we can continue to help edit those assortments for them based on what selling best or based on what we're finding from a brand perspective. But again, we want to be able to give them that assortment and that selection.

Wendy 21:05

Yeah, it's fascinating to me again, to think about because our lens is always through the lens of the shoppers. Now you've heard me say 1000 times in Las Vegas and will no doubt before the end of this hear me say one more time. And I think about how people go to Walmart to shop, and how people or, why? And how and how they go to a department store to shop and the different kinds of proverbial mission. What have you learned from those experiences? When I got the grocery list? I've got lots of other things. Sometimes I've got a kid screaming in the cart or something versus, you know, I'm going to make a trip to the mall to the department store. And I'm going to have a moment. What did you learn from those two different experiences in terms of the way you think about this brand that is SpaceNK

Noah 21:54

this assortment of brands that we continue to curate for sure. For us, I think one of the key learnings that we really found is that there's a lot more time for the consumer to shop and learn in the environments that are more the luxury environment. So services are playing into that quite a bit. Variances are playing into that quite a bit. So we're finding that usage of Spa rooms or the way that brands actually engage with consumers in the luxury environment is really helping that purchase, continue to grow and finding routines that work for the customer there. In the prestige environment we're finding that speed is obviously super important for them, they may be coming in for groceries, or they may be coming in for other health and beauty or wellness items. And so finding that they have the assortment availability, and the speed of being able to get that off the shelf and into their cart, is making it quite an easy, how do you reduce the barriers of entry for that consumer on the prestige side of the business. And that is just simply through the availability of those products that they're really voting on.

Wendy 23:05

What's interesting about that, to me is, and again, I probably use this example in Las Vegas, I certainly use it a lot here in our How America Shops® research in the early days of order online pickup in store. And then even in the recent work we do, where you see this new trip that formed which was you know, I'm ordering online, I'm going to drive up, pick it up, put it in the trunk. And then we saw these numbers, like two thirds of the people who did that then parked the car, and then went into the store and you go like, what? And part of it is because they forgot something. Or now they actually had time to spend time in places like your BeautySpaceNK at Walmart, your prestige space, now they have time to do it. And as long as it's not ice cream melting in the trunk, you know, they get the everyday essentials off their list. And now they free themselves up for these experiences that maybe they don't always have the time if they're with the cart and the kids and doing chores sort of thing. So that was the other part that I thought was interesting in that experience that you've created in a big box.

Noah 24:15

Thank you, I would imagine that you're probably seeing data similar to ours, which is the frequency of that consumer coming back is more regular, where in the luxury side, we're finding that they're going once a month or maybe once a quarter, even shopping for their full routine, that frequency of coming back into store in the prestige side of it, the big box retailers, is much more regular. So again, like I said, if they're shopping or grocery or any other category, the frequency and so then the eyes on the amount of times that those eyes are falling on your brands and your products is much greater than we're finding in the other channels.

Wendy 24:49

That's I think another really important learning for this audience, regardless of category is that we are always saying it's understanding the obvious mission and trip. But it's also understanding the nuance around that that creates a different opportunity. But seeing those two things and understanding the pace of the beauty shopper and being able to deliver the right product, message, services, whether it's digital or physical around that becomes really important. So it sounds to me like you've learned a tremendous amount, I'm sure you came to SpaceNK with tremendous knowledge based on your years of experience. But living in those, at least those two spaces beyond the ecommerce space, has given you some extraordinary insight into the nature of shopping and shoppers, not just beauty, is that true?

Noah 25:41

I will say it's had been an adventure for sure. But it's been an awesome wild ride from that perspective. And one of the things you've mentioned, kind of this shopper, looking cross category, as you're suggesting, and as many of the viewers and listeners will probably be thinking about is that you can find trends in any one of those other areas. So we've seen in mass, organic foods really starting to trend. And so that's helped us shift in regards to let's find some natural brands or organic brands that the consumer who places value on that in food is going to find value in that in beauty. And so that cross category assessment, if you will, that brands should take while looking for what works in their channels is going to be really important as well.

Wendy 26:29

And the other thing you just brought to mind was, you know, I think about Nordstrom and the other department stores now selling vitamins that used to only be things that were in the vitamin aisle in the drugstore, the Walmart, Target, whatever whoever supermarket. And now you see that sort of expanded offer of categories in the more luxury limited distribution space, where they too have come to understand more about the whole shopper and sort of stolen from one side of the aisle or the channel distribution, you're very wise, that's really interesting to think about how you would, in any category, approach all of that. So just one of the things that I keep alluding to, but I figure I might as well toss it right in the middle is the complexity of managing this model. Is it more complex or less complex?

Noah 27:36

Oh, no, for sure, the operations has been a tremendous undertaking for us. Fortunately, through great partners, we're able to continue to do that. But what I think we do best is really give brands the accessibility to scale. And so for brands and for us, it's important to find as many points of distributions that we feel are going to b, right for them. So when we look at our process in regards to really getting product to the consumer, we hold a central stock file in our distribution center. And that central stock file is available to any one of those locations or retailers that we have agreements with. So we continue to move it quite quickly. Even though there is a an element of a middleman in regards to the process, we take that out as best as possible and really offer ease and operations for our partners. And so that's really been our goal.

