Where Napoleon Perdis Retail Strategy Went Wrong

Troy McKinna is the co-founder of Agents of Spring and Calm & Stormy and author of the just-released Brand Hustle. In this guest post, McKinna (pictured below) casts an expert eye of the recent failings of Australian cosmetic king, Napoleon Perdis…

Napoleon Perdis entered into voluntary administration early this year to “right size” the business. Poor retail conditions, declining shopping centre traffic, increased competition and a long-term shift to online sales has exposed the organisation’s high-cost base.

As part of the administrative proceedings, the Australian beauty brand closed 28 of its concept stores. The brand has also recently ended its long-term partnership with David Jones in favour of a distribution arrangement with Priceline.

This is not the first time the brand has had to right size the business. In 2015, Napoleon Perdis exited the USA market after ten years of building its own store network and partnering with retailers. At the peak, Napoleon Perdis had 3,500 points of distribution across the USA.

Over 25 years the founder and namesake, Napoleon Perdis, has built a strong prestige beauty brand by associating it with the fashion industry and releasing innovative products out into the market. But Napoleon Perdis brand has struggled to build a sustainable and profitable route to the consumer.

In most consumer categories there are two types of retailers – curators and dealers. Curators go to great lengths to ensure the shopper has a rich experience. They carefully select the right range, create store ambience, attract and train great staff and find the best retail locations. In contrast, dealers are focused on the deal. What is the best price we can offer the consumer, to bring in traffic and drive sales volume?

Curated retail environments facilitate sales, but they also help enhance the brand value. They nourish the brand making it desirable and memorable. Owning concept stores is the best way for a brand to create a bespoke sales environment. The challenge of owning stores is the high cost of running them. Retail environments are expensive to open and also very risky in the current retailing environment.

It appears that Napoleon, the creative force behind the brand, has been guilty of being too passionate and bullish with his expansion plans. Did the brand simply have too big a retail footprint for its turnover?

The recent shift from partnering with David Jones to Priceline makes business sense. David Jones has been struggling to find their place in this new retail environment. Department store sales have been declining and don’t appear to be offering any growth soon. The retail footprint of Priceline and the growth potential that it can offer is much more attractive. It would be safe to assume Priceline will move more units than David Jones, but at what cost. By ranging the brand in Priceline, Napoleon Perdis is risking the long-term value of the brand. The retail environment lacks the experience of shopping in a concept store or premium outlet like David Jones.

Napoleon Perdis was also slow to adapt to online retailing, with a low reported rate of 3.5 per cent of turnover coming from e-commerce. Instagram has changed the fundamentals of building and selling beauty brands. A generation of young women is growing up on social media, introduced to and influenced by the new breed of beauty brands. E-commerce offers the opportunity to have a direct dialogue with customers, building a great experience, but without the expensive bricks and mortar footprint.

Napoleon Perdis’ retail history is a great case study for all brand owners. How do you connect your brand’s retail strategy with your business model? Branded concept stores are great for building brands, but they are expensive. What existing retail partners can you supply that offer fantastic customer experience without the overheads? The digital disruption has and will continue to change the retailing landscape forever. How can old brands adapt to online retailing environments quicker?  The last lesson will be an ongoing one. How can brands survive ranging in price led retailers and high experience concept stores at the same time?