Ulta buys Space NK and Cassey Ho talks fighting dupes

0:09Hello, everyone, and welcome to the Modern Retail Podcast. It is our show that covers the ways the retail industry is changing and modernizing. I am senior reporter Gabby Barco here, as usual, with my co-host, Melissa Daniels, who's back fresh from vacation. How was everything, Melissa? Hi, Gabby. Thank you for the warm welcome back. Everything's good. I spent some time with my family and my kids' cousins just, you know, jumping around the DFW Metroplex. Had a lot of fun going to some great stores and great restaurants and, you know, just generally cavorting with tiny people. Yeah. Well, that's a big mall hub, right?

0:54Oh, yeah. Speaking of, we do have a series that's running on modern retail next week. It's all about malls, including how a lot of legacy malls across the U.S. are just under constant pressure to modernize and adapt to the times. Yeah, we're all going to be tackling it from different angles. Melissa, maybe you can tease your story here. Oh, yeah. I'm really excited about the story I've been working on for this series. I'm looking specifically at Tanger Outlets and the way that they have really updated what their tenant kind of assortment is. So it's not just a place you go to find great deals on footwear and apparel, but also, are you dining while you're there?

1:45Are there other experiences that you can have? And really how outlet malls are sort of becoming a destination unto themselves. So as an outlet shopper, I'm thrilled to be working on this. And there's a lot of great details that I spoke with Tanger about. So yeah, everyone can check out that story and more on modernretail.co next week. More on that next week. We will have some of our staff members talking about their stories. So please tune back in. Later on in this episode, Melissa is going to be talking to Cassie Ho of Poplex about experiences with dupes and IP. It's a big hot topic right now.

2:25But first, we're going to be talking about some pretty big M &A beauty news this week. We're going to check in on dupes also in the beauty industry. So very beauty themed episode this week, which is why we are being joined by Lexi Lepsek of our sister site, Glossy. Welcome, Lexi, to the show. I believe this is your first time on. Yes, I'm so happy to be here. Thanks, Gabby and Melissa. It is my first time and I'm happy. Great. Well, I think you're going to probably help us break down a lot of what's going on. First, we'll talk about Alta's acquisition of Space NK, which to me came at a little bit of a surprise, but maybe you were keeping tabs on that more than we are over here.

3:09And then later on, you wrote a story this week on Glossy about the state of dupes lawsuits, I believe, which has a lot to do with what Cassie is going to be talking about later. So yeah, we thought that's a great time to unpack all of this. Yeah, perfect. It's so funny, Melissa, we must have a hive mind for both talking about dupes this week. Yeah, exactly. For me, it's one of those things that spans a lot of like interests for me. You know, I joke that I'm one of five people who likes talking to intellectual property lawyers in the country. And you might be in that number as well. Yeah. But I'm also like, I love the deal and I love a affordable option and I love democratizing trends.

3:58So, you know, but I'm also like really big into this idea that creators should own their own ideas and have protection for that. So, you know, I think there's just a lot of really interesting intersecting topics in IP and dupe culture. So we can get into that in a little bit. But first up, like I said, let's talk about M &A. So Space NK is, for those unfamiliar, is this UK-based luxury beauty retailer. I would say it's sort of like maybe the UK's version of Sephora. That's how I've always viewed it, obviously on a much smaller scale. But yeah, Alta bought them out this week from the private equity firm Manzanita Capital.

4:37Yeah, Lexi, I'm curious to hear what are your thoughts here because Space NK has had, I guess, a tumultuous few months now. Yeah, totally. You know, we kind of knew something was going on with Space NK a few months ago when President Trump released all the information around the tariffs. And they almost immediately, you know, sent an email out to their U.S. shoppers and said, we're not shipping to the U.S. we can't take on this tariff. And so we kind of knew something was going on there. And then they also, I don't know if a lot of people know about this, but Space & K also had a really, really successful wholesale business and they called it Space & K Wholesale Plus.

5:14They distributed into a ton of top stores, Nordstrom, Bloomingdale's, and they actually sold that distribution arm in June of 2024 to PCA companies. And so we definitely have been feeling like there's something about to go down over at Space & K and Ulta purchasing them. At first, it was a little surprising to me, but Ulta is undergoing what they're calling their Ulta Beauty Unleashed plan right now. And so if you think about it, it kind of does make a lot of sense coming off of their poor performance in the end of last year with their sales. They had drops, they brought in a new CEO, Keisha Steelman, and she announced this plan in January.

