e.l.f. Beauty will shutter all of its owned retail, narrowing its multi-channel strategy while other digitally-native brands broaden theirs.

WHAT HAPPENED: e.l.f. Beauty will close its 22 operating retail stores, which the company says will help it focus on ecommerce operations.

Why it matters

  • After launching online in 2004, e.l.f. Beauty grew as a luxury-quality-drugstore-prices brand, standing out among its beauty aisle counterparts and amassing a large community on social media, mostly comprised of millennial consumers. While it established wholesale partnerships with Walmart, Target, CVS and Ulta Beauty, it also began opening its own stores in 2013. Then, in 2016, the company went public, raising about $141 million.
  • e.l.f.’s decision to retreat from a multi-channel strategy stands out among other digitally-native brands that are attempting to juggle ecommerce, owned retail and wholesale. At the time of e.l.f.’s IPO, the owned retail stores were considered a potential growth vector, which clearly never panned out. In the company’s 2018 filing, it recorded that its owned retail contributed to only 5% of company sales in the last year, while its wholesale partnerships raked in 87% of revenue—its two largest partnerships were Walmart, which accounted for 30% and Target, which accounted for 21%. Thirteen percent stemmed from its direct-to-consumer channels and net sales decreased 1% to $267 million. Ideally, owned retail should serve as a real-life, interactive marketing mechanism for digitally-native brands, which e.l.f. was not able to achieve. At the same time, owned retail is a costly venture, and shutting down these stores will likely help the brand save money, which perhaps it will use to grow its notoriously low marketing budget in order to boost ecommerce and wholesale revenues.