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Path Finder: Democratizing Beauty Distribution

Accessibility is trumping traditional retail boundaries, as consumers show themselves eager to shop in an array of environments—and savvy beauty brands follow.

Accessibility is trumping traditional retail boundaries, as consumers show themselves eager to shop in an array of environments—and savvy beauty brands follow them.
Appeared In
Special Issue
Beauty Inc issue 05/07/2010

When Steve Stoute was mapping out the launch strategy for Mary J. Blige’s upcoming scent, he decided almost immediately against department stores—the traditional go-to option for such a project. Instead, the scent will launch in late July on the home-shopping TV channel HSN, bypassing brick-andmortar retailers all together—for the time being at least.

 

Separately, though not unrelated, luxury hair care guru Frédéric Fekkai recently announced his brand’s expansion into select mass market stores, unveiling a strategy that he and parent company Procter & Gamble hope will allow the brand to comfortably straddle mass and prestige distribution.

 

Explaining his decision to explore cross-channel opportunities, the always well-turned-out Fekkai said at the time of the announcement: “I love to go to Target and Whole Foods—as well as Hermès.”

 

He’s not alone. Consumers today have made their willingness to shop across multiple channels very clear. In fashion, for example, Isaac Mizrahi decamped from the catwalks of New York City to Target and back again, racking up more than $100 million in sales at the mass giant and sparking a legion of imitators, from Karl Lagerfeld and Jean Paul Gaultier at H&M to Stella McCartney at Gap. Then there’s Wolfgang Puck, whose culinary company started with Spago restaurant in tony Beverly Hills, and has since expanded into an empire consisting of upscale restaurants in California, Las Vegas and Minneapolis; casual franchised eateries in airports across the country, and a line of food, books, tools and appliances that are sold on HSN, among others.

 

So, while many in the beauty industry may still define brands solely by where they are sold (Sephora, for one, dropped Fekkai from its assortment shortly after the announcement), the consumer clearly doesn’t.

 

“You can no longer let the box define the brand,” says Stoute, lead investor and chairman of Carol’s Daughter, referring to big-box retailers, whether mass or prestige. “The brand has to define the box. Because of the Internet, no one buys channel anymore. They can go on Bluefly.com and buy Gucci—they don’t have to buy it at Neiman Marcus or Saks,” he continues. “Channel distribution is breaking down. The lines are blurring.”

 

Lyn Kirby, chief executive officer of Ulta, agrees. “Increasingly, brands are coming to grips with the reality that this distinction between mass and prestige is a distribution-centric paradigm,” she says. “It is not an experience-centric paradigm. Customers don’t know the difference between distribution channels. They’re not marketing strategists. They are focused on what experience they’re getting in the store.”

 

Forget trading up. Shoppers are trading up, down, across and every which way. “Today’s consumer is looking for great specialization and not shopping at one retail outlet for all of her beauty needs,” says Bob Seidl, president and ceo of H2O Plus, which is sold in its own stores, in department stores and in more than 1,000 chain and specialty stores including Ulta and Beauty 360. “We are in the prestige arena, but that arena is being redefined and is broader and appeals to a changed consumer.”

 

While the recession is a large reason why the consumer is different, the recovery isn’t expected to significantly alter her new behavior patterns. The Dow may have hit 11,000 in April, causing jubilation in Washington and Wall Street, but Main Street’s mentality is far from celebratory. “Eighty-nine percent of women are saying the recession isn’t over, even when economists are saying it’s over,” says Wendy Liebmann, founder and ceo of WSL Strategic Retail, citing statistics from her firm’s recent “How America Shops” survey. “When you look at affluents, $150,000 plus, 58 percent say the recession will last one to two more years, and 29 percent say three to five more years.”

 

Moreover, though the affluents can well afford to spend, they don’t want to—particularly in an upscale environment where temptation lurks around every corner. “Women don’t want to be tempted to overspend,” says Liebmann, “so they stay out of stores where that might happen. There is an avoidance thing. So with Fekkai, for example, [customers] may be staying out of department stores because they don’t want to be tempted to go to the shoe department. But if they see the brand in a more mass environment, even though it’s not a better deal in terms of price, they’ll still purchase it because they’re not tempted to overspend on other stuff.”

 

The new cross-channel strategy encompasses more than brands widening distribution from prestige to mass—it’s about broadening the availability for all brands that resonate with consumers. “The next wave is integrating some of the interesting brands that are sold only online or via electronic retailing into vertical distribution,” says Melisse Shaban, ceo of Chrysallis. “We are talking $100 million businesses for some of those brands,” she continues. “How do you create an incentive for them to want to go bricks and mortar?”

 

The result is a democratization of distribution, a world in which consumers no longer attach any special significance to where they’re buying something. “The customer is willing to buy today in a much more democratic way,” says Michelle Feeney, ceo of St. Tropez, who was formerly vice president of international global communications at MAC Cosmetics. “I always used to say customers would buy MAC out of the trunk of a car, they liked the brand so much.”

