Another blow to the niche beauty retail space this week: Beloved beauty and wellness retailer and service provider Shen Beauty has shuttered its Cobble Hill, Brooklyn store-cum-spa, pivoting to an online-only model effective immediately.
This development follows news from earlier this week that Amyris is closing clean beauty-focused spa and retailer Onda Beauty, which the beauty biotech company acquired just over a year ago, as well as reports that Farfetch is folding its beauty business. The luxury fashion e-commerce platform purchased beauty retailer Violet Grey in Jan. 2022. As reported in WWD, industry sources claim Violet Grey’s beauty business will continue even after Farfetch’s other beauty business winds down this summer.
In an exclusive interview with Beauty Independent, founder Jessica Richards shares that, while she has vacated the $22,000 a month lease on Shen’s 1,500 square foot location, the company is not going into bankruptcy. Richards spent Monday and Tuesday of this week moving out of the space and has shifted Shen’s business to online only.
Shen sells hundreds of beauty, wellness and lifestyle products from both well-known brands like Tweezerman and Bioderma to emerging brands like Haoma and Superegg. Richards is known for her discerning eye for spotting promising brands as well as her curation prowess. Since Shen’s debut in 2010, she has cultivated an exciting mix of masstige and luxury, indie and legacy brands. Richards was also a very early adopter among beauty retailers of the “self-love” category, carrying brands like Dame years before Sephora, Goop or Saks Fifth Avenue.
Richards says Shen’s current bestselling brands include hair specialists Roz and Manta, skin and body care brand Nature of Things and color cosmetics range Kimiko.
While the serious issues that led directly to Shen’s store closing started in earnest in March 2022, to tell the full story of how she got here, Richards goes back to 2018. “It’s almost like a roadmap for every other retailer, vendor or anybody else of what not to do,” she warns. “But, at the end of the day, the buck stops with me. Whatever has transpired is my fault. I’m the business owner.”
In 2018, Richards was overseeing beauty and wellness curation for Urban Outfitters, Anthropologie and Free People, in addition to running Shen out of its original Brooklyn location. At this time, she was also in talks to partner with The Center founder Ben Bennett, who, she says, at the time was a “dear friend and mentor.” Bennett was in the process of leaving his position at beauty and wellness incubator HatchBeauty.
“Whether he captured Hatch or she [Tracy Holland] bought him out, he wanted to roll Shen underneath it, be a minority investor, launch brands underneath [the Shen name] and flow them out to other retailers because he loved my idea of brands and he wanted to go into the luxury space,” shares Richards.
Before The Center deal came to fruition, Richards briefly accepted the CEO position at Dr. Barbara Sturm, but had to turn it down the next morning due to a health problem that left her unable to travel. She then moved forward with Bennett on The Center. “He hired a bunch of people, Emilie Pacheco from Goop, a few people from Hatch,” she details. “We decided to create a brand based on the bestsellers of Shen. One was a Youth To The People cleanser, another the Niacinamide Serum from SkinCeuticals. One was a retinol eye cream, and so on. The initial five SKUs were based on Shen’s bestsellers. He already owned the name Naturium, but the concept came from me.”
In August 2019, Richards and Bennett were still in negotiations when he sent her a term sheet that gave him 60% ownership of Shen. The deal was a no-go for Richards.
She says, “I never have cared about ownership. I am not one to want the whole pie by myself. I would rather have a smaller piece of a bigger pie with a lot of people around, make it work and make it big and beautiful. Why I have never taken on investment, which everybody always asks me, is not that it hasn’t been put on the table. It’s because I’m not a person looking for money. I am more of a creative and I really needed an operational partner, somebody to come in who was going to do that. Ben was going to be that person, and I was going to lead creative, but I just couldn’t do it.” Bennett couldn’t be reached for comment.
After that, Richards signed the lease for Shen’s newer space, working with design firm Mythology to create a “beautiful and authentic” Shen store. “We were supposed to open April 1, 2020. We ended up opening September 1, 2020, during the pandemic, which almost killed me,” she details.
