Here’s why SUGAR’s stores are a potent marketing tool in non-metros

SUGAR Cosmetics inaugurated its 200th standalone store in Bengaluru in June 2023. Interestingly, it was in June 2022 that the beauty brand opened its 100th store. It has managed to double its store count within a year.

SUGAR began its journey in 2015 as a direct-to-consumer brand (D2C) before expanding into the offline retail sector in 2017 through strategic partnerships with large format retailers and general trade stores. In a significant move, the company forayed into brick-and-mortar retail in 2019 by opening its first proprietary store.

Speaking to afaqs!, Kaushik Mukherjee, co-founder & COO, SUGAR, says that the digital-first brand soon realised the need to explore the offline world and apply online insights in the physical realm. Physical stores play a pivotal role in educating the consumers about certain products.

Reflecting on the initial brick-and-mortar foray, Mukherjee says that the first 12 stores operated smoothly and achieved monetary break-even within four months. This gave it (the brand) the confidence to continue to expand. The capital expenditure invested in each store broke even within 14-15 months, further solidifying SUGAR’s belief in opening 100 stores. 

“Last year, we presented the 100-store plan to our investors and received $50 million as funding. The plan’s premise was to leverage the initial success of the 100 stores and move to 200 stores. We’re a digital-first brand. Our biggest learning is that if we’re looking to establish a prominent beauty brand, a robust offline presence is essential. That’s where our stores play a vital role,” Mukherjee adds.  

Out of the 200 stores, only 9% are present in high-street markets, while the remaining 91% are located in shopping centres/malls. 

In an interview with afaqs! in October 2021, Mukherjee mentioned that kiosks are cost-effective with less rentals. So then, why is the brand opening standalone stores, instead of kiosks that can also act as physical touchpoints? 

“The customers who come into our kiosks, are familiar with the brand. They’re interested in a specific product. They make a quick purchase and move on,” shares Mukherjee. 

“The target audience, as far as physical stores go, is slightly different. The customers haven’t made up their minds about the brand and are just curious. The conversion funnel is higher in stores, as compared to kiosks, but for that, we need a beauty advisor to spend 15 minutes with the customers. The kiosk is a bit more transactional, as compared to stores.”  

Online versus offline  

The surge in digital shopping that was accelerated due to the COVID pandemic, highlighted an important aspect that impacted customer behaviour, particularly in the beauty segment. The inability to test products online, drove more customers towards in-store shopping. 

In the online realm, customers tend to click and explore various options. In the retail space, the physical shelf plays a vital role in the buying process. 

Mukherjee highlights, “Online shopping is targeted towards particular promoted or discounted SKUs. The competition is fierce and one has to capture a customer’s attention in a matter of seconds. We can showcase product ingredients, etc., but the customers will only start exploring if they’re convinced about pricing. In retail, customers walking into a SUGAR store, are convinced about pricing. The brand had already overcome the price hurdle and now customers are making a decision based on other factors.”  

With 200 stores, retail contributes 60% to SUGAR’s sales. Last year, retail contributed 55% to the brand’s sales. The online world’s contribution is the remaining 40%. 35% of the brand’s revenues come from the general trade market. 

“General trade is a profitable channel for us, as compared to other channels, as no human capital cost is involved,” Mukherjee adds.

Tier-II/III cities 

30% stores of SUGAR’s stores are located in Tier-II/III cities. Some of the best-performing stores are located in cities like Bathinda, Surat, etc. 

In metros, people already know the brand, as it advertises on television and digital platforms. 

“In Tier-II/III cities, customers walk into a store and start to explore a brand. We can attract new customers who have not seen us. The potential customers are using (apps like) Moj, where we don’t advertise. Opening up stores gives us an additional catchment audience,” Mukherjee states.

Interestingly, a trend of group shopping has been seen in Tier-II/III cities. In metros, one visits a store alone or with a partner. In Tier-II/III cities, on the other hand, a group of 3-4 people come together, and each buys a product for themselves. 

Earlier, the brand’s main focus was the 18-25 age segment. But now, with the rise of physical stores, the focus is more on the 26-35 bracket.

On the learnings from the first 100 physical stores that were applied in opening the next 100 stores, Mukherjee informs, “In the second hundred stores, we embraced a more risk-taking approach, as compared to the first one. Initially while opening first 100 stores, we were cautious about zoning, that our stores are strategically positioned next to beauty or fashion brands, anticipating customers with shopping intent for occasions. As we progressed, we became bolder and less concerned about such placements, realising that we had gained confidence and a solid foothold in the market.”

Association with ‘Shark Tank’

Vineeta Singh, co-founder & CEO of SUGAR, was one of the ‘sharks’ in two seasons of the hit business reality TV series ‘Shark Tank India’. Sharks have now become an Internet sensation, with a massive following.

In an afaqs! interview earlier, Aanchal Jain, head, global brand experience, Lenskart, mentioned that the appearance of Peyush Bansal (co-founder, Lenskart) on the show led to a massive spike in the online search for Peyush Bansal ‘Shark Tank’ glasses and Peyush Bansal glasses. 

Singh is known for her iconic (makeup) looks on the show. 

Mukherjee shares, “We realised during ‘Shark Tank’ that despite our celebrity-led advertising, some people didn’t know the brand. The number of searches went up after the show. The conversion was normal, nothing spectacular. But we experimented by launching Vineeta’s favourite makeup kit and that started selling quickly.”