The rise of THG: the next Farfetch of beauty?


To receive the Vogue Business newsletter, sign up here.

The online beauty landscape shifted this week with the £1.6 billion e-commerce marketplace The Hut Group’s acquisition of UK prestige beauty online retailer Cult Beauty for £275 million, after a competitive bidding war.

The under-the-radar e-commerce giant, based in Manchester, with a presence in 195 countries, has big ambitions. “We’re focused on building THG into the world’s No. 1 beauty platform,” says chief executive Matthew Moulding. To get it there, THG’s betting on its upmarket, curated and speedy shopping experience, backed by strong partner relationships with lots of brands. It will happen in “the next couple years”, Moulding says.

The deal takes Cult off private shareholders’ hands, including majority investor Mark Quinn-Newall – co-founder of Net-a-Porter – and co-CEO Alexia Inge.

Inge was drawn to THG’s growth, having watched the firm “enrich and accelerate their [brand] offering with world-class ecommerce capabilities, as well as exciting CSR, people and sustainability initiatives,” she explains. “We’ve been looking for a partner who could bring us rapid technological and operational advancement, e-commerce innovation and the muscle of scale. I in particular was looking for a suitor who loves what Cult Beauty does, liked that we are a bit different and saw the value in the quirkiness and humanity that we’ve built into the business.”

The addition to THG’s portfolio, which already includes e-tailers Lookfantastic and Dermstore, and beauty brands such as Illamasqua and Eyeko, will bolster its position in the market and enable it to forge closer ties with many of the brands sold by Cult, Moulding says. “The biggest players are LVMH-owned Sephora and Ulta. Taking Cult on board will help us to close the gap. At a group level, we want to become the go-to destination for any beauty brand owner. We want to be the dominant party.”

Founded in 2004 by Moulding and John Gallemore with a £500,000 investment and initially focused on selling electronics, music and gaming as a white-label e-commerce provider, THG was valued at more than £5 billion when it floated last year in what was one of London’s largest tech IPOs to date. Its growth strategy is now rooted in beauty and wellness and has followed a Farfetch-style model: in addition to carrying an assortment of eight prestige beauty brands on its global site and pursuing M&A, the group also operates more than 200 online sites with end-to-end service for clients including L’Oréal, Estée Lauder Companies, Johnson & Johnson and Procter & Gamble. It’s now on track for sales of £2.23 billion for 2021, a 38 percent climb, with profits of £150.8 million. Still, that dwarf’s Ulta Beauty, who posted sales of $6.2 billion last year. Sephora doesn’t report revenues. THG expects Cult to contribute an estimated £60 million in sales this year, and £140 million in 2022.


Read More:The rise of THG: the next Farfetch of beauty?