5:57And part one was going to be to drive core business growth. They've done that since their sales are up. Second is to scale new businesses. And third is to realign their foundation for the future. So this Space & Cape purchase definitely feels like the second step here to basically scale new businesses. Yeah, it also feels in line with their ambition to expand internationally, right? Yeah, for sure. They announced that in the same time that Keisha sort of had her first earnings meeting in January. And she shared that they're going to be expanding into Mexico during the second half of the year. And then similarly, they're going to expand into the Middle East through a licensing agreement.

6:42Mexico's also sort of like a licensing agreement. They are partnering with a global brand operator called Grupo AXO for the Mexico expansion. So they've got, definitely they have big intentions to go international. Yeah, you know, I think an acquisition here does make sense as a way to just sort of give them added muscle, especially if Space and K was already in this position where it was looking to make some moves and get bought, right? I mean, there's a lot you can do with Mexico and the Middle East right now. Alta, I spoke with earlier this year at Future Stores about these expansion plans.

7:18And they were saying how what they really want to do is make sure that their assortment is reflective of the local market. The same way they've been able to do so, you know, regionally here in the U.S. where, you know, they're also building out more stores. So I think when you're on that journey, if you have someone like Spacing K who already really knows the UK consumer, what does that give you as far as knowledge and data and brand partnerships? Yeah, for sure. And I think that the big thing I think to think about this one, though, is that not too much will probably change. I do not see a world in which they're turning into Ulta stores by any stretch of the imagination.

7:56I think these will just continue to be a really strong part of Ulta's portfolio. I don't know how well Ulta would do if they just opened up in the UK. I think this is a much smarter way for them to do it. I know that when Sephora went to the UK years ago, it did not go quite as well as they anticipated. I think they had a really rocky time with it. That UK consumer, they've got all of their stores there. There's tons of beauty stores. And so I think this is a pretty thoughtful and smart way to expand into the UK and Ireland. Yeah, you've got boots. I think that's like a big dominant presence. But I think, I believe Sephora is trying again.

8:36And you've got like 2.0 right now in the UK. So it'll be interesting competition there. But you're right, the Space NK, and I think the Space NK customer probably skews a little bit higher end, I believe, right? It really is more specialty. They're more curated versus Ulta where you've got like everything from the high end to like drugstore brands. Yeah, I would almost compare them a little bit more to like maybe a Blue Mercury or a Credo or something where I believe Space NK's primary sales drivers are like high-end skincare. Yeah, speaking of, maybe we can just delve a little bit into Space NK's ambitions in the U.S.

9:15for those who've been watching them. So they did attempt to break through in the U.S. It's almost like the reversal where they also had a lot of trouble even with the help of Bloomingdale's and Nordstrom. But yeah, they first opened a store here in Soho in 2007 and then added a couple of other locations. But Lexi, I'm kind of curious to hear why you think, you know, even though they were selling a lot of the same brands as Sephora or Alta, it just ultimately didn't really stick. And hence, you know, kind of going back to the drawing board right now. Yeah, you know, I think this kind of goes back to one of the things that Alta is always saying in their earnings, which is that they want exclusivity.

9:57They want products that you can't get anywhere else. I know that Ulta plays ball much, much better with brands where they get those exclusives. And so I think that the consumer here is just, they have got their stores, they've got their sort of refill, their replenishment things that they do. And it's really tough to, I think, try to convince a consumer that they're going to go buy maybe one of the same products they've been using just from a different retailer. Like Ulta's got their killer rewards program. Sephora has also got a killer rewards program. All those department stores are so competitive with their gift with purchase.

10:34Like I know even it took a retailer like Violet Gray years to get people to switch over to shopping from them from sort of the big box department stores. So I don't know. I think it's tough when you don't have that much that's unique. Yeah, that makes sense. And the name recognition, of course. You know, I just always felt like an indie retailer. All right. Well, on that note, this is a good time to transition to talk about beauty dupes, somewhat related. But yeah, Alexi, I'm excited to talk about this story you wrote that just went up this week about just a bunch of different lawsuits right now that are, I guess, either underway or maybe some have been settled in the beauty space due to dupes or duplicates.

