The Beauty Slowdown Has Come for Indie Retailers

The woes of a few of the magnificence trade’s greatest names, like Ulta Beauty and Estée Lauder, have made latest headlines. However indie retailers are feeling the squeeze too — if no more.

Clear magnificence retailer Credo Beauty laid off 27 p.c of its company employees in Might 2024 and has been delayed on funds to a few of its manufacturers, the retailer confirmed. In the meantime, one other clean-centric retailer, Gwyneth Paltrow’s Goop, underwent two units of layoffs in September and October this yr, accounting for practically 24 p.c of its employees. These reportedly included the famed magnificence editor Jean Godfrey-June, who served as Goop’s magnificence director for practically a decade. 13 Lune, which is concentrated on BIPOC-owned manufacturers, lately restructured its settlement with JCPenney, and the upscale Violet Gray was simply offloaded by Farfetch as founder Cassandra Gray purchased it again.

“It’s been widely reported that there has been a pretty consistent decline across beauty, and Credo has not been immune to that,” stated Credo Beauty CEO Annie Jackson.

Whereas loads of magnificence corporations are seeing slowdowns proper now, the indie magnificence retail mannequin is an inherently dangerous enterprise. Impartial boutique chains function a launchpad for younger manufacturers new to retail, and on the identical time, compete towards giants like Sephora. They additionally typically are centred on extra area of interest ideas resembling Credo’s clean-beauty ethos or Violet Gray’s it-girl luxurious standpoint. This curated strategy helps create devoted fan bases desirous to strive new merchandise and find out about manufacturers. However their smaller measurement makes them susceptible to the whims of the market if their space of focus turns into much less fashionable. This yr, they’re additionally going through softening client demand, the rise of Amazon and decreased funding alternatives.

“From the lens of indie, access to capital has been super tough as brands continue to grow this year. Everyone is feeling those challenges; it’s been a tough market,” stated Nyakio Grieco, the co-founder of 13 Lune. “It’s an election year. People are being really mindful about their spending and we can attribute some of the slowdown to that.”

Feeling the Pinch

With area of interest curations and devoted buyer bases, indie retailers supply small start-ups the prospect to realize model consciousness and development at a manageable scale.

“[Indie retail is] really great, because you get to be able to get it right in a setting like that, before you go to the Sephoras and the Ultas of the world,” stated David Olsen, CEO of the clear make-up label RMS Beauty. “You can learn a lot by partnering with the indie retailers.”

The clear magnificence model left Sephora and has centered on its indie retail companions together with Credo Beauty over the previous yr. After seeing 130 p.c gross sales development in 2023 and 60 p.c development this yr, it entered Ulta Beauty in October 2024.

However that smaller scale additionally brings drawbacks. Indie magnificence’s turbulent time goes again to the beginning of the pandemic. In 2020, the UK magnificence boutique Area NK closed its eight freestanding US shops, the cult clear magnificence retailer CAP Beauty transformed totally to e-commerce and luxurious clean-beauty boutique Shen Beauty closed solely in 2023.

Credo Beauty noticed a year-over-year single-digit lower in retailer foot visitors within the first half of 2024 after a burst of bodily retailer enlargement, which is “probably the most capital-intensive thing you can do,” stated Jackson. Final yr, it opened 5 shops and one pop-up, and can open a Portland location in 2025. Some funds to manufacturers have been delayed, Jackson confirmed. The retailer introduced itself up-to-date on funds for a number of manufacturers on Oct. 31 after The Enterprise of Beauty reached out.

Late cost shouldn’t be unusual in magnificence retail. In reality, it’s so frequent that retailers’ contracts will usually embody a reduction of as much as 3 p.c for paying on time, in accordance with a number of model founders. However for the sorts of unbiased labels stocked at smaller retailers, inconsistent funds are disruptive. “A lot of the founders who are feeling the pinch are probably indie-owned, don’t have VC backing and deep pockets and are really concerned about their runway,” stated one model founder who has skilled delayed funds at Credo Beauty and a number of different retailers.

Many indie retailers through the years have leveraged their sturdy curation and branding to forge profitable partnerships with bigger retail companions, resembling Area NK’s shop-in-shop places with Bloomingdale’s, Nordstrom and most lately, Walmart.

