After Launching On Amazon, Lady Gaga’s Haus Labs Shifts To Sephora. What Does The Move Say About Beauty Distribution Today?

When Lightspeed Ventures-backed and Lady Gaga-affiliated Haus Laboratories premiered exclusively on Amazon for pre-order on July 15, 2019, not coincidently Prime Day, before going fully live with the e-tailer in September that year, many in the beauty industry wondered if the risky distribution choice would pan out. Nearly three years later, the verdict is in: Haus Laboratories didn’t roar on the e-commerce giant e-commerce platform despite the platform making giant gains during the pandemic.

Now, with its name shortened to Haus Labs and its positioning evolving from artistry to “clean artistry,” the brand is relocating to a new house, Sephora, where it will sell beginning June 9 at 25 doors prior to rolling out to over 500 across the United States and Canada. It’s leaving its old house, Amazon, behind.

In reporting on the updated distribution strategy, industry sources informed Women’s Wear Daily that Haus Laboratories achieved $30 million in sales on Amazon and, in Sephora, Haus Labs is projected to generate $45 million to $50 million in annual retail sales. The brand’s distribution strategy and sales expectations both today and at its start are intriguing for what they convey about the influence and confluence of e-commerce, brick-and-mortar retail, celebrity and investment.

To help us understand those dynamics, we asked 15 investors and distribution experts the following question: What does Haus Labs’ decision to move from Amazon to Sephora say about beauty on Amazon and beauty distribution more generally?

Tina Bou-Saba Co-Founder and Co-Managing Partner, Verity Venture Partners

The brand launching on Amazon was a bit curious. That’s how Silicon Valley investors are. They’re all about disruption. It was about disrupting the beauty business and being Amazon-first. A professional beauty or consumer products investor would have been more analytical about testing rather than diving headfirst into an Amazon business that’s unproven. A lot of Silicon Valley thinks retailers are unsophisticated, and they couldn’t be more wrong.

Lady Gaga is amazing. I think she’s extraordinary, but I don’t feel Amazon is where people are discovering color cosmetics. Sephora certainly makes sense, it’s much more of a natural fit than Amazon. People talk about Amazon’s beauty business being big, but my sense is most of Amazon’s business is people re-stocking on staples like Aquaphor, not searching for new makeup. If we think about Gaga and her image, it’s so glamorous. It’s hard to capture that on Amazon.

I also wonder if the brand missed the window. I personally feel that there’s been some saturation in the celebrity brand space. There’s no question that they have an incredible customer acquisition advantage. They get out of the gate really fast in a way that could take years for most new brands, but the question is terminal value. We don’t know what these brands are worth over the long term. From an investor perspective, we always have to believe there’s someone out there looking to pay hundreds of millions for a brand. For Coty and Kylie, it worked out, but we don’t know if that’s going to be the case for each and every celebrity brand.

If the idea is, hey, let’s put it out there, customer acquisition will be easier, we’ll sell a bunch of products and decide what to do, there’s nothing wrong with that, but it’s definitely at odds with the customer philosophy of fewer, better things. And, if we are approaching a recessionary period, not all brands will make it through. We are going to see how things look on the other side.

The lesson here is you have to get your distribution strategy right. It’s going to be really interesting to see how Haus Labs does at Sephora. Will it grow the whole category? Or will it be taking share from other clean brands or from brands like Pat McGrath Labs, Anastasia Beverly Hills and Make Up For Ever?

Kemper Brennan Founder, Bravura

Sephora is an authority in beauty, whereas Amazon is an authority in convenience. As a new brand (regardless of celebrity or influencer involvement), it is critical to have an authority in your court, whether the retailer is an international giant or operating on a smaller scale. The relationships and partnerships built with these buying offices help guide new and emerging brands on their journey and get the brand in front of the right consumers.

Amazon can seem appealing given the size of its consumer base. However, it’s important to keep in mind that not every Amazon client is a beauty client. Specialty beauty retailers, on the other hand, have an established beauty-forward community that is keeping their finger on the pulse of the latest launches and beauty trends.