11:22Yeah. Yeah. It's really interesting to me. I think the big question that I wanted to ask is that if dupes are just about everywhere nowadays, you have almost all of the mass brands that are duping some products. You have brands coming into the States that are basically just their entire business model is based on dupes. So I'm curious as to if dupes are just everywhere now, why do we keep hearing about these lawsuits? Like, what's the point? So I guess I'm sort of, you know, approach this story wondering, like, what's the point of all these lawsuits? What are they trying to do? And do brands need to do them?

11:58Do brands, when they get duped, do they need to file a lawsuit? Do they need to take these sort of protections into the courts? And so I did that. And I talked to a really great brand protection attorney named Elizabeth Millian, who came on to the Glossy Beauty podcast this week. And so lots of dupes. And Melissa, I'm so excited to hear your story as well. Yeah, I think that's a great way that you kind of came into this conversation, which is sort of like the so what? of it. You know, we've reached a point where people are just, you know, copying even with admiration versus ill intent. You know, this is such a great product and you want to make it available to more people, right?

12:39I mean, you know, if you see something happening, but, you know, truly there's only so much that you can do from a legal side to protect yourself. And unless you have gone through the motions and the expense of getting patents and trademarks for your work, you know, there's only so much you can do legally to get people to stop creating something that you accuse them of duping you on. And even in the case that you have that layer of legal protection, sometimes it doesn't work. But what I don't know is how you protect a beauty product legally. I I mean, are people copywriting or trademarking or getting patents on the beauty products and then suing off of those?

13:24Or are there other claims that they're coming in with in these lawsuits? Yeah, it's mostly brands that are basically saying that the company that duped them is trading on the value and the recognizability of their product to sell products. And so, but it's weird because these cases, it feels like we see them in the media where you'll say like, well, you'll hear like, oh, glow recipe, suit, makeup by Mario. And it's like, ooh, and then it just disappears. And so I was curious as to like, what happens with these suits? Like where are they going and what's happening? And I mainly learned that these suits kind of have two big purposes.

14:01And number one is to send a message to potential dupers. So they'll be able to see this and they'll say, this brand is not messing around. We don't want going to dupe them because we might end up with a lawsuit. We might end up, you know, in this hot water with this company where the results might not necessarily be that we get in trouble, but like it's going to cost us money to defend ourselves. It's going to be a lot of back and forth. So that's sort of the main reason. And then the second one is something I learned about called coexistence, where a brand basically is going to have a much harder time enforcing its IP if the company allows dupes to gain market status unchecked.

14:41So if you're just chilling, somebody dupes you, you're like, I don't really care. And then a couple of years go by and they have a chunk of the market for your product category. It's gonna be really hard, I learned, to take them on after that because you've just let them gain the market share. Yeah, maybe this is a good time to talk about some cases. I think benefit versus e.l.f. beauty right now is a big one. And then Supergoop versus Five Below and iWorld is interesting. You know, I personally feel like the Supergoop SPF has been duped across the board at this point. But I don't know what your thoughts are on, yeah, whether going after this sort of, you know, discount store makes sense here.

15:24Yeah, the Supergoop Five Below one's interesting. It just sort of came out and it was one of those where they really do look similar. And it's an interesting case because it is just kind of a generic product for Five Below, and they're making it with a manufacturer. And it kind of looks almost identical. Supergoop, if you're not familiar, is written in blue cursive writing, and it has an exclamation point to the end. And the name of this company that looks very, very similar is called Sugar Girl. so they're really using like the exact sort of placement of the letters in the word with the exclamation point at the end so if you kind of are looking at it and maybe you need reading glasses but you don't have them with you like if you're looking at you might be like okay yeah I've seen this I've seen this SPF before so I'm not sure exactly what's going to happen but Supergoop is alleging that it is a copycat product line it imitates its products in order to trade on consumer recognition of Supergoop.