Wendy 28:33

Well, I must say, stepping back and kind of wrapping up one of the things that we've been talking about a lot, and we're not the only ones talking about it, but this fragmentation of retail, which has come from both new formats that have opened and new technologies that are informed and occasions like pandemics and things like that, but this notion, we had pushback from clients at one point when we everybody said oh yes, but everybody's trying to save time, they're really trying to be, you know, they don't have any time they're stressed or whatever. So they're going to shop in fewer places than they used to. And yet we see people shopping in more places. And that explosion of distribution is very reflected in all of the things that you all the touch points or all the access points that you've created. That's why I thought this whole conversation is so interesting, because you're almost the fragmented, disrupted beauty landscape that actually is very reflective of lots of places and lots of categories because the shopper is in all of those places.

Noah 29:35

Thank you for that observation. And for that comment. We have been working extraordinarily hard on our model here in North America and it's truly paid off. What we think has happened is we've gone from a brand that was quite small in the onset here in the United States when we joined our initial venture into the market and now we're getting the opportunity to speak to people like you and research houses like you that really are helping us continue to build our model. And so we're feel very fortunate in regards to the expansion and growth that we're experiencing based on our model change.

Wendy 30:09

And I'll say one last thing that I forgot to ask you, you also have the SpaceNK brand, right in terms of categories, which I first experienced a while ago. But is that in both I shouldn't know the answer to this is that both in luxury and in prestige

Noah 30:24

it's exclusive to the prestige market. And we created it for a few different reasons. But primarily, we were looking at across the board, what is the value in the prestige channel is that the customer wants sighs impression or perceived value to that product, they know they love great category. So bath and body or fragrance or home scenting or those kinds of things. We're testing some of those categories this holiday through our partnership with Walmart, but they were really looking for that value. And so that was how we developed it. I would say that it has kind of evolved into a bigger conversation for us, which is really that, you know, whether we've experienced a recessionary economy or an inflationary economy, the reality is that that consumer is still willing to spend right now, which is really exciting. But how the impact of pricing or ingredients have led to pricing in the marketplace has really helped us bring the same kind of quality products through our private label goods to the consumer in those markets. And we've seen a great success from it.

Wendy 31:32

Yeah, now it struck me is that another again, another level layer into this model, which feels like a very well, it's sort of a disrupting the traditional beauty channel model, which actually, in so many ways, hasn't actually been disrupted since Sephora showed up 25 years ago, which is like, stunning to think about that. And then Ulta followed and whatever. But that's just the layer upon layer that you're thinking about as you build this business in both places, or multiple places, is fascinating. So you've given us some very good guidance in terms of if we are not in the beauty business. Noah I can't thank you enough. This was a great peeling back of the of the strategy and where this brand SpaceNK has come over the last 15 or so years.

Noah 32:50

It's great seeing you again. And thanks for your time and the ability to ask such insightful questions. We love sharing information and helping anybody who's looking to enter the market. So thank you.

Wendy 33:01

I think what's most fascinating about what Noah said, was this sort of shared learning across channels. So you know, on the one hand, it's about how does the department store let you sell something in a mass retail environment, “let you” she says in quotes, and those issues of kind of the politics and who owns the brands. And granted, they're not all the same brands. We saw those battles in the early days. For those of you who remember, in Sephora and Ulta. We've seen it in other categories where you know, you move into different kinds of distribution. And somebody says, no, no, can't be there, because you're here. But what I found fascinating about this journey that SpaceNK has been on is their consistency is about discovery for whichever shopper, and whatever shopper happens to be looking for something new and different and beauty. So that was common across the board. But then thinking about how to deliver that same sort of experience with the tools available or not in the different channels. So he talked a lot about, you know, in department stores, you have a body in the store, a person, a beauty advisor, whereas in mass, you don't necessarily have that. So what do you do to compensate for that, and then learning about the digital tools in mass that actually, when you have shortage of staff, employees, whatever, that you can use and apply in a more luxury select distribution space. I think as we all think about disrupting retail, and where we put our brands and what white spaces there are the ability to say when we think about what does it take to build a business in this channel of that channel, we have to keep a very open mind because we have so many tools today that can enable us to adapt across without saying, Oh, we don't have people forget it. We can't do it kind of thing. So I think the message I heard a lot from Noah was the is kind of very open minded proposition. But based on a very clear and similar platform, people want to discover, they want to discover in physical spaces mainly. And depending on what they can afford, how do you create that environment of discovery? How do you understand the different nature of the trips, as he said, people are in Walmart much more often than they are in Bloomingdale's or Nordstrom, how do you take advantage of that? And then how do you learn from one to the other, it's not everything trickles down from a luxury space anymore. It's sometimes trickles up or over from a more popular price mass space. So when we think about disruption, it shouldn't be like, as I said, in the beginning, hair on fire, it should very much be about what's the learning, as we think cross channel, cross category, and cross opportunity, as long as she always says you keep the shopper in the room, and you know exactly what the shopper wants today and tomorrow. And of course, that's why we're here. So that is the journey to the future of retail. There's another one in the box. Enjoy it. See you soon.