Logistically, it’s easier for brands to enter Amazon as they offer a relatively quick and easy setup. Because the entry barriers are lower, it’s more competitive and, therefore, more challenging for brands to stand out in a crowded space. Amazon can be a great partner for more well-known and established brands given they have very large marketing budgets. The play there is convenience and bringing your product closer to the consumer when it’s easy and convenient for them.

When entering a specialty beauty retailer, the brands are betting on more exposure in front of consumers with high purchase intent. Retailers like Sephora are known as strong partners when it comes to brand building and creating sustainable brand awareness that drives sales.

Laura Meyer Founder and CEO, Envision Horizons

The battle for brand exclusivity between Sephora and Amazon is fierce, and I think this is a huge move by Sephora in the war for online beauty customers. Sephora no doubt sees this as an opportunity to acquire Amazon customers to their own e-commerce through the brand loyalty of Haus Labs customers.

Looking at some third-party scraping data, it appears that sales have slowed for the brand on Amazon in recent months, and I am sure part of that is scaled back marketing/merchandising support from Amazon. It even appears all advertising for the brand is turned off and a lot of products are marked 50% off likely as a liquidation sale.

My hypothesis here is that Amazon gave a lot of support to Haus Labs in the first year, which is also what they do for brands that join their Indie Beauty and Premium Beauty program. After the first calendar year though, those brands are expected to manage the Amazon channel on their own, and no longer receive internal support. Haus Labs first launched in 2019, and I'm sure Sephora approached them with a much better deal.

This all said, Amazon beauty is still on a tear. In the last year, I have had a lot more conversations and signed more beauty brands that were traditionally Sephora brands than ever before. The shift in beauty, specifically premium or luxury beauty, has finally happened where Amazon is viewed as a strategic channel to grow online sales.

The rising cost of customer acquisition on Facebook, Instagram and Google has many digital marketers looking to Amazon advertising as a more efficient channel, and the only way to advertise with Amazon is to sell on Amazon. We have also seen an incredible correlation between products trending on Tiktok or Reels and those purchases being made on Amazon.

In conclusion, the battle between Sephora and Amazon will continue, and beauty brands will have to decide which retailer is best for their business or if they can negotiate to partner with both.

Megan Bent Founder and Managing Partner, Harbinger Ventures

Amazon is a great place to scale a business—not to start one. It is a challenging platform to build a brand on because Amazon's consumer is price-sensitive and prone to replenishment versus discovery. Additionally, Amazon has chosen not to protect brands by opting out of actively policing counterfeits and unauthorized resellers.

Sephora, on the other hand, has proven to be highly selective, but also capable of successfully launching and scaling indie brands.

Kim Wileman Founder and CEO, Galla Beauty

Haus Labs decision to move to Sephora is a strategic next step in their evolution as a brand. When Haus Labs initially launched, their decision to launch exclusively on Amazon was disruptive. At the time, Haus’s and Lady Gaga’s decision impressed that Amazon was a key distribution player, offering a solid opportunity for beauty brands in terms of sales potential and accessibility.

The reinvention/rebrand of Haus Labs is exciting. As someone who has collaborated on several celebrity brands, Lady Gaga’s community is vibrant, bold, visual, unapologetic and truly inclusive. Her fans and followers emulate her, and they want to be seen. This includes experiencing the brand firsthand. Sephora offers the value of live interaction. Pivoting to brick-and-mortar retail like Sephora will surely increase the brands’ engagement, visibility and, most importantly, sales.

We’re starting to see a leveling off on revenue gains from retailers’ e-commerce sites as consumers start to venture into stores post-COVID. Amazon is going to continue to be a great channel for accessibility, customer reviews and two-day shipping. Amazon’s revenues will continue to grow, and for prestige brands, the channel will remain relevant as Amazon’s algorithm for SEO is crucial for brand performance.

