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Buckle your seat belt; it’s time to get busy. The growth rate of prestige beauty market sales have been tapering in the U.S. since May and there’s a looming gap in the calendar ahead, with six missing shopping days between Thanksgiving and Christmas, the industry’s biggest headache in seven years.
What makes the calendar more worrisome is that there is a growing sense that consumer buying preferences may be undergoing a seismic shift. “The consumer is open to spending; she just doesn’t know if she is driven to spending it on beauty,” says Karen Grant, vice president and global beauty industry analyst at NPD Group. Grant, who has noticed a decided broadening of the beauty shopper’s scope of self indulgence into other categories, succinctly asks: “What is going to be the new shiny object?”
According to NPD’s figures, total beauty sales in U.S. department stores for the year-to-date period through September were 6 percent ahead, compared to an 8 percent gain for the same period in the prior year. But this year’s figure includes an extra week. Once that is deducted, the 6 percent gain turns into a much slighter 3 percent increase, primarily claimed by skin care and makeup. Fragrance, the traditional engine of the fourth quarter, is basically flat. Grant says there is hope that the late women’s launches—including the hot Tory Burch exclusive at Bloomingdale’s, One Direction’s Our Moment and Estée Lauder’s Modern Muse—will combine with blue-chip classics like Chanel to spark a holiday drive. In a recent NPD survey, 2 percent more consumers said they intend to spend more this holiday than they did last year and fragrance is on their top-five list.
Jonathan Zrihen, president and chief executive officer of Groupe Clarins, Western Hemisphere, says, “We are cautious but we are active.” He has a clear explanation on why the prestige market in America has been slipping lately: “The amount of mortgages are up and credit-card debt is down.” To stimulate interest, the company has launched its first-ever national network TV campaign in support of a skin-care product, its new Double Serum. Clarins is also putting more personnel in the stores at crunch time and giving rotators a menu of more entertaining approaches—like putting Angel body creme on a painter’s palette—as “tools to excite the consumer.”
Howard Kreitzman, vice president of cosmetics and fragrances at Bloomingdale’s, notes that the challenge of the holidays will be to do the same amount or more business in less time. “It won’t be easy, but I don’t think it will be a disaster: We have to be prepared,” he says, adding that the game will boil down to doing it at the counter. “We have to be the best at execution this year. There’s no room for mistakes.” There are some pluses, such as the store’s loyalty program, which has been well received, and the exclusive launch of the Burch fragrance, which “has done extraordinarily well,” Kreitzman says. High-end limited-distribution brands like Jo Malone and Tom Ford continue to shine brightly.
Retailers also have another card up their sleeve. The first week in November is a soft comparison, thanks to the devastation wreaked by Superstorm Sandy last year. Carol Hamilton, president of the Luxe Division of L’Oréal USA, says, “this holiday season is all about the timing. Some consumers will shop earlier than last year, jumping at deals. Some will wait as usual to the very end. The retailers and brands who will win will be those who keep the momentum going throughout the season.”
“The key is you have to move much more product in a three-week time period and the post-Christmas time period is worth more than it was last year,” says another manufacturer, speaking not for attribution. “It’ll be a promotional shoot off.” And the gains will be meager, up a couple of points “at best,” he adds.
Alexandre Choueiri, general manager of International Designer Collections at L’Oréal USA Luxe, agrees that the fragrance market is “slightly softer” than in the past but not as much as he feared back in June and July. He foresees a topsy-turvy, complex season, complicated by many factors, including the beginning of Hanukkah on Nov. 27, the day before Thanksgiving.
In general, L’Oréal has been pursuing a strategy of increased innovation, as with its highly successful Polo Red men’s launch by Ralph Lauren, and the relaunch of Giorgio Armani Privé exclusively with Neiman Marcus and Bergdorf Goodman. “It’s much bigger than anyone would have thought a year ago because so many customers want those personalized fragrances,” says Choueiri. Admittedly small, he says that next year it could grow into a “several million” dollar business. This Christmas, the division also is doing a collection of six replica interpretations and inspirations—like “Beach Walk” and “Flower Market”—of the Maison Martin Margiela fragrance at Barneys New York for holiday. Dismissed in the past as a novelty niche, this budding market “is becoming more and more relevant and interesting because it’s very dynamic,” says Choueiri. “It’s consistently growing. The customer wants more and more unique fragrances that they feel are individualized, personalized. It’s a strong trend. The question is how can we make it big—and profitable.”
Relevance is a word that rings true with Wendy Liebmann, chief executive officer of WSL Strategic Retail. She says in this uneasy economic climate shoppers must be seduced into buying. The consumer might think, “I may have money to spend, but there is no real reason to say, ‘They get me and what is being offered is relevant to me,’” she says. In offering their products and crafting their messages, companies have to zero-in on the consumer. “It is about relevance and knowing me,” Liebmann says.
“The big lesson for the industry is that we have to find a new way of selling fragrance,” says Marc Rey, president of Coty Prestige U.S. and regional vice president of Coty Prestige, North America. He suggests making sure all price points are covered, including the lower ones, and to reach consumers through more than the traditional channels, such as an increased presence in digital, both in distribution and advertising. While acknowledging that fragrance sales were down slightly for September—although regaining lost ground in the last three years—Rey also says that NPD doesn’t cover all the fragrance outlets, such as QVC and Ulta. “You need to be where people go,” Rey asserts, adding that it is important “to make sure we don’t talk only to heavy users of fragrances. What we are doing a little bit too much is distributing the shares, part of the cake, among us, but we don’t grow the size of the cake.” He continues, “As an industry, we may not talk enough to the lapsed users or even the nonusers.”