These team-ups can “give your company explosive growth and revenue — if done with the right partners,” stated Grieco.

The retailer, which has had a shop-in-shop take care of JCPenney since 2021, modified the phrases of the settlement in July after stocked manufacturers started seeing delayed funds, in accordance with a supply conversant in the matter. Below the unique partnership settlement, 13 Lune had ordered from manufacturers after which offered the inventory to JCPenney. However, in accordance with the supply, JCPenney would find yourself shopping for smaller order sizes than initially indicated, inflicting delayed funds to manufacturers.

“Everyone that was part of the Thirteen Lune launch at JCPenney knows JCPenney completely mismanaged the inventory process,” stated the supply. “They significantly overbought and left Thirteen Lune financially responsible for their mistakes to ensure a more seamless process. Thirteen Lune advocated for a direct relationship between the brands and the retailer to mitigate any more frustration.”

“JCPenney and Thirteen Lune came to the mutual decision over the summer to update our working relationship, establishing a direct buying relationship between Thirteen Lune brands and JCPenney in an effort to streamline processes,” stated an announcement by a JCPenney spokesperson. “We are proud of the strides JCPenney Beauty has made in bringing awareness to BIPOC and female-founded brands across the industry. Thirteen Lune remains a key partner of ours and we are committed to a positive working relationship with all of our brands.”

The new settlement is a licensing deal through which JCPenney makes use of the 13 Lune identify for its shop-in-shops, in accordance with the supply. JCPenney purchases merchandise and fulfils invoices instantly from the manufacturers, confirmed the JCPenney spokesperson. 13 Lune and its in-house magnificence model Related are not unique to JCPenney. Different partnerships could begin sturdy however not final: Credo Beauty, for occasion, teamed up with Ulta Beauty for a curated assortment of manufacturers in 2020, however this system resulted in March 2024. Jackson nonetheless sits on the retailer’s Clear Beauty Council and described the Ulta Beauty partnership as a “total test.”

Area of interest Challenges

Retailers specializing in a selected area of interest class are additionally susceptible to shifting developments and investor and client mindsets. There could also be no higher up to date instance than “clean” magnificence, a class whose contours have virtually solely been drawn by retailers themselves.

Credo and Goop have been pioneers identified for stocking mindfully formulated merchandise from tough-to-find manufacturers. However that assortment turned much less differentiated after Sephora and Ulta Beauty created their very own clear designations and started stocking Goop- and Credo-discovered labels like Ilia Beauty and Kosas. Additional complicating issues is the clear magnificence backlash, which has been brewing because the early days of the pandemic, with a rising variety of critics accusing manufacturers and retailers of fear-mongering.

13 Lune and its model roster, in the meantime, have seen a weakening funding setting as buyers pull again from their 2020 guarantees to dedicate extra funding to BIPOC founders. One in all 13 Lune’s buyers, the Fearless Fund, was even focused by a right-wing activist who has been suing organisations over range initiatives.

Retailers are adjusting to a troublesome market by leaning into retailer expertise, curation, newness and discovery. Credo Beauty has been remodelling shops and bringing again companies like mini facials and make-up utility that it shut down through the pandemic, whereas additionally providing extra monetised alternatives resembling retailer shows.

13 Lune, in the meantime, has been leveraging its distinctive curation and model id for licensing offers, resembling its in-flight amenity package with American Airways. Grieco stated it’s open to extra retail partnerships, and likewise desires to additional scale Related, which is ready to enter a brand new retailer subsequent yr.

Retailers could not have the ability to management client sentiment — model founders and retail executives alike acknowledged that the election yr and stress over the financial system and inflation have dampened magnificence spending. However Credo’s Jackson stated that this fall, retailer visitors is up double-digits from final yr, and can doubtless proceed to develop after the election and through the vacation season. Goop Beauty income has elevated 21 p.c year-over-year this yr.

“People are starting to turn the ship around,” stated Jackson. “I am very optimistic about next year.”

Signal as much as The Enterprise of Beauty publication, your must-read supply for the day’s most vital magnificence and wellness information and evaluation.