How Big Box Retailers Won Over Premium Beauty Brands

Despite offering premium products packed with trending ingredients like Vitamin C and niacinamide, when the time came for premium skincare brand Naturium to choose its first wholesale partner, Sephora and Ulta Beauty weren’t at the top of its list.

”We built the brand knowing we wanted to be a Target brand, whether they had accepted us or not,” said Susan Yara, Naturium’s co-founder. One year after launch, it entered Target in 2021; it’s now sold in all of Target’s more than 1,800 locations.

In the US, big box retailers like Target and Walmart have steadily been premiumising their beauty offerings through shop-in-shops, updated assortments and improved merchandising. Target’s beauty category has almost doubled since 2019, securing buzzy launches like Blake Lively’s hair care line Blake Brown and L’Oréal’s new hair colour tool Colorsonic, while its shop-in-shop partnership with Ulta Beauty has brought in more than 70 prestige brands like hair care line Ouai and Rihanna’s Fenty Beauty. Sephora has a similar partnership with the affordable department store Kohl’s, while Walmart, which launched a dedicated premium beauty offering in 2022, also has a tie-up with niche retailer Space NK, called Beautyspacenk, in more than 250 stores.

Those efforts have paid off, evidenced by the growing number of indie brands that are choosing to enter wholesale through a big box partnership. British skincare maker Byoma picked Target for their US debut, tween-friendly line Bubble chose to work with Walmart while trendy acne care line Starface has grown its presence in both chains.

That’s also evidenced by the growing number of higher-income shoppers frequenting their stores. In an analyst call following its second-quarter earnings in August, Walmart chief executive Douglas McMillon said high income shoppers were helping grow its overall sales, adding, “Our future looks like it’s got a spread across income levels that’s different from our past because of convenience.”

While selling in Sephora may be the default dream for a beauty founder, there’s plenty of reason brands are giving the likes of Target and Walmart a closer look. Mass retailers have a bigger footprint than specialty stores — there’s around 500 Sephoras in the US to Target’s more than 1,500 — and due to each individual shop’s larger square footage, brands may also get more shelf space.

Mass retailers are also snapping up market share from struggling drugstore chains like CVS and Walgreens, which have both seen sales slow in recent years due to a poor customer experience, according to Neil Saunders, managing director at analytics firm Globaldata.

Still, drugstores fill a need for mass beauty brands that hasn’t gone away, and their slowing performance is impacting those labels. Since its half-year earnings in August, L’Oréal has been warning about the effect that weaker drugstore performance has had on its skincare brands such as Cerave and Vichy, which it has repeatedly cited when discussing their wider slowdown — it missed analyst expectations by more than 10 percent in October.

Placement in big box retailers, which serve a similar purpose in the lives of consumers, could help. But despite adding touches to make themselves feel more boutique and courting indie brands, these stores are still massive corporate machines that require their partners to have scale and breadth. There’s also a question of saturation: in stores as large as 182,000 square feet (the size of a typical Walmart), brands must compete to stand out.

“We knew there was a chance we would get lost [in-store],” said Yara, saying that the the company carefully considered its packaging, brand colours and product assortment to try and beat the odds.

Scaling up a business to be ready to compete in such a high-traffic environment and with a heavy promotional calendar can put pressure on companies. “The sales potential is brilliant for the brands, but the disruption potential for the business is enormously high,” said Saunders.

A Rising Tide

The ascendance of Target and Walmart marks a departure from a traditional split in the US beauty market. Historically, premium brands were sold exclusively in specialty and department stores, fearing that proximity to mass brands or sundries like pet food and cleaning supplies would dent their carefully crafted image.

Today, however, the appeal of mass retail is too much to resist.

“Ninety percent of the US population have a Walmart within 30 minutes from their homes … there’s something like 80 million Americans going into Walmart every week,” said Shai Eisenman, founder of Gen-Z skincare line Bubble, which launched in 4,000 Walmart stores in 2021, adding that from an accessibility perspective, “there’s just no better place.”

It also took a concerted effort from mass retailers to attract premium brands — and the customers who shop for them — Saunders said. They had to show greater flexibility, offering more latitude around displays, volume and pricing integrity, essentially allowing brands to have more control over how their product is merchandised. “Now, when you go into [mass stores], the beauty proposition is nice,” he said, adding that many sections have lower fixtures or shelving, making it feel more boutique and intimate.

Instead of simply displaying a price tag, brands might also be able to negotiate bespoke shelving units that convey more information about their products and use their brand colours or logos. Bubble uses results and claims from its clinical trials, such as the hydrating properties of its Water Slide serum, $14.98, and has also made use of secondary displays to add more information about the products.

“Educating really helped us,” said Eisenman, adding that 70 percent of customers who bought Bubble products at Walmart hadn’t shopped for beauty at Walmart before.

Standing Out and Scaling Up

More than 80 percent of Target’s beauty business is done in-store, which a spokesperson largely chalked up to its investments in interactive and attention-grabbing displays. The end of aisle display (also known as an endcap) for Blake Brown, for instance, is modelled after Lively’s home bathroom, complete with a mirror, faux showerhead and homely accessories. Having a famous founder stop by the store also doesn’t hurt; images of a pregnant Rihanna pushing a cart around Target shopping for baby clothes when her Fenty Beauty line dropped in 2023 helped announce its arrival.

But how do smaller brands get the same benefits?

For Naturium, having eye-catching coloured packaging with a distinctive font and a range of product sizes was key. The brand is best known for its body washes, but Yara said she was aware just how competitive the body wash category is in Target, and the range would be displayed next to better-known and lower-priced brands. Naturium carefully considered what products would fare best in that setting, ultimately stocking body washes in bright, but not garish, shades like salmon pink, mint green and baby blue in a generous 500ml size — considerably bigger than standard mass offerings — for $15.99.

Yara said the brand was also able to negotiate having its other body products displayed in the skincare section, not body care, increasing its overall footprint in skincare and reducing competitive presence.

Brands hoping to sell in a mass retailer also need to understand how they work operationally. Slotting fees, which are charged to a brand just to be on the shelf, aren’t uncommon, as are chargebacks, higher marketing budget requirements, larger minimum order quantities and strict shipping schedules. Eisenman said Bubble launched a dedicated team out of Bentonville, Arkansas, where Walmart is headquartered, specifically to ensure it had people on the ground to service the business, while Sarah Moret, the founder of premium deodorant company Curie, said she had to take on inventory financing in 2023 to ensure the business could fulfil a new Walmart order, describing it as “near impossible” to do so as a bootstrapped business. Now, she’s focusing on adding new scents and new products, as she said new items are key to growing within Walmart.

Brands may not have to choose between breadth and prestige when scaling up. But they can still get lost in the shuffle, and the impact on the business’s finances and personnel need to be planned for, said Saunders.

“A lot of brands find that they have growing pains,” he said. “But that’s better than the pain of not making sales.”

Editor’s Note: This story was updated on Nov. 7 2024 to clarify that Target’s overall beauty business, not product assortment, had almost doubled.

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