The UK skincare market is worth more than £2.1bn. With all the lotions boasting competing claims about benefits, it's a hard sector for new brands to crack. But Murad - currently about a tenth of the size of Dermalogica in the UK - is expanding its spa-based business to do just that.
Murad UK was set up as a joint venture in 2006 between British entrepreneur Elliot Walker and the brand established in Los Angeles by Dr Howard Murad. Founded in 1989, the products are positioned as the first doctor-branded skincare range - and Dr Murad is claimed to be the first to use ingredients such as pomegranate, Goji berries, glycolic acid and antioxidants in his creams.
In the US, Murad has a big direct-to-consumer business and sells through beatury retail chains Sephora and Ulta, as well as through salons. Walker, who was head of Europe for another skincare brand, saw the opportunity to replicate Murad's success in the UK - despite two other distributors having tried, and failed, to do so before.
Walker faced two big barriers. One was that the UK has no big beauty retailers. In addition, he lacked the infrastructure or wherewithal to develop a direct marketing business, whereas the US spent millions of dollars each month on infomercials. So he has had to do things differently. Although he speaks of “the pros and cons” of adhering to brand guidelines, he credits the US operation with giving Murad UK the autonomy it needed.
Massaging the benefits
The only part of the strategy that is similar to that of the US has been to develop a presence in spas – helpful for getting customers in front of Murad-trained experts who can advise which products they should use for the best results.
But this is a slow way to build a business. As recently as 20 years ago, there were only 15 spas in the UK. Although there are now closer to 700, there are no successful chains that would make the task of selling the range into them that little bit easier.
“It’s very much about going from one customer to the next, and it’s expensive to service,” says Walker. He’s also had to tackle perceptions, to get spas to think that treatments can be about more than relaxation – the preserve dominated by what he calls the “fluff and buff” brands.
“Over the past seven years, we’ve gone from people saying ‘I don’t think you can use those products in a spa’ and us trying to explain why they could, to all the five-star spas taking in Murad,” he says.
In this respect, the arrival of the credit crunch, only a year after the business was launched, was something of a blessing. Consumer habits have changed as a result of the financial crisis, says Walker, as fewer people feel they can justify the expense of “a relaxing rubdown”. Instead, they want to see results, whether that’s “rejuvenation” – a reduction in lines and wrinkles – or an improvement in skin conditions such as acne.
Here, Walker believes the science sets Murad apart and gives it a competitive edge. For example, he says the acne product is formulated with ingredients that specifically get rid of spots and blemishes. “With the best will in the world, some algae from the bottom of the sea is not going to get rid of it,” he adds.
Murad is one of the first brands that really embraced online beauty – it’s batting above its weight in an online environment because we were an early adopter and saw the potential
Even though the number of spas is growing in the UK, they reach only a small proportion of the consumer market. So from day one, Walker was keen to build an online presence. He had identified a weakness in his competitors’ business models which made it hard for their retail partners to sell their products online – and which has encouraged a new market of specialist beauty e-commerce sites, such as FeelUnique.com.
“Murad is one of the first brands that really embraced online beauty – and it’s batting above its weight in an online environment because we were an early adopter and saw the potential,” says Walker. The brand is now in the top 20 brands on Feelunique.com and other sites like it, he adds.
The strategy has paid off. Although the company’s figures are not made public, Walker says that turnover has doubled over the past two years. Staff numbers are also expected to grow from 50 to 80 by the end of the year.
Part of that expansion will involve supporting the brand’s expansion into bricks-and-mortar retail. Until recently, Murad UK’s only crossover into the bricks-and-mortar space has been at Harrods, where the products are stocked at its Urban Retreat spa. But last year, it reacted to an opportunity and launched as a partner to Marks & Spencer’s new beauty offering. And over the past 18 months, it has been rolling into John Lewis, House of Fraser and Debenhams with its “full-service” counter concept, the MuradSpace.
Importantly, this set-up still gives brand advisers the space to talk to potential customers, use a diagnostic camera to inform their product purchases, and track their progress on return visits.
The exact number of department stores that will host a MuradSpace is still under negotiation, but Walker is keen to open only in locations that don’t cannibalise sales in the company’s salon business. Nevertheless, by the end of next year, he wants consumers all over the country to be within easy reach of a Murad salon, spa or department store.
“It’s been such a success that it’s one of those things you wished had happened seven years ago, because you’d be so much further ahead,” he says. “But then we wouldn’t have had so much awareness, or laid the groundwork for that success.”
Interestingly, the MuradSpace was developed in conjunction with the brand headquarters in the US. And although it was first launched at John Lewis in Oxford Street, the concept is likely to become the retail strategy for the rest of the world. In fact, after only seven years in business, the UK is the biggest of Murad’s 40 overseas markets, despite other distributors in other countries having been up and running for much longer.
Now it has grown to a certain size, Murad UK is nodding to the success the US has had with infomercials – in a way that it can afford. At the end of 2013, it launched on home shopping channel QVC. “It was a big thing for us, because we could have somebody telling the Murad story,” says Walker, adding that the brand has already attracted a large following among the over-65s.
The fact that Murad UK doesn’t have millions to spend on advertising has forced Walker to build the brand slowly and steadily. “Lots of skincare businesses appear and disappear overnight. I think what I’ve built is a solid business that will grow, because we’re not dependent on one customer.”
Walker is also proud that he’s grown the business without outside help or bank overdrafts, and indicates he wants to keep it that way. “You can build a business quickly, but that costs a lot of money. Or you can do what we’ve done, which is build it organically and put all the money back into the company. That’s what we’ve done here in the UK.”
However, with new channels to market and 30 new staff coming onboard this year, you get the sense that the brakes are coming off. Walker’s confidence in the product is being driven by the results.
Murad UK factfile
- Founded: 2006
- Staff: 50
- Retail partners: Harrods, M&S, John Lewis, Debenhams, House of Fraser