Once the doors opened, everything was great—for a while. Sales-wise, 2021 was the business’s best year. An employee who had worked for Shen for many years in a finance function approached Richards with a proposition. “She said, ‘you really can’t run this operation on your own. It’s triple the size, triple the rent, triple the inventory, triple the employees,’” recalls Richards.
“I trusted this person. She gave herself the title of president of business affairs because that basically was a glorified personal assistant to me. She was still my bookkeeper and paying bills, but now she was dealing with staff schedules and things that I really wasn’t able to do and I’m not good at. I was able to go full force into creative, which is one of the reasons why we had the best 2021.” At its height, Shen’s e-commerce business was bringing in over $1 million a year in sales.
March 2022 is when Richards discovered all was not what it seemed. She discovered her president of business affairs had opened and maxed out a new credit card in Richards’ name, a total of $75,000 in debt. “This person had basically supported their life on it,” she details. “Family vacations, gas every day, about $16,000 in charges in McDonald’s over the course of two years.”
Richards also discovered over $700,000 in unpaid bills to vendors. Richards says she still owes some brand partners money as a result. The business’s books were a mess. Richards went through several new accountants before finding a quality bookkeeper that could sort the numbers out.
To open the new location, Richards took on debt for the first time since launch. The construction loan to build the new store was a small business administration loan. While she was waiting for it to fund, she was laying out her own money to launch the Shen in-house brand, wracking up total expenses of about $265,000. In addition to the construction loan, Richards was in the process of taking out a capital loan to fuel the brand project. Given Shen’s solid financials at the time, Richards didn’t anticipate any issues getting the capital loan approved. Yet a couple of weeks later, Richards was told her loan was denied because Shen sells sex toys and CBD products. Financing woes are all too common for smaller companies that dabble in taboo categories, but the pill was a bitter one to swallow for Richards.
“The person who created the self-love category for Goop, Urban Outfitters, Anthropologie, Free People, which Sephora and Ulta then launched publicly within days of my bank loan getting denied,” she laments. “How do you think that makes me feel? Everybody has taken the idea and been able to be profitable because they’re corporations, but I get slammed to the ground. So, not only was I out the money that she didn’t pay and the money that she misappropriated, I was also out the $265,000 that I had spent, plus the loan that I was awaiting.”
“Then, a week later, I was confirmed and approved for my third round of economic injury, disaster loan or EIDL money of $1.1 million. Then the government shut down the funding. All within a month,” says Richards.
Finally, in the summer of 2022, the entrepreneur discovered that Shen had spent over $600,000 on automated digital marketing ads that were not being monitored properly and reaped basically no return. “I understand that larger companies can spend into the red, but I’m small,” admits Richards. “I’m not able to do that with no return. And Meta and Google, they just suck you dry.”
In September, she stopped Shen’s advertising spend and laid off most of its staff. All in all, she cut $90,000 a month in expenses from the business, but, because of lackluster sales, it wasn’t enough.
Sales-wise, 2022 was a solid year—above 2021 but not quite what Richards had projected. This year has not been so kind. While January through March was flat year over year, April was “a bloodbath,” says Richards. “May was a worse bloodbath. June was an even worse bloodbath. July we were decimated.”
These trials have taken their toll on Richards. After a recent stress-related health scare, she knew that closing the store was the right move for the business and herself. In addition to being an entrepreneur, Richards is a single mom to two boys.
She highlights the ongoing support of two women and fellow industry professionals, Elizabeth Whitman, founder and CEO of Exponent Beauty, and RéVive CEO Elana Drell-Szyfer, for their support over the past year. She says, “Those two women are the reason why I’m still alive today, and I haven’t fallen over. They’ll never understand how much their kindness and compassion and support mean.”
While the shuttering of Shen’s physical store may be a setback for Richards, the industry trailblazer plans to build Shen into a major beauty e-commerce player, doing what she does best. “I’m really good at what I do, which is harnessing and creating brands and bringing them to the market,” says Richards. “I would love to be able to be the person in the middle who helps these brands meet with banks and understand the terms of the deal so that they don’t get their whole lives taken away because they don’t understand things. I don’t want this to happen to anyone else.”
