In June 2017, Shelby Wild launched her clean hair-care line, Playa, made up of botanical-based shampoos, conditioners, summer sprays and hair oils. Within months, she was contacted by Sephora’s buying team.
After a six-month exploratory discussion period with Sephora, Playa launched on Sephora.com in May as part of the retailer’s Clean at Sephora initiative. In addition to being a clean-ingredient company, Playa’s small merchandise assortment of five core products caught the retailer’s interest, since many other hair-care lines have a sprawling assortment. For Playa, Sephora gave the new brand massive reach to both its product, as well as its clean message, said Wild.
According to the company, Playa made $1 million in revenue in its first year and is projected to make between $4 million and $5 million in revenue in year two. As of early August, Sephora made up 45 percent of Playa’s total business. Because of the brand’s success online, it launched in Sephora’s top-134 doors in its Scouted at Sephora section — prime real estate in physical stores filled with handpicked products by Sephora staff — that same month.
Though Playa also sells in retailers like Germany’s Niche Beauty and Net-a-Porter, to further scale in Sephora, Wild had to raise funding. Earlier this spring, she raised a $2 million private round of investment that helped to purchase inventory, create updated packaging and put money toward marketing and influencer relationships.
“Sephora has been an incredible partner and really has guided us through this brand-building process, but we needed to raise money to grow,” she said, emphasizing that Sephora is Playa’s largest retail partnership.
Sephora has emerged as a crucial, but commanding partner for indie brands looking to scale, thanks to initiatives like Clean at Sephora and Scouted. The retailer gives these small companies global exposure online and physical shelf space, as well as guidance around product and storytelling. As Artemis Patrick, chief merchant of Sephora North America, explained, “We meet early and often to help guide them through the process of building their brand.”
In return, indie brands are expected to invest in fostering their retail footprint. It’s necessary, as these brands are realizing there are growth limitations to strictly selling direct-to-consumer or with smaller retailers that don’t have the expansive reach of Sephora. It costs them from a dollar perspective to meet the demands of playing in a massive retailer, but the thought process is that it will pay off.
Essentially, it takes money to make money at Sephora.
“If Sephora says, ‘I’m going to give you shelf space, they expect you to invest,’” said Kim Devin, founder of Australian clean skin care brand Dr Roebuck’s. Dr Roebuck’s, which first launched online with Sephora and then in physical retail, credits 90 percent of total brand sales to North America, thanks to its Sephora partnership.
The brand has been in Sephora doors for a little over a year, but Devin admitted it is “over-investing” right now. “We are spending more money than we are making, but Sephora helps with the education and brand awareness to get you there,” she said.
Devin raised an undisclosed minority investment in March, 50 percent of which went toward holding inventory. “Unlike a fashion brand, where you can show a sample range and retailers buy it, we have to hold the inventory upfront and hope the consumer buys it. We try to hold more at any time so we don’t ever sell out,” she said of Sephora’s strategy. Devin estimates she is holding 5,000 units of any of her products at any time.
“Sephora is not going to kick you out of their doors if you don’t meet your sell-through, but they will work with you month after month to get you to reach your plan,” said Devin.
Sephora would not comment on what it advises indie brands to explicitly do in regard to financials or raising capital, but incubating new lines has always been part of the retailer’s strategy, explained Patrick. “Our Sephora merchandising team takes great pride in scouting indie brands from all over the world,” she said. “They work hard to serve as a business partner, as a champion and, most importantly, as a business mentor to our brands through launch, incubation and growth.”
For Playa, establishing and maintaining a presence in Sephora is worth the downpayment. The brand ran out of inventory for nearly six weeks starting in July, so its latest round of investment helped get product back on Sephora.com sooner than expected. Another $50,000 of Playa’s $2 million investment went toward sampling Playa product to training Sephora associates through its gratis program, a process in which brands give Sephora store employees products for free to teach them about the assortment and create excitement in-house.
Ellis Brooklyn, an eco-friendly fragrance line, also raised capital to grow specifically in Sephora. Ellis is also sold in other retailers, like Barneys New York and Credo Beauty, but founder Bee Shapiro called the Sephora relationship special because of its team, which possesses a beauty-junkie level of expertise, from product to packaging to video. After originally launching on Sephora.com in September 2016, Ellis Brooklyn launched in 120 Sephora doors in late August 2018. Shapiro bootstrapped her business with $20,000 of own her money at launch but raised $500,000 in capital this year prior to expanding in Sephora physical retail.
“If you think about this from a pure cash-flow perspective, we weren’t making enough prior to fund the 120-door roll-out. There was a gap,” said Shapiro. “If I was just going into 10 doors, I probably wouldn’t have needed to find investment, but 120 is not 10.” Ellis Brooklyn’s investors are all independent, including Tina Bou-Saba of angel fund CxT Investments and manufacturing company Boom LLC.
Still, Shapiro said it’s money well spent. She now has a three-year plan with Sephora and isn’t looking for any other retail partnerships at this time. Fittingly, with the Sephora expansion, Shapiro said Ellis Brooklyn’s business is expected to grow by 400 percent this year.
“Growing with Sephora has been like having an outside consultant at your disposal at any time,” she said.