 

Continute reading >>

 

See Also:

Pop Culture Market Movers >>

Wal-Mart’s Carmen Bauza >>

Top Beauty Executives Weigh In >>

Feeney is joking, of course, but her point that consumers craved the brand more than the retail ambience in which it was sold is an insight that helped inform her distribution strategy for St. Tropez, the London-based self-tanning brand she took over in 2007. In the U.K., the brand is sold in the grocery chain Sainsbury’s; in the drug chains Boots and Superdrug; in the department stores Selfridges, Harrods, House of Fraser, John Lewis and Debenhams, and in salons and spas across the country. Rather than cannibalize each other, Feeney says sales are up double digits across the board.

 

“The consumer is looking for variety and convenience,” agrees Hana Zalzal, founder and president of Cargo, a makeup line sold in CVS’ Beauty 360, Sephora in J.C. Penney, Ulta, Macy’s and QVC. “It’s not about elite locations. We are all too busy, and we’re looking for quality and value.”

 

It was that accessibility that Alberto Culver was looking to tap into when it converted Nexxus Salon Hair Care from the professional salon channel to the mass market in 2006. “Everyone is trying to crack the code of making sure the consumer has the experience of getting luxury with the convenience of a broader distribution,” says Gina Boswell, president of global brands at Alberto Culver, who notes that the brand was recently awarded four more feet of space in Wal-Mart. “As long as the essence of the brand equity is maintained and nurtured by both the channel partners and the manufacturers, the consumer will vote with her feet. Three different circles— the consumer, the vendor and the retail environment—are key to whether this trend continues.”

 

Maintaining brand equity is key. Product prices, for one, are inviolable. “The price point is key to being in different channels,” says Feeney. “If you’re discounted in one, the whole thing comes tumbling down.”

 

The entire brand must be represented, too. Consumers today are savvy enough to recognize which products are sourced directly by a retailer and which are obtained by secondary means, like diversion. “You have to deliver the brand in its entirety,” says Liebmann. “The consumer has to be able to get what she wants when she wants and not feel like she’s being shortchanged because she’s changed stores.”

 

Then there’s the communication piece of the puzzle. Packaging, imagery and in-store merchandising all have to be finely honed. Just because distribution of a brand has become more democratic doesn’t mean that its messaging can follow suit. In fact, quite the opposite. “We upgraded our imagery with a campaign that is very premium,” says Boswell, noting that Nexxus also redesigned its packaging and shelf talkers to compensate for self-selection rather than having a stylist explain the line. “We simplified the packaging and made it easier for consumers to navigate the brand and product benefits,” she says.

 

“The moment confusion reigns, she is out of there,” adds Liebmann. “The clarity of the offer becomes very important, not having multiple versions of the brand. It’s about selling that brand in multiple channels that helps me get to my customer, wherever she may be.”

 

All of this presents a treacherous path forward for many beauty brands, particularly those in prestige distribution who are looking to branch out. The wave of retail consolidation in both the prestige and mass markets means there are fewer players who are bigger and more powerful than ever before. “If you’re a small or midsize brand, you have to find other ways to get business, without irritating your core retailers,” says Liebmann, who believes the department store model will have to evolve into a multitiered retailer encompassing the Internet and off-price outlets to address new consumer shopping patterns, as well as the encroachment of mass retailers into the prestige world with new formats such as CVS’ Beauty 360 and Duane Reade’s Look Boutique.

 

Shaban agrees. “It’s about changing the experience,” she says. “It’s incumbent on the brand and the retailer to come up with new merchandising experiences to allow for the experience in their stores to be unique and different. The reality is that we have to learn how to do things better. There is a lot of low-hanging fruit.”

 

Shaban cites Impulse Beauty, Macy’s new opensell format that the retailer is testing in about 10 to 15 West Coast doors, as just such an example. Brands—including Smashbox Cosmetics, Laura Mercier, Dior, H2O Plus and Philosophy—are merchandised on black gondolas with white letters. Though Macy’s declined to comment, 40 such installations are expected to open by the end of the year.

 

The verdict is still out, however, as to the idea’s longterm success. “It still needs a little more time, as far as I’m concerned, for it to be nurtured,” Smashbox president Budd Taylor told WWD in April.

 

For its part, Neiman Marcus is testing a discount retail concept, currently branded Last Call but most likely a name that will be changed in the near future.

 

Wherever the venue and whatever its name, one thing is certain: The consumer will continue to drive the new distribution paradigm. “Going forward, consumers and brands will share the brand,” says Cargo’s Zalzal. “The consumer will be part of brand development and brand identity by what they’re posting on fan pages, saying on blogs and more. The balance of power is shifting and every consumer has a voice now.”

 

See Also:

Pop Culture Market Movers >>

Wal-Mart’s Carmen Bauza >>

Top Beauty Executives Weigh In >>

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