16:23And I think that that's sort of like the underlying thing here with all of these cases is that you have to prove that the consumers were confused and purchased it thinking it was something else, which is, turns out very, very hard to do. So my gut tells me most of these cases are just kind of a warning. Well, and it winds up sort of maybe ending in a settlement or something, and even just a, hey, slap on the wrist, don't do that again. But in the meantime, there's a ton of lawyers, you know, pulling in some really nice retainers and legal fees as part of those settlements. I just pulled up the Sugar Girl 5 Below dupe.

17:04And it's funny, I actually found it on an Instagram where the person who runs this account is explicitly looking at like dollar stores and discount stores for dupes of high-end beauty products. And I think that's why it's even getting harder to prove that people are confused because consumers are knowingly buying dupes and they don't really care and they want to in many cases. That's sort of what the attorneys that I spoke to all said. They were like, you know, the consumers for really, it's really interesting that the consumers are really setting sort of the standards for this because it's hard to prove that you thought you were buying a$35 product at a dollar store.

17:46Like it's a very challenging argument. Not to mention, you know, dupe culture in the last few years, it's become almost like bragging rights to find something with the same ingredients. And I guess in some cases, the same packaging. I kind of want to talk about Benefit versus Elf here, which sounds like it was settled just a few months ago, but this is the, you know, the Benefit famous mascara that is duped. This is a$29 product that Elf made for$6. This is classic drugstore dupe, in my opinion, where you're really going after that maybe teen or young consumer that would maybe want to try the product but doesn't want to invest in it.

18:28Yeah, Lexi, what are your thoughts on this? And is this an example of what you mentioned, which is that it was really hard for benefit to, I guess, to get the judge to agree with them on that. Yeah, for sure. This case is so fascinating. And it's really what inspired my story because it's the only one that I've found and the legal experts I talked to have been able to find that actually got a ruling by a judge or a jury for that matter. And Benefit did not win. Elf ended up being successful with this because unfortunately, Benefit was not able to prove that the brand was confusing a consumer into thinking the dupe was Benefit.

19:10However, it definitely is an interesting case to look at. So the products are, they're pretty similar. They're both pink and black tubes. They have a similar sort of like curved plastic wand. They're named very similar. So Benefit is called Roller Lash and the e.l.f. product is called lash and roll, but they are very different in price. It makes sense why Benefit did this because in the court proceedings, they did say that Benefit had made$300 million in sales on just this mascara in the US when it launched in 2015 up until 2023 when they launched the website or when they launched the lawsuit.

19:50So definitely a very big, big thing for Benefit. But I do kind of want to touch on the Sol de Janeiro. I know we talked a lot about the other two, but this seems to be, to me, kind of interesting because even the price point is pretty much kind of middle market, which is really funny because it's kind of like, it's like the Spider-Man meme where they're both like pointing at each other. The Sol de Janeiro lawsuit against Emco Beauty is interesting because everybody's kind of coming for Emco Beauty right now. Well, we had their CMO, Meredith Rojas, on the podcast a few months ago. And, you know, they're very proud that they're duping.

20:30They're very proud. They think about dupes as being a form of innovation, of being able to offer something that is similar at a significantly cheaper price. So they're very proud of that. They're leading with that. It's definitely pissing off a lot of brands. Sol de Janeiro, of course, is known for its body mists. They have a bunch of them. They're all different. They're all different colors. They have cute names. They're about 25 bucks each. Emco Beauty, of course, known for their dupes, but they make a very similar product to Sol de Janeiro for 12 bucks and they've got a couple of them. But what's really interesting, I'll say this is not the first time that Emco Beauty has been sued from a company that they're duping.

21:10This one's super interesting because Sol de Janeiro is also suing for the fragrance, which in beauty, we constantly hear you cannot patent, who cannot trademark a fragrance, that's impossible. But the funny thing that I learned about this, and of course, we don't know if Sol de Janeiro is going to be successful with this one, or if it's just going to disappear in a few weeks. But the interesting thing is there actually is precedent for trademarking a fragrance, but it's not in beauty. It's Play-Doh, which can you guys like smell Play-Doh in your head right now? Yes, I can. Well, Hasbro, who owns Play-Doh, actually was able to get a trademark patent for the smell.

