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Is ecommerce + wholesale a new DTC one-two punch?

Beauty brand Morphe is closing its US stores. Pullback or visionary?

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Beauty brand Morphe is closing its own-brand US stores and shifting its focus to digital and wholesale channels.

“We have made the difficult decision to close all Morphe stores in the U.S.,” the brand wrote on Twitter. “We are forever grateful to our store teams for their passion, talent and dedication over the years.”

A spokesperson provided a more detailed statement to WWD:

“Following a careful evaluation of all aspects of our business, we have made the strategic decision to enhance our focus on the company’s wholesale and ecommerce operations going forward. We believe this shift will position Morphe to better compete in the broader beauty landscape and more efficiently reach our customers where and how they shop.”

Here’s the quick history of the brand:

Founded in 2008 by Chris and Linda Tawil, Morphe grew from a makeup brush company into a global beauty brand by combining the DTC tactics of low prices and influencer partnerships that helped its products go viral, Bloomberg reported.

Eventually, it opened a slate of physical stores that grew to about 20 locations in the US, per its website. It has 11 international stores, and is available at hundreds of wholesale locations through Target, Ulta Beauty and Sephora Canada.

In 2019, investment firm General Atlantic purchased a 60% equity stake in the brand, valuing it at $2.2 billion.

In 2020, it became a portfolio company of Forma Brands, which was positioned as an incubator of next-gen beauty brands. But in October of this year, Forma signaled that it was mulling bankruptcy. As Beauty Packaging wrote at the time struggles were traced to the pandemic-prompted dip in demand for color cosmetics sales, supply chain issues and the severing of its partnerships with influencers Jeffree Star and James Charles over controversies in subsequent years.

Two views on what this means:

More belt tightening: On one hand, this is another pullback in a tough week for retail. Amazon, Stitch Fix, Helen of Troy and Everlane all announced layoffs, while Macy’s said it will close four locations and Bed Bath & Beyond said it is considering bankruptcy. Boxed is exploring a possible sale. The economic about-face wrought by inflation is leading to a post-holiday shakeout that is happening just days into 2022, and Morphe could be another example. Forma’s move to raise the specter of bankruptcy is an especially worrying sign.

Digital + Wholesale: On the other hand, the focus on ecommerce and wholesale could be a sign of the times, as well. Once, opening stores was a path to achieve a new level of growth for digitally-native brands. But deals signed by darlings like Glossier and Allbirds in the last year have proven that there is opportunity in wholesale, as well. Operating stores is expensive, and it becomes even more difficult to drive traffic without wraparound services that give people a reason to visit (Think: Warby Parker’s eye exams). It begs the question, will more brands see ecommerce + wholesale as a viable strategy going forward? Perhaps Morphe will be a trendsetter once again.
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