Spanish co-operative Eroski has sold 103 Perfurmerías IF stores as well as the accompanying e-commerce operation to German perfumery operator Douglas.
The move follows Douglas’ acquisition of the Spanish Bodybell business, comprising 223 beauty stores, two online shops, a logistics platform and wholesale business with a cash & carry unit.
The decision to sell off Perfumerías IF outlets has been part of Eroski’s refocus on its main business, as it shelves all non-core activities and underperforming operations. The co-operative already sold 36 hypermarkets to Carrefour last year, also with the aim of improving its competitiveness. According to LZ Retailytics data, the retailer also got rid of 31 perfumeries in 2016, reducing the number to 169 units. With now almost two thirds of its portfolio in the hands of Douglas, we believe the perspectives appear grim for the perfumery chain. The remaining outlets are likely to be closed or sold individually to third parties.
For Douglas, the acquisition gives a boost to its Spanish network. Via its Bodybell takeover, the company already increased its store number from 57 to 280 perfumeries. The Perfumerías IF acquisition now adds another 103 stores to one of Europe’s largest luxury beauty specialists. It will potentially control up to 383 beauty outlets in Spain – not considering potential closures due to overlaps of the business. This means, the country operation has become the most important foreign market after France for the German retail company. It also means that Douglas has managed to step out of the shadow of its innovative and trendy archrival Sephora, which runs only 130 stores in the market.
By gobbling up chains with a larger footprint than itself, Douglas has become the second largest health & beauty store operator in Spain. Only Dia’s Clarel – the drugstore chain mainly consisting of former Schlecker stores – operates a greater network comprising 1,174 outlets at the end of 2016, according to LZ Retailytics. But Douglas is not directly competing with Clarel, even though in its home market of Germany operators of similar concepts continue to put pressure on the premium beauty specialist. German dm and Rossmann have become even more threatening due to their current focus on cosmetics, upscale trendy brands and social media influencers. However, Spain is now only one of very few Western European markets where neither player (yet) has a presence. Currently drugstore player Clarel is also mainly targeting a different client group: shoppers that are not typically looking for premium brands, but prefer to combine shopping for household goods with the purchase of beauty products.
Due to this and since AS Watson’s Marionnaud went through a phase of network streamlining as a response to negative sales trends, Sephora has become the only remaining serious competitor in the Spanish market. At least from a nationwide perspective, although at local level Douglas of course has to compete with various independently run beauty stores.
Douglas seems to be attempting to compete with Sephora by using acquisitions to inflate its presence. This is likely to create a boost initially and might even help to outperform the LVMH-owned chain for some years, however it cannot be the only answer to tackle it. With investments being pumped into acquisitions, Douglas should not be distracted from working on its private label innovation, store design, e-commerce offering and retail technology as these are Sephora’s strongest growth drivers. This strategy would also help Douglas at a European level as Spain is not the only market where it has to deal with this rival. Only recently, Sephora also entered Douglas' home market of Germany via a partnership with Galeria Kaufhof.
With contributions from Senior Retail Analyst Gildas Aitamer.