It’s been more than two years since an ecommerce reality check post-Covid sent Adore Beauty into concerted naval gazing. Since then, and despite worsening unit economics for the broader ecom pureplay and marketplace sector, it’s turned the corner. In its latest half-year results to 31 December, the beauty retailer reported conservative revenue growth of 2.3 per cent to full-year revenue of $103 million, as well as better gross margin growth of 36.2 per cent. Notably, EBITDA hit a margin of 4.5 per cent, up 98 per cent to $4.7m.

There was equally a good story to tell on customer retention – 1.26m contactable people in the database, a 20 per cent lift – plus 4 per cent increase in active customers (those who ordered in the last 12 months). Adore Beauty boasts of 70 per cent awareness in the beauty space, according to Ferguson, and nearly $200 million in annual revenues with a customer base exceeding 800,000. In its full-year FY24 results, Adore recorded sales of $195.7 million, up 7.4 per cent, and an EBITDA margin at the lower end of its prior guidance (2.2 per cent and 2.5 per cent).

Now the business wants more. Under a three-year strategy announced late last year, it’s aiming for a 30 per cent uplift in revenue to $260m, plus doubling of EBIT margin to 8 per cent with gross margin lift of 200 base percentage points.

Building out Adore Beauty’s first physical store network was already on the cards before CEO Laing arrived last July, but it’s another part of his bullish plan to generate growth. Enter Adore Beauty’s first physical retail shopfront, which opened to queues of punters in Southland, Victoria on 1 February 2025. It’s the first of at least 25 retail shops planned nationally to help increase active customers to over 1.25m. As Laing put it, the store is all about capitalising on the 87.5 per cent addressable market Adore Beauty’s data suggests is out there waiting for a physical location to make their next beauty purchase.

With Australia’s online retail penetration sitting somewhere between 15-20 per cent depending on the category you scrutinise, Adore Beauty is not reaching enough of its potential target market, says Ferguson.

It’s also a way for Adore Beauty to extend what is currently a higher margin, $4 million a year retail media business out from its content marketing-led construct into a broader portfolio of omnichannel offerings. The move will put Adore in the competitive ring for about $3bn channelled through retail media this year in broader marketing investment to sales, according to Mi3’s latest report. Well, expand in the medium term; not just yet, says Ferguson.

While a new deal to bring on Zitcha’s retail media tech platform gives Adore Beauty’s 50+ existing brand partners more self-serve tools to buy ads, Ferguson says the retailer has to win customers over physically first through experiential activations, good ranging, seamless digital-to-store pricing and organic experiences. He says this, even while acknowledging Adore’s online media-first efforts have given the retailer an online audience that’s “larger than most TV programs” to monetise.

“Upfront, we want to make sure that the stores are well beyond the first store before we start thinking about how we are going to push and put ads and messages in front of visitors to our store,” Ferguson tells Mi3. “We also want to collect and make sure the data and information we have helps us put the right stuff in front of those visitors as well.”

Brand extension: Opening a physical store

Ferguson jokes in the 25 years he’s been doing ecommerce, CEOs of several large retailers have quizzed him on whether being online-only was all just a test.

“What I learned is you don’t test a channel,” he comments. “If you have a brand that customers love, if you have a value proposition meaningful in the market, then you add channels. People are now asking if we’re testing stores. No: We’re very clear about rolling out 25 stores or more over the next three years.

“If you asked people across many industries what is their preferred or main way of shopping, online is still 15-20 per cent. If you ask people in our target market if they have heard of nine or 10 beauty brands including us, 70 per cent or more have heard of Adore Beauty. Between 70-plus per cent and 15-20 per cent of sales lies a massive opportunity for us.”

Physical stores ultimately make Adore Beauty more accessible, argues Ferguson. “We believe we do beauty in a fundamentally fantastic, accessible, pragmatic and authentic way. Physical stores are a good way to buy beauty. If you believe that and customers love you – and they do, as they keep on repeating – we have the impetus to broaden our reach, to increase that accessibility and opportunity for customers to see us.”

After Southland will be Watergardens in Victoria, due to open in March, plus three locations in NSW, a third in Victoria, one in Queensland and two in Western Australia. Six stores are due to open by end of financial year. Three existing Ikou stores in NSW will also be augmented by 10 stores nationally over the next three years across both premium metro and regional areas. Adore Beauty purchased Ikou for $25m in July 2024.

The connection between digital and physical is absolutely there, however. Adore Beauty kitted its first store out with a digitally-led design to integrate physical and online features, enabling in-store access to 13,000 product SKUs as well as digital product pricing, offers and content. Every bay has its own screen with digital pricing, integrated with the website and offers, making up more than 100 screens in-store.

About 300 brands have been curated and chosen specifically for the Southland location – both budget and premium, owned brand and top-tier – plus retail store assistants to advise on products and choice. There’s also a skin analysis machine to look at your skin and assess damage by UV – “which was mildly horrifying for me,” says Ferguson – delivering tailored recommendations. A big demonstration area dubbed the ‘Adore Beauty Kitchen Table’ is being used for demos, activations and experiences. Plus, there’s still that Tim Tam post-purchase.

