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Adore Beauty sells 60 per cent stake to private equity firm

Private equity firm Quadrant Growth Fund has acquired a 60 per cent stake in pureplay online beauty retailer Adore Beauty.

Announced on Monday, the acquisition comes at a time of rapid growth in the 20-year-old Australian e-commerce business.

Adore Beauty has more than tripled its revenue since FY17 to a current run rate of more than $100 million, transitioned to a cutting-edge ‘headless commerce’ platform and expanded into New Zealand, its first international market since a short-lived stint on Alibaba’s Tmall platform in 2016.

Now “it’s time to pour the rocket fuel on”, says Adore Beauty CEO Kate Morris, who started the business with her now husband James Height in her garage in 1999.

Growth at home and abroad

On the horizon is further international expansion, with an initial focus on New Zealand and other English-speaking countries in the APAC region. At the same time, Morris believes there is still room to grow in Australia.

“I think there’s still a pretty big opportunity to scale up here and do more here,” she told Inside Retail.

The maturation of the e-commerce sector and sudden explosion of the beauty category have seen Adore Beauty begin to take market share from major players in recent years. Despite the online retailer’s success, however, Morris says many potential investors didn’t really understand the business.

“They would go, ‘You’re just doing multi-brand retail, therefore you’ve got a limited amount of time until Amazon crushes you’,” Morris said.

“That’s looking at the way the beauty customer behaves so simplistically, and it’s not actually the way things are panning out. People are so engaged with beauty now, it’s actually specialists that are performing best.”

Morris believes the reason Adore Beauty has been able to take market share from department stores is the range of products it offers – now numbering more than 220 brands – and its timing.

“Having the right brands at the right time. We’re really good at that,” she said.

A seamless integration

Another differentiating factor is Adore Beauty’s integrated commerce and content strategy, which has seen the retailer roll out shoppable blog posts and embed makeup tutorials and other videos on its product pages.

“There are plenty of e-commerce businesses that have a blog, but it’s shoved over to the side. It’s this awkward flipping back and forth, and that’s not how people shop. It needs to be mixed in together,” Morris said.

“We’ve been working on that for 18 months, and now it’s at a stage where it all really works.”

This was one of the factors that attracted Quadrant to Adore Beauty, according to Justin Ryan, managing partner of Quadrant Private Equity.

“It’s really exciting and liberating stuff. What they’ve done there in terms of engagement with the customer is fabulous and differentiating,” he told Inside Retail.

“At the same time there’s a great platform that’s been built over 20 years and a great foundation to put the foot down and accelerate. We are about growth,” he said.

Ryan said it’s not uncommon for Quadrant to double the size of the businesses it invests in, though he said the private equity firm planned to grow Adore Beauty at a rate that makes sense.

Both Ryan and Morris said they have no plans to open bricks-and-mortar stores.

The sale price was not disclosed.

Morris previously sold a 25 per cent stake in Adore Beauty to Woolworths Limited in May 2015, but bought back the stake after two years due to strategic differences.

This story first appeared on sister site, Inside Retail Australia.

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