As Lush opens its biggest store to date in Liverpool, Retail Week speaks to boss Mark Constantine about the retailer’s full-year results and bold bricks-and-mortar ambitions.
At a time when many retailers are shifting investment away from stores to online, this ethical beauty specialist is bucking the trend.
Lush’s new Liverpool flagship, which is five times the size of its previous branch in the city, is nearly 15,000 sq ft – or big enough to fit in more than 9 million of the retailer’s famous bath bombs.
“We’ve always been a highly creative business and that has driven us in everything we do”
Mark Constantine, Lush
The shop spans three floors including a spa and is bursting with new initiatives such as an in-store florist, a hair lab offering trims and treatments, a perfume library selling exclusive fragrances and books on perfumery, and even a children’s party area where kids can play with and make products.
Asked what has driven the innovation in its new store, chief executive and founder Mark Constantine is matter of fact.
“We’ve always been a highly creative business and that has driven us in everything we do – I don’t see that changing any time soon,” he says.
“The unusual thing about our business, particularly for a cosmetics business, is that it is still effectively run by our [product] formulators, so it gives us real autonomy to create in-store experiences based on the products that they develop and that our customers respond to.”
Lush’s latest store opening in Liverpool is just one of the new formats the ethical beauty retailer has rolled out in the past year.
The retailer has opened three Naked stores – shops which promise to use no plastic packaging at all – in Milan, Berlin and most recently in Manchester, and has even opened a store in Tokyo’s trendy Harajuku district that has no in-store signage and is dedicated exclusively to bath bombs.
“We can’t do what we’ve done in Liverpool in every store because we cannot afford it”
Mark Constantine, Lush
In this new tranche of stores, shoppers can discover product information by using the Lush Lens app, which allows them to hold their phone above an item to access information and demos – technology which Constantine says is likely to be rolled out across the wider estate in time.
He says Lush will also take lessons from the Liverpool branch and roll out elements to other stores on a case-by-case basis.
“We can’t do what we’ve done in Liverpool in every store because we cannot afford it,” he laughs.
“It’s very early days but the early sales are very strong, so we’ll see what works and what doesn’t and work with landlords in our other stores to change what we can based on that.”
Constantine has no intention of easing up on the rate of innovation.
He says the retailer will unveil three more new store formats over the coming months and at speed, having reduced the time from coming up with the idea to unveiling to just three months at the bath bomb store in Tokyo.
Lush is also pushing into new in-store experiences.
In the retailer’s upcoming Fresh store in Paris, which is due to open in June, shoppers will be able to have fresh moisturisers made onsite that will be infused with freshly cut flowers from an in-store florist and stored in a sustainable seaweed pouch.
“I’m not often proud because I’m ambitious and I think the risk of taking pride in your work is that it can slow you down a bit, but I was very proud when I saw that store,” says Constantine.
Cost of investment
Despite the innovations Lush has driven over the past year, the retailer’s financial performance has been more subdued.
In the year to June 30, 2018, the ethical beauty retailer recorded a 68% slump in pre-tax profit to £23.4m. At an operating level it posted a loss of £4m versus a previous profit of £22.7m, despite group turnover increasing 5% to £524.4m.
“Because we’ve spent it all,” Constantine laughs when asked why Lush’s full-year profits have declined so sharply.
He says the bulk of the retailer’s profits have gone on the Living Wage, which he says he is committed to paying because “we cannot have retail staff not being able to afford a room, or dinner”.
He says that the expense also pays for itself in staff retention terms, which will become an increasingly significant issue for retailers because of lower immigration numbers post-Brexit.
Constantine also says investing in Lush’s Liverpool store, where during the financial period “we had all of the expenses and none of the profit”, also played a role in the profits decline, as have the costs of the apprenticeship levy and increased rates.
Constantine describes the present Government as “anti-business and particularly anti-retail”.
“They have absolutely plundered retail in recent years and put nothing back in,” he says, adding that while Brexit is a factor that concerns him it is “far from the only thing I’m annoyed about”.
Home and away
The Government is unlikely to change its tune on business rates any time soon, and Lush shows no sign of slowing down when it comes to new store formats and product innovations, so how does Constantine plan to balance the two so they don’t hit the bottom line in the longer term?
He says growing the retailer’s international footprint is a key priority. Lush, which is in 48 international markets altogether, plans to open 100 more stores in the US over the next three years as well as ramping up its bricks-and-mortar presence in Japan.
“If you look down your average high street today, how many stores can you see that develop and create every product they sell in-house and in the UK? I think it’s just us and Greggs at this point”
Mark Constantine, Lush
“The great thing about Japan is that you are guaranteed to turn over a profit in every store every month of the year,” explains Constantine.
“Britain is a nice business to be in if you want to profit around Christmas, but any good retailer doesn’t want to rely only on that, so operating out of Asia gives us balance.”
Although the UK, where Lush has 105 stores, is not the key driver of sales today because it has 920 international branches, Constantine is proud of the retailer’s place on British high streets.
“If you look down your average high street today, how many stores can you see that develop and create every product they sell in-house and in the UK? I think it’s just us and Greggs at this point,” he says.
As he rolls out new store formats, Constantine will hope that appetite for his innovations will be as great as it is for Greggs’ blockbuster hit, vegan sausage rolls.
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