DermStore Beauty Group will become a subsidiary, but operate under its own name.
Target Corp. expanded its presence in the beauty industry Tuesday by acquiring the DermStore Beauty Group, an online beauty and skin-care products firm, for an undisclosed amount.
DermStore, based in Louisville, is a 14-year-old firm that operates DermStore.com, which offers about 750 brands of skin-care products. The company also owns HairEnvy.com and Blush.com, which sell hair-care products and cosmetics, respectively.
The websites will continue to operate separately from Target under their own brand names and DermStore will become a wholly-owned Target subsidiary. DermStore CEO Dan Obegi will be president of the subsidiary, and no DermStore jobs will be cut.
“There is no doubt that the online beauty industry is growing rapidly, and this unique opportunity enables Target to gain insight into the superior, online customer experience DermStore provides,” said Casey Carl, Target’s president of multichannel and senior vice president of enterprise strategy, in a statement.
The acquisition follows this summer’s launch of the Target Beauty Concierge service, which is placing beauty experts in 200 stores nationwide to advise shoppers about cosmetics, hair care and skin care.
Because DermStore’s offerings include high-end, specialized items, the acquisition comes with customers who prefer prestige beauty products typically found in department stores, said Target spokeswoman Katie Boylan.
“DermStore’s broad assortment is obviously focused on prestige and dermatology brands, and certainly that is a complement to Target’s offerings,” Boylan said.
“Their expertise in the online space, their customer service, [and] the content and curation that is available on DermStore.com was all very appealing.”
DermStore.com has collected more than 100,000 customer product reviews. That feedback could help Target appeal to the choosy beauty customer, said Chicago-based retail consultant Brian Kelly.
“Getting the online ratings or consumer feedback is one channel of input that Target gets into rounding out its understanding of how the consumer shops in that category,” Kelly said. “And then having people in the store gives them a whole new channel of direct contact with the consumers.”
Kelly said the move could help Target stay competitive with Walgreens and CVS Pharmacy, which are both moving into high-end beauty product offerings, as well as Wal-Mart, which has become more aggressive in the beauty sector.
“Beauty is a key gateway to women, and women who are higher users of beauty products tend to be more toward that fashionista,” Kelly said. “This is a key category for them to maintain that relationship with [that shopper] on an emotional level. Whether it be through a bricks-and-mortar channel or an online channel, this is really about Target having a relationship with her.”
Prestige beauty products are a $10.2 billion industry in the United States, according to an NPD Group report released in March. The industry cited 7 percent growth in 2012, which was driven primarily by skin-care products, according to the report.
The DermStore announcement also reinforces a focus on e-commerce that Target touted in March when it created a cooking-based subsidiary after acquiring Cooking.com and Chefs Catalog.
Target said Tuesday’s acquisition would not have a material effect on its 2013 financial results. The deal is expected to close in 60 days.
Steve Alexander • 612-673-4553
Celia Ampel • 612-673-4642