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Beauty Eyes Tough 2nd Half

Luring beauty shoppers from other outlets, learning about Coty's plans for Del Cosmetics and finding that one item that could be the next big hit are the...

NEW YORK — Luring beauty shoppers from other outlets, learning about Coty’s plans for Del Cosmetics and finding that one item that could be the next big hit are the three top goals on retailers’ to-do lists as they head to San Diego for the National Association of Chain Drug Store’s Marketplace meeting.

The meeting kicks off Saturday, with Meet the Market, one-on-one appointments that are seen as golden opportunities for fledgling beauty brands to get their 10 minutes of fame with a buyer.

So crucial is the time to see new brands that manufacturers said Wal-Mart is sending some buyers who plan to meet only with new firms. This is the fifth year of Meet the Market and NACDS expects 10,000 face-to-face meetings among 400 exhibitors and more than 300 retailers representing 80 companies.

Retailers said they are on the prowl for something different they can use to make their stores stand out. “Everyone’s looking for something ‘special, different.’ I think it’s going to be a very challenging second half,” said one top merchant.

Although she said large chains shouldn’t be first seeing a new item at Marketplace, she did say the meeting still serves as a great locale to gauge the pulse of the market. Another said she is eyeing programs that can help her chain “get more of the pie.” She said she’s faced with some of the highest gas prices in the country and highest unemployment rates. “Our number-one goal is to drive sales,” she said.

Tom Winarick, executive vice president with Prestige Cosmetics, who will not be exhibiting, said the major issue retailers face is the economy, specifically energy costs and all that impacts. “Shoppers are starting to count their pennies more closely and this is affecting not only front end, but pharmacy too,” he said. Fewer pharmacy visits translate into lower front-end volume, he pointed out. “The energy cost increase also impacts their operating costs ranging from overhead to transportation from warehouses to stores. Retailers have to become even more aggressive promotionally to stimulate sales,” Winarick explained. On the bright side, he said, mass beauty has always prospered during lean economic times.

For the 52-week period ended May 17, food, drug and mass sales of cosmetics (excluding Wal-Mart) rose 1.8 percent to $2.76 billion, according to ACNielsen. That was a smaller growth rate, however, than the same period last year when volume rose 3.3 percent.

But industry consultant Allan Mottus isn’t so sure that is true this time. “I think we are finally coming to the conclusion that pricing [in mass] is too high,” he said. “Retailers were hoping a stretched shopper would trade down from department stores and that is happening, but they are going to Sephora and Ulta,” he said. “And some are just trading out of the category.” He said that Sephora’s price points on its private label brand are low enough to compete with higher-end mass lines.

He believes mass merchants are trying to figure out what they want to be — the higher-end of the mass market or a value stop. CVS, Mottus said, is definitely pursuing the higher end, as the chain has been aggressive with new and exclusive launches.

Although the quest is for new, it is a mature market leader that many retailers want to meet with during the four-day gathering — Coty. As Coty absorbs Del Cosmetics, retailers want to know more specifics of its future plans. Coty did outline some of that at the Annual Meeting, but to top executives. Now those in the trenches want to know the score. Many urged Coty to keep some of the strong people in place, although Coty has announced many reductions in staffing. One top insider said the best idea for “The New Coty Beauty Company” is to keep much of the old. “They have a good business going as long as they don’t try to reinvent everything,” said one retailer who asked not to be named. Another source who also wanted to remain confidential wondered if three beauty brands are needed from one company, referring to Rimmel, NYC Color and Sally Hansen. Several buyers said they hadn’t been brought up to date on Coty’s plans or a new direction.

This year, Marketplace will bring together more than 250 retail companies representing over 145,000 stores with 675 manufacturing companies across 11 major retail categories. Marketplace represents more than 90 percent of the industry. “Along with the Successful Selling conference in the winter, Meet the Market gives exhibitors a chance to open doors with a wide range of retailers,” said NACDS president and chief executive officer Steven C. Anderson.

Still, there are a few beauty players sitting Marketplace out. Since it is such a big show, a few small firms feel they are overlooked and that it is an expensive meeting to attempt to get an audience with what has become an industry dominated by few players. “I’m wondering if it was the right decision,” said one New York-based firm who passed on this year’s event. “But I can get to most of the accounts in person now so I’m putting my budgets into travel to accounts. Still, being at Marketplace does give you an important presence…maybe next year.”