Adore Beauty founder slams department stores stuck in the 1950s

War rooms and innovation will bring beauty into the future and increasingly online, says Adore Beauty co-founder Kate Morris.

Kate Morris, co-founder of Adore Beauty. Picture: Nicki Connolly

Adore Beauty co-founder and executive director Kate Morris said as the Covid-19 pandemic emerged as a major threat to business, the economy and health in March 2020, she cobbled together a “war room” of other online retailers - some of them direct competitors - to share knowledge and advice.

At the Australian Governance Summit held by the Australian Institute of Company Directors on Tuesday, she said traditional department stores that have not innovated cosmetics counters in 70 years have left the shopper experience stuck in the 1950s, but those shoppers are now moving on.

Looking to create an opportunity from the Covid-19 crisis and pushing ahead with disrupting the entrenched traditional retailers, Ms Morris has revealed she was taking on a new role at the online beauty and wellness retailer Adore Beauty of chief of innovation to put innovation at the forefront of the company’s strategy and planning.

“First of all I would say it (innovation) is fundamental to what has made Adore successful and if you think about our story of starting in a garage 20 or 21 odd years ago with no money and no experience and did we have any right to waltz into an $11bn market and decide we were going to disrupt some really big well-resourced incumbents.

“The only reason we were able to do that was because we were willing to innovate and interrupt the way things always worked in our industry,” Ms Morris told the Australian Governance Summit held by Australian Institute of Company Directors on Tuesday.

“And to give you an idea of how important we think that is, my new title at Adore is actually chief of innovation and so that is going to be my role, going back to being an entrepreneur.”

Ms Morris told the summit she promised Adore Beauty will further disrupt the traditional department store model, which draws much of its profitability from its beauty and make-up floors, saying that department store models haven’t changed for 70 years.

“I look at that customer experience of going in to a department store cosmetic hall and that experience hasn’t been innovated in 70 years, it is just the same as it was in the 50s, and I just think customers have moved on a bit from that.”

Turning to lessons from the Covid-19 pandemic, Ms Morris that online retailers were operating in a vacuum of information in the early weeks of the pandemic last year and that Adore Beauty narrowed down its trusted sources of pandemic information and shares that twice a day with its staff.

She also told the summit that as a start-up Adore Beauty was for most of its two decades of corporate life in a “crisis mode” and that as a founder of new business it was part of her job as CEO to “put out fires”.

“When you are a bootstrap startup the crises are coming thick and fast and the only weird thing about it for us was that actually all these other businesses were going through it at the exact same time,” Ms Morris told the AICD summit.

“So, and obviously it was also a very sort of scary time because there was so much uncertainty and all the team were looking to us for certainty over what was going to happen, and I didn‘t have any of the answers.

“And it was about this time I had a lot of other online retail business owners also reaching out to me and saying hey ‘what is happening, do you know anything, what are you guys doing about your warehouses, are you wearing masks yet?’.”

Ms Morris said in the first few weeks of the pandemic she invited dozens of other online retailers, including some of Adore Beauty’s competitors, to an informal online forum where they could all share experiences, tips and advice for Covid-19 and how to prepare their businesses and staff for the coming challenges.

“I set up a Slack workspace and invited all of these online retail business owners … some of them were competitors … I think we all kind of realised it was really bigger than about who are the winners and who are the losers.”

Adore Beauty was founded in 2000 by Ms Morris and James Height and has grown to become Australia’s No 1 pureplay online beauty retailer.

In October the founders took out $92m from Adore Beauty’s float, with private equity firm Quadrant also making a handy profit as it sold down to 32.5 per cent.

Ms Morris and Mr Height each retain an 11 per cent stake while Quadrant is the largest shareholder. The shares were sold in the IPO at $6.75 but have failed to trade above that since the float.

Last week, it posted first-half results showing revenue of $96.2m, 8 per cent ahead of prospectus forecasts and up 85 per cent on the previous corresponding period. Net profit rose 180 per cent to $2.536m, while EBITDA of $5.2m was 58 per cent ahead of prospectus forecasts.