Brady Donnelly Managing Director, Sela

My sense is that this is not a positioning play, but, instead, an aggressive move on Sephora’s part to start securing exclusivity for brands worth the investment. This scenario isn’t new, of course—prohibiting listing on Amazon to secure an exclusive retail listing is commonplace—but the decision to actually delist on Amazon post-launch and move to Sephora, presumably exclusively, is rare, if not entirely new.

What this means, I think, is that Sephora has fully accepted Amazon as like-for-like competition, meaning brands no longer see the latter as a positioning risk. For beauty distribution, I think this reality will accelerate some of the subtle shifts we’ve seen in recent years: retailers launching third-party marketplaces, Prime-style shipping and investments in ad tech in the fight for marketing spend, among others.

If Sephora can make the right technical moves, it may be able to hold its position as the go-to launching pad for beauty, though it will need to find a way to make retail margins at least closer in line with those of Amazon, as it still requires a much greater amount of capital at a much greater risk.

Veronica Brinkmann Founder, Studio Brinks

For many indie brands starting out, the goal is to grow quickly. Not only is there a lower bar of entry to sell on Amazon, but it's also enticing because they have a lot of perks and marketing programs to get these brands ramped up.

Amazon has had a bad rap for unauthorized third-party selling of beauty products. Sellers purchase products on sale and then flip them on the Amazon marketplace for a profit. I've seen instances where products have been tampered with and watered down. As you can imagine, these practices can really impact a brand's reputation. Amazon has taken strides to fix some of these issues by creating beauty programs to help brands feel safer, but they still have a way to go.

Sephora stocks somewhere around 250 brands, far less than Amazon, so there's an exclusivity factor to having your brand sold there. Haus Labs' decision to move exclusively to Sephora is a strategic one as they'll have more control over their reputation and overall customer experience. I'm excited for this next chapter for them!

Shane Hohenstein Founder and CEO, Voyageur Group

Amazon has never been a great brand builder like Sephora, Ulta or even a Target. The reason is that the vast majority of all detail page views on Amazon come from the Amazon search bar. So, Amazon isn't providing great tools to help brands elevate and be discovered. It is all about the search bar.

Amazon is, however, still crucial for beauty brands sales and marketing goals. On the sales side, Amazon represents massive market share and a high-volume retailer.

On the marketing side, however, Amazon is even more important for beauty brands. With 58% of all new product searches (eMarketer) starting on Amazon (not Google), it is imperative for brands build their Amazon presence and show up at the top of search when customers do come from the web to discover category products on Amazon.

Tami McGown Business Consultant, Tami McGown Beauty Industry Expert

I love shopping on Amazon and usually buy on this platform weekly. However, I buy very few beauty products from them unless I know exactly what I am getting or is a reorder item of something I already own. Because I have been in the beauty industry my whole career, I prefer to try products in person, usually frequenting Sephora, Ulta, luxury retail and small independent boutiques.

Lady Gaga is obviously a celebrity brand, and most of these brands are either in Sephora or Ulta, Celebrity brands launch best in these two stores and then grow into other venues. Consumers want the experience of trying the products before buying, making it not only a fun transformation, but also not making a mistake with color or texture.

Most makeup brands are far from ready to abandon brick-and-mortar. Vendors want to have the personal connection with the consumer to not only build loyalty and educate, but to also help the brand evolve. While Amazon will continue to capture the market on millions of products, makeup is a very personal item that should be tried and tested before purchasing.

Taylor Barry Co-Founder, Beauty Breakthrough

This speaks to the value of retailers like Sephora that support a consumer's journey in brand discovery. This is a destination where individuals are actively seeking new brands and innovation. Amazon is wonderful in a multitude of ways, especially as it pertains to convenience for replenishment orders once a consumer is already locked into that product/brand.

More generally speaking, this strategic transition validates the need for a brick-and-mortar presence to support brand growth and awareness. In addition to e-comm, Haus Labs is launching in 25 doors to start and then is slated to open more locations. A beauty consumer will always love to experience texture, view shade ranges, and quickly compare and contrast product alongside others.

