Farsali CEO Announces Sephora Exit

Words by Romana Hai

Farsali CEO Announces Sephora Exit
Farsali CEO Announces Sephora Exit

Farsali, a beauty brand best known for its Unicorn Essence primer that went viral on Instagram, has decided to end all its current partnerships across 35 different markets by the end of 2020. This move includes ending its current relationship with Sephora.

In the U.S., Sephora exclusively sells Farsali products at more than 2,500 of its physical store locations. Sephora also sells the brand internationally on its eCommerce site.

The company’s move to end its partnerships is rather jaw dropping as nearly 80 percent of its sales are generated through retail partnerships, and it comes at a time when many businesses are struggling to stay afloat.

Farsali

Farsali is a six-year-old brand that was founded by Sal Ali and his wife Farah Dhukai, who is a known YouTuber, fashion blogger and a makeup artist. The brand became a hit on Instagram thanks to Dhukai’s social media presence. Farsali quickly became an Instagram phenomenon. In fact, in 2018, WWD reported that the brand expected to earn $35 million to $45 million in sales that year.

While the company’s plan to end its retail partnerships may not necessarily make sense at first, the company says that much thought was put into the decision.

On August 5th, Sal Ali and Farah Dhukai announced that due to personal reasons related to Dhukai’s infertility, combined with business impacts of COVID-19, it made the most sense to scale back the business. Ali admitted that running a privately-owned retail operation without raising any capital continues to be incredibly difficult for the company.

The company’s troubles were exacerbated by store closures of its retail partners during the pandemic, several leading retailers cancelled orders, which resulted in product launch delays and failure to meet commitments.

Farsali

“I was in a territory that I had no business being in, and that became clearer to me. My intuition told me that with COVID-19 and the resulting economy, nothing is going to go back to the way it was anytime soon, and that I was playing a very dangerous game right now and needed to bring in investors,” said Ali. It was this realization that made Ali regret not bringing on investors early on.

Ultimately, COVID-19 was the last straw for the Farsali brand.

So, how did Sephora take the news? Ali says “Sephora was really surprised” as Farsali is the second best-selling brand for the retailer, and has continued to be during the COVID-19 pandemic.

Sephora pushed the brand to rethink the termination and suggested maintaining the partnership and forgoing a product launch for the upcoming year. “But I also don’t know what this journey means to me, personally. I don’t want to stay in Sephora and not be part of the conversation and instead just be in the background,” said Ali.

Ali says the company does not expect to see any growth this year but plans to continue working with its third-party distributor located in the U.K., where it is sold in Selfridges and Cult Beauty, as well as maintain its partnership with India-based retailer Nykaa, which just began this year. Otherwise, Farsali will only be available DTC through Farsali.com.

When faced with the decision to continue partnering with retailers or going DTC, the idea of operating with just a 60 percent margin didn’t make sense, especially during the COVID-19 pandemic, Ali said.

Ali hopes to build a 2.0 of the brand but this time plans to bring on investors at an earlier stage while also taking a slower approach to scaling business, which he believes will put the company in a better position to compete — even with brands that enjoy a lower cost to market via Amazon.

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