Another big investment is collecting real-time store insights through AI camera technology and analysis. “This shows us where people gravitate in-store, how they dwell at any point, what brands they favour and what’s exciting people,” says Ferguson. “We’ll use that to iterate the range and brands we hold there plus the experience itself.”

Retail Media competing with traditional media

Then there’s the retail media opportunity. In its FY24 financial report, Adore Beauty reported annual retail media revenue more than doubled to $4 million (+112 per cent). About 50 brands have worked with Adore through its retail media platform to date.

“Retail media enhances our margin and profitability, reduces our advertising costs and over time, drives revenue as well because of the effect it has on building brands we partner with,” Ferguson says.

“But it has this wonderful sort of dual aspect. Yes, it drives income and value for our business, but it is also our opportunity to reach millions of people. When you’re talking about transactions, it’s always a subset of that because of the conversion rate. But when you talk about retail media, we’re reaching an audience larger than most popular TV programs. What are we going to do with that audience? We’re going to give them messages, and we’re going to talk about the brands we love.”

Adore Beauty has brought on retail media tech platform Zitcha to help manage the 300+ brands it works with to potentially connect them with its 800,000 customers via media solutions. The deal includes onsite, offsite and in-store retail media solutions as these gradually rollout across Adore Beauty’s physical retail footprint.

Ferguson acknowledges brand partners such as L’Oreal look to retail media as an opportunity to better engage with customers, which have become more engaged with Adore Beauty thanks to its efforts to come at this “from a media perspective”.

“We came to retail media from a media perspective: We originally started building lots of articles and content online, which were originally very verbatim,” he explains. “But what we noticed is people love when we were being honest. As a retailer, you have a very unhidden agenda, which is we want to sell stuff. So we are inclined to say everything is great. But when we said, look, we like everything ourselves but if you’ve got oily skin, that isn’t the best product for you… customers lit up. They were saying, oh, so I can trust you to actually help me purchase what might be right for me.

“We then branched out to the podcast, and that really soared in the ratings when we talked about awkward moments, the 360-degree of beauty, where it’s not celebrated in-store that you need to remove bum hair. Those topics got lots of engagement. We learned if you’re going to make retail media, it has to compete with media. We’re competing with TikTok, Mamamia, Shameless. They’re all fantastic producers of content. And if we want to win our audience’s time, then we need to at least be interesting.”

With millions of people coming to Adore’s site every month, the opportunity to sell eyeballs to advertisers was obvious, continues Ferguson.

“As an ecommerce business, you always focus on who those who convert. But that’s leaving a lot of people without a focus. What can we give to the large X per cent that don’t convert on that visit?” he asks. “So we approached it from that initially. Gradually, we operated this as a way for our brand partners to also tell a story to those visits as well.”

But when it comes to physical stores, Ferguson is cautious about jumping too early into overt retail media onsite. “We’re looking for activations in-store, and events in shopping centres. We’re thinking about how we do podcasts live. All that will be supported by the addition of the Zitcha platform in terms of how we can allow our brand partners to participate and be part of that media, and look at some of that data from in store as well. That’s about ensuring we’re then delivering the right messages.”

Australia has seen five or six big retail media plays coming online just this year – Petbarn and Australia Post being the most recent. Yet immaturity and a lack of unified measurement have already been raised as concerns for brands looking to leverage and understand the return on these retail media investments. Ferguson agrees on the noise and challenges of cutting through.

“I would say, perhaps a little selfishly, that oils ain’t oils… We’re particularly proud of our retail media because it has a real emphasis on media,” he responds. “It’s doing what media does, which is entertain and add value, and it’s definitely not an advertorial. I think that’s important – it tracks and keeps a different kind of audience.”

As to where retail media could go eventually, aisles online is one option for Ferguson. “Coles and Woolies put gondolas on it, and charge based on what level of the shelf you’re on. We could probably do that; that’s one type of retail media. There’s the content media and advertising, the live reads as part of it, which adds to the quality,” he says. “There’s more retail transactional spaces, categories, top of sites, all that sort of stuff.”

Ferguson additionally points to Adore’s biggest non-endemic (i.e. an advertiser that isn’t an existing Adore supplier) partnership with Arnott’s for Tim Tam: “Retail media doesn’t have to be a traditional advertising relationship; it can be a real affinity and a brand partnership as well. It’s those sorts of partnerships we’re excited to be carrying forward in-store.”

Owned brand extension

Another string in the bow is growing owned brand. As part of the three-year strategy, there’s also expansion of Adore’s owned brand range to 8-10 per cent of total product revenue.

Ferguson points to several owned brands in stock already: Adore Beauty products, which are often beauty tools; AB Lab, a range of products including sunscreen that debuted 12 months ago; and Viviology, which includes serums.

“There’s a different pricing stratum on each of those, but we’re aiming to be pragmatic and authentic in the way we market them, and also accessible in terms of price,” says Ferguson. “I wouldn’t say they are the no-frills label own brand product of the past, and they do vary in where they are pitched. But the mix is important to us.

“When we talk about our Adore Beauty journey from the beginning, we’re always about explaining beauty but also not making it about 20 different counters with big brands on them saying everything here will solve your problems. We’ll say mix and match to find what’s right for you.”