Ben Fenton Managing Partner, BFG Partners

While I don't know the specifics around their decision, this is a reminder of the importance of balancing online sales with brick-and-mortar distribution, whether through Sephora, Ulta or other retailers. It is very hard to replace the education, experience and trial that occurs in store.

Amazon is also a very expensive channel to sell through. A strong partnership with Sephora or Ulta, for instance, can really elevate a brand not just from an education, awareness, trial and repeat standpoint, but can be a much more viable financial channel as well.

Rachel ten Brink Founder and General Partner, Red Bike Capital

I think the move speaks to the challenges of brand building versus purely driving sales. The top CPG SKUs on Amazon are search-optimized, but not brands known in any other environment.

While the scale of Amazon is unparalleled, their ability to build brands is still limited. On Amazon, consumers are trained to focus keyword search, not discovery. Sephora provides the ability to discover the brand in a beauty context.

Catie Bennett Principal, Fifth Century Partners

We believe this move underscores Sephora’s continued position as a leader and true brand builder, especially for indie and clean brands. Amazon has not yet established itself as a beauty destination and brand builder despite being an important distribution channel for many brands.

Fabian Urquijo President, Swiftarc Ventures

During the height of the pandemic, consumers were increasingly purchasing products online, and we noticed a clear uptick in their purchasing appetite and willingness to try new brands. Sales on Amazon, particularly in the beauty category, reflected that consumer behavior. In the case of Haus Labs, this could have been the right brand strategy at the time.

Now, as we return to normalcy, we will begin to feel the effects of those trends shaking out post pandemic. We’re already witnessing a decline in e-commerce sales from pandemic heights along with the added stress of macroeconomic factors consumers are currently facing.

The lesson here is to never underestimate the importance of establishing an omnichannel capability. This allows brands to meet their consumers where they are at all times. The pandemic was simply a moment in time that played in the favor of e-commerce strategies, but, as retail opens back up, shoppers will return to their usual habits.

Susannah Dellinger Founder, Bright Beauty Collective

Haus Labs’ move away from being solely an e-commerce/Amazon brand to restructuring and rolling out a nationwide partnership with Sephora shows us what beauty lovers already know. Beauty, especially the color category of makeup, is something the consumer wants to be able to discover through play.

Add to that the frustration customers face when trying to shop online for makeup shades, and it's clear that a physical in store presence is a direct path to gaining market share. How often have you ordered something, whether it’s a lipstick that looks like the perfect pink online to only have it show up and be coral in person, or a concealer shade that is way too dark and have to face the hassle of making an online return?

Additionally, many new makeup brands take off simply due to the discovery aspect of being in store next to more established brands. Customers walk in looking for one thing, and suddenly are intrigued by a gorgeous eyeshadow shade or new makeup palette from a brand they would never have searched for online.

Sephora's reach for this type of discovery across U.S. and Canada makes it an appealing option to many brands looking to make an impact in a crowded makeup marketplace. Customers in this post-pandemic era are back to wanting to be able to experiment with colors in person, see shades, feel textures, and even just enjoy shopping alongside a friend for an afternoon of fun and makeup exploration.

We have seen this shopping behavior through decades, which is why so many retailers, from Sephora, Bluemercury and Ulta to even the traditional retailers such as Nordstrom have either started out or moved toward open-sell shopping environments. Retailers have removed the barriers of outdated cosmetic counters and purposely set up "play stations" throughout the stores with disposable applicators, mirrors and tissues at the disposable to allow for an immersive shopping experience.

Makeup is meant to be fun, something to experiment with to express yourself with, and shopper's today are savvier than ever, with more options than ever before. Having your brand represented only in a two-dimensional way through e-commerce doesn't engage your ideal customer in the same way that a brick-and-mortar shopping experience can.

Haus Labs is certainly taking a page from the success of other celebrity brands within Sephora such as Fenty and is hoping that they can connect in a more meaningful way with their community in real life. It remains to be seen if the brand will also utilize in-store sales teams throughout the country to engage with customers at point of sale and share brand messaging in the most direct way possible, which we have seen to be the key to success at Sephora in the past.

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