“It’s getting harder to be a bricks-and-mortar retailer”
A managing partner of Quadrant, the private equity firm that took a majority stake in Australian e-commerce pioneer Adore Beauty this week, has warned online retailers against opening bricks-and-mortar stores to build awareness.
“Bricks-and-mortar is something I’d be very careful about,” Justin Ryan, Quadrant managing partner told Internet Retailing.
“I think it’s getting harder to be a bricks-and-mortar retailer in this country unless you’ve got a very differentiated model. We believe e-commerce is a new and emerging channel for growth.”
Ryan said Quadrant had no plans to take Adore Beauty offline as it looks to “dramatically grow” the business.
“It’s certainly not what we have in mind. Their strength is the online offering – that’s the differentiated proposition here,” he said.
This is in contrast to the growing trend of online-only retailers opening stores or showrooms to build brand awareness and allow customers to touch or try on their products before buying. Think Warby Parker and Bonobos in the US, and TDE and Brosa in Australia.
But Ryan said there were other ways to build brand awareness besides investing in bricks-and-mortar stores.
“Building a brand is not just about a bricks-and-mortar presence. Out-of-home [advertising] is about building the brand – there are all sorts of ways. Bricks-and-mortar is just a traditional paradigm,” he said.
Backing female-founded businesses
Quadrant has invested in several traditional retail companies, such as Kathmandu, Amart and Barbeques Galore, and in recent months has added some e-commerce businesses to its portfolio, including B2B auction site Grays Online and online period and leak-proof underwear brand Modibodi.
Together with Love to Dream, a baby swaddle and sleepwear brand that is stocked in over 500 stores throughout Australasia, Quadrant has taken majority stakes in three female-founded businesses this month: Adore Beauty started by Kate Morris, Modibodi started by Kirsty Chong and Love to Dream started by Hana-Lia Krawchuk.
According to PitchBook, just 2.2 per cent of all venture capital funding went to startups with female founders in the US in 2018.
“We’re here to change that,” Ryan said.
Quadrant paid an undisclosed amount to acquire a 60 per cent stake in Adore Beauty, an online-only beauty business started by Morris in 1999, and plans to dramatically grow the business.
Ryan said it is not uncommon for Quadrant to look to double the size of the businesses it invests in over a period of years. Adore Beauty has a current revenue run rate of more than $100 million.
Morris also told Internet Retailing she had no plans to open a store.