Why Farfetch and TheRealReal No Longer Find Beauty Products Pretty

Over the past few years, the beauty category has witnessed unprecedented growth, leading to a surge in new brands, innovative products, and cutting-edge marketing strategies. However, while the beauty category has thrived and evolved, it doesn’t necessarily mean that retailers not associated with beauty will find success in the competitive arena.

One of the significant hurdles non-beauty retailers face when entering the beauty sector is brand association. Consumers tend to associate brands with the products they are already known for. When a retailer primarily recognized for its clothing, electronics or home goods suddenly introduces beauty products, consumers may experience cognitive dissonance. This can lead to skepticism and hesitation in embracing the new offerings.

Farfetch Exits Beauty

Confirming this idea is Farfetch, which plans to cease the sale of beauty products on Aug. 31, just a year after venturing into the realm.

In January 2022, the upscale fashion marketplace diversified its operations by entering the beauty sector through the acquisition of high-end beauty retailer Violet Grey. Within three months, the company introduced a collection of beauty labels on its platform. This selection included brands like Augustinus Bader, Charlotte Tilbury Beauty, and Dr. Barbara Sturm. Subsequently, the marketplace expanded its offerings to Isamaya Ffrench and Simi Haze.

While the company gets ready to wrap up its online beauty sales, it will retain ownership of Violet Grey as a separate entity within the Farfetch Group.

Farfetch’s decision illustrates the obstacle retailers face in the sector: How to carve out a position in light of the formidable rivalry presented by industry titans such as Sephora and Ulta.

In fact, in June, PYMNTS reported that Ulta Beauty saw 95% of its sales come from its loyal members.

In a conversation with PYMNTS as part of the “Summer Loyalty Series,” presented by Banyan, Nicole Bernhardt, who leads Ultamate Rewards at Ulta Beauty, discussed the role of data in designing the promotions and incentives that establish Ultamate as a successful loyalty program.

Bernhardt said Ultamate stays attuned to evolving consumer trends and empowers the retailer to offer personalized experiences to their customers, spanning elements like exploration, checkout process, and promotional offers.

Read more: PYMNTS Summer Loyalty Series: 95% of Ulta Beauty Sales Driven by Loyalty Members

Alongside beauty industry leaders capturing the lion’s share of the market, there’s a trend of consumers shopping in-store for their initial purchase, valuing the interaction with products. They then resort to online platforms for repeat purchases.

The RealReal Exits Beauty Too

The RealReal faced a comparable obstacle in its beauty division, which struggled to gain traction and ultimately ceased operations in March. The move allowed the luxury resale platform, which has yet to make a profit, to focus on higher-value items.

At the time of the announcement, PYMNTS reached a RealReal spokesperson, who said, “As you’ve heard us say over the past few months, we’re prioritizing our efforts on growing our luxury consignment business. With that, we have been de-emphasizing the direct side of our business, including our beauty category, which is a smaller piece of our marketplace. We’ll continue to sell through the existing inventory and sunset the category.”

Read more: The RealReal Sharpens Focus on Consignment, Shrinks Direct Business

During its most recent earnings report, the company remained focused on its higher-value items strategy but also revealed that it has been monetizing the site through third-party advertising. The move was said to help The RealReal reach profitability, which John Koryl, The RealReal’s CEO, said was near, during the call with analysts.

However, Koryl emphasized the importance of relevance in ads. Ads that match consumer preferences, requirements and ambitions are more likely to seize attention. Personalization and targeting, therefore, are vital.

Read more: The RealReal Looks to Third-Party Ads as It Retools Resale Platform

Foray Into Beauty

Rather than diving abruptly into the beauty realm, retailers that don’t specialize in beauty products might consider a gradual strategy. They could initiate their venture by introducing related items such as skincare accessories or partnering on cosmetic lines, progressively cultivating trust among consumers regarding their beauty selections.

Also, non-beauty retailers can allocate resources towards enlightening consumers about their beauty merchandise. Offering comprehensive details about ingredients, substantiated efficacy studies, and transparent articulations of their beauty principles can contribute to their credibility.