The global financial turmoil has rattled even the die-hard beauty shoppers, who have resorted to buying smaller sizes of luxury brands and snapping up value-priced gift sets in department stores. Some prestige market consumers have traded down to premium-priced mass brands in drugstore chains, while mass shoppers are turning to budget brands.
This story first appeared in the November 21, 2008 issue of WWD. Subscribe Today.
“People are spending a little less and there is less traffic in stores, but the customer is still buying,” said Howard Kreitzman, vice president of cosmetics and fragrances for Bloomingdale’s.
“We are seeing a reaction to value,” he continued, noting that gift-set sales are up, items under $100 are selling and the classic fragrance business has picked up earlier than usual. Also, sales of the highest-priced skin care items seem to be softening.
A second retailer echoed some of Kreitzman’s comments and added that customers have gravitated to smaller sizes, particularly in women’s fragrances. There are also indications that shoppers are replenishing basics. But high-end men’s fragrances and higher-priced skin care are still selling. Customers are also being drawn to the more novel and innovative products, not only the Gwen Stefani fragrance, Harajuku Lovers, but also the vibrating mascaras from Estée Lauder and Lancôme. “They’ll come if they want it,” the retailer noted.
At Carol’s Daughter, a personal care and beauty brand, president and founder Lisa Price noted that customers are treating themselves mostly with hair care products. “Moisturizers are secondary,” she said.
“Innovativeness and new products are still able to post positive [growth],” said Karen Grant, global beauty industry analyst at NPD Group. Nevertheless, transaction levels are said to be lower, as is the value of transactions. “While shoppers are still buying, the frequency is dropping off,” Grant said.
Wendy Liebmann, chief executive officer of WSL Strategic Retail, elaborated on the remarks that she gave during the Fragrance Foundation panel discussion Tuesday (see this page).
Liebmann added that 68 percent of women said they were cutting back on fragrance purchases, up 14 percentage points from a year ago. And 59 percent are cutting back on color cosmetics, up 4 percentage points. But the most drastic change is in hair care and skin care. In the latter, 55 percent are cutting back, up 20 percentage points, and 51 percent of women are cutting back on hair care, up 19 percentage points.
But there are glints of a silver lining, as sales of premium products pick up in the mass market. “We are actually seeing increases in lines such as L’Oréal,” said one large chain retailer, “as department store consumers trade into mass and buy lines like L’Oréal and OPI and Nicole nail polish. We are not selling as much midrange cosmetics.”
At the other end of the spectrum, retailers also report existing mass beauty shoppers trading down further to budget brands, including Wet ‘n’ Wild in cosmetics or Sinful in nail color.
Buyers said bargain-hunting shoppers are looking for one-day sales and more buy-one, get-one-free deals. Mass chains are borrowing a page from department stores by adding friends-and-family discount days. Several merchants plan to start slashing prices earlier. Meijer, for example, will post holiday special sale pricing nine days before the Thanksgiving holiday on its Web site. “Economic conditions are motivating consumers to spend more time searching out the best values in retail,” said Jeff Handler, senior vice president of marketing for Meijer. He said Meijer actually expects Thanksgiving Day to be one of the busiest of the year. CVS Pharmacy also is moving up its weeklong Black Friday promotional event to Sunday.
Consumers have definitely shifted patterns — eating at home more or using cash instead of credit. In fact, Walgreens chief operating officer Greg Wasson said his chain sees “a more anxious, concerned consumer” than in the past. He said they are using fewer credit cards and “trying to live more within their means.”
The financial contagion has spread to Europe, but the effect has been muted so far. “It is all about keeping up appearances,” said Christine Benson, buying manager at Selfridges in London, adding that women are continuing to shop for beauty as usual. “They may be cutting down in certain areas, but they won’t compromise when it comes to beauty. Women are prepared to give up a meal in order to save for their beauty must-haves.”