21:50And they call it sweet, slightly musky vanilla with an overtone of cherry combined with the smell of salted wheat-based dough, which I just think is the funniest thing. Wait, is there a collab here that's like waiting to be done? Like the Play-Doh XM Co Beauty like drop next month? If we see that, I would actually Oh, I mean, yeah, I don't know if I'd want to smell like Play-Doh, but like I can smell it in my head and it like it's it's a good feeling. Like it's a good it's a feel good smell to smell. Man, scent and nostalgia. There's a whole other podcast topic I'd love to have you back to get into because it's a big one, I know, in that category.

22:29But I really like what you mentioned about how difficult it is to get, you know, legal protection from sort of the IP, like on paper protection for a fragrance because it's like literally effervescent. You know what I mean? There's nothing really to hold there. This is something that I get into sort of with Cassie a little bit. And I think we've seen this, you know, in other lawsuits and maybe even more from a fashion side. I've talked to Kizik, the footwear company, a lot about their patent portfolio because they have hundreds of patents pending or secured about the slip-in shoes that they make.

23:10And they're going to start licensing those out to other brands who want to make slip-on footwear. And the IP is becoming almost a company asset that's bigger than the brand. Uh, and to me, it's like, you have to be so specific that what you have created is unique and that nobody else can make it. And here's what makes it unique. And that's harder and harder to do when you get into this realm of color, fragrance, design, style, feel, fit. Um, yeah, I could go on and on. I love this topic. Melissa, you will be continuing the conversation. We're not getting off the dupes train just yet, but we're excited for your featured segment.

23:50this week with Cassie Ho, who's been dealing with this, I guess, a little bit from the creator perspective, right? But in similar vein. Yeah, exactly. You know, Cassie Ho is the founder of PopFlex Active. It's an athleisure brand. She also has a line that she sells called Blogilates through Target. She just launched her second collection there earlier this year. And what's interesting with her experience is she has secured patents for designs that have been wildly successful for her own brand. And then she's seen those copied on places like Shein and on Amazon, and even in some cases, big box retailers.

24:29So we get into that and we get into how she's been really transparent about this fight. She brings it directly to her fans. She has around 19 million followers across all of her social profiles. So she shows them her designs as she's making them. So then when something else pops up somewhere else, she says, look, you know, here's what I drew. Here's what they came out with. And she's a rare founder and that she's been very transparent about why this upsets her, what it means for her business and her bottom line. And we get into all of that and had a really great conversation about it. All right.

25:05Well, tune in for that next after the break. But Lexi, it was so nice having you on. I hope you come back soon. Yes, I would love that. Thank you.

25:24All right. Today, we are continuing our conversation around dupe culture and what that means for brands. We know that some customers love dupe culture. They even build entire social followings around how to find the best low-cost alternatives. But it's a serious intellectual property issue for businesses and brands in the apparel and CPG space. You know, we saw this when Lululemon most recently sued Costco over selling dupes of some of its products, allegedly. But today we're going to get into this with a experienced professional in the space. I have Cassie Ho, the founder of PopFlex Active with me today.

26:01Cassie, how are you? I'm good. Thanks for having me again. Thanks for being here. Well, welcome to the Modern Retail Podcast. You know, you're better known among your 19 plus million followers as blogilates. For those of you who may not be aware, you know, just tell us a little bit about yourself and your brands. So I started a YouTube channel in 2009 and unintentionally built a community of women who wanted to get fit and healthy online. And, you know, my childhood dream was to be a fashion designer. And so those two things ended up really working out for me, even though that's That wasn't my college degree or anything, but I was able to begin designing clothes that I wanted to wear for myself, solving problems in female active wear, putting pockets in dresses where you normally wouldn't see them, getting rid of camel toe on leggings by getting rid of that front seam.

26:58And so when I started Pop Flex in 2016, it started to grow because I had been wearing so many different types of act-aware for so long. Like I feel like I've almost worn every single brand. And so when I launched my own, it really came from a place of intention. Every single design has a why, it has a purpose. And that's why, you know, the brand has grown so much. And today I have PopFlex, which is my D2C company, and then Blogilates, which is available at targets nationwide and that's the more affordable in-store brand. So I'm really, really lucky to be where I am. Yeah, I love that your journey involves just chasing your dream, even if it was a windy path, right?