It has been well documented that this past holiday season was one of the worst in more than 15 years. Somehow, mass marketers managed to squeak out with slightly better-than-expected beauty sales, led by fragrance and skin care, and clean sell-through on anything that screamed value.
Beauty fared better than general merchandise, according to a regional chain drugstore executive, citing that the poor economic condition led women to want to look better. Sales at this chain showed that “skin care was fairly healthy; cosmetics was not as good as skin care but it was not on the floor, either, and in hair care, we are seeing trade-off from high-end to medium- and low-end brands. Customers are cherry-picking brands on promotion, seeing how they can get the bargains,” the executive said, noting that depletions in cosmetics negatively affected sales, since many retailers are changing over their current sets to get ready for spring.
This story first appeared in the January 9, 2009 issue of WWD. Subscribe Today.
In some ways, holiday 2008 marked a return to categories that were strong five years ago in chain drugstores — and historically for the channel — such as fragrances and bath items.
Perhaps the biggest surprise was a “decent” year in fragrances. CVS Pharmacy executives singled out celebrity fragrances as among its best items. The revival of Britney Spears as an artist also provided a lift to her scents. Other fragrances mentioned by a survey of top mass retailers included Hannah Montana, High School Musical and McGraw by Tim McGraw. A return to classics was seen in a spurt of sales for Charlie and even Dana scents, including English Leather. A few buyers said Shania Twain scents suffered somewhat from her lack of stage presence last year, but that Celine Dion items moved well.
Scents that were snapped up carried sales tags, retailers added. Many chains enacted sales before Christmas rather than waiting for the after-holiday blowout. Rite Aid, for example, had 50 percent off designer scents for a pre-Christmas promotion. Walgreens also had sales before the Yule, but drastic reductions came directly after Christmas Day. In its circulars prior to Christmas, Walgreens promoted select scents, such as Celine Dion fragrances Enchanting and Sensational; David Beckham at $10 off; classics including Giorgio Beverly Hills and Shalimar at 50 percent off, and gift sets like Antonio Banderas for $17.99. Designer scents were featured in advertising with the tag line, “Why pay department store prices?” There was an exclusive “only at Walgreens” of Davidoff Cool Water Freeze Me or Summer Fizz eau de toilette at $10 off.
The advertisement touted fragrances as a “great fit for everyone on lists.”
Prior to holiday, Duane Reade ran special loyalty card programs, but for the most part its promotional style mirrored its 2008 strategy. Post-holiday, however, Duane Reade’s fragrance aisle now boasts 50 percent-off sales tags, signs that weren’t around pre-Christmas.
One retailer explained the reason behind cautious pre-holiday promotions.
“If you are a merchant and the economy is unsure, you don’t know what to do. You can’t just run 25 percent off sales when you don’t know how the customer is going to react. You need to give them what they are used to, and that is what you saw in the ads in December. Retailers stayed close to the vest. You didn’t see anything exciting,” said the chain store executive.
Buying for a weak season also paid off for most major chains where there was less-than-normal residual merchandise.
“We were pretty cautious with our Christmas buying this year, so we had pretty good sell-throughs,” said one buyer.
But retailers knew the fragrance business would need the nudge from price slashing. Men’s cologne sales for the 52-week period ended Nov. 29 were off a dramatic 10.3 percent to $132 million from $147 million, according to ACNielsen food, drug and mass data, which excludes Wal-Mart. Women’s scents were down 1 percent from $465.4 million in 2007 for the same 52-week period versus $441.7 million in 2008. The ongoing soft trend in fragrances helped convince buyers of the need to reduce prices early.
It seemed to have paid off, at least for Coty Beauty. Mary van Praag, senior vice president of sales at Coty Inc., said, “Coty Beauty Fragrance had a very strong volume increase the week prior to Christmas. While overall fragrance sell-through was down slightly versus the prior year, which is not surprising given current economic conditions, there were [retailers] that were clear winners with unit volume ahead of the prior year. The winners were those that got out early and had strong brand presence and price point distinction. Our key top-selling gift set brands were Celine Dion, Tim McGraw, Adidas and Playboy. In addition, we had strong sell-through in our Value Sprays and Omni Coffrets.”
At least one manufacturer, Burt’s Bees, saw no reason for special promotional plans for Christmas outside of its usual holiday gift set offerings, such as those at Whole Foods.
Mike Indursky, chief marketing and strategic officer of Burt’s Bees, likens the natural care company’s strategy to certain luxury car brands.
“You don’t hear about Toyota or BMW asking for [money from the government],” Indursky said. “You can survive any economic storm if you have these things. It’s the brands that don’t have these things that have to overpromote.”
He added that sales of Burt’s Bees are exceeding last year’s and that, if the company’s strategy to not promote is affecting sales at all, “I can’t detect that.”
Still, low price points were winners. Children’s cosmetics priced at less than $2, along with inexpensive hair accessories for stocking stuffers, were a hit at some stores. Reasonably priced implements were also popular at mass. “Customers responded to ad price reductions. They did not buy at full retail,” a merchant for a large chain explained.
Shawn Haynes, senior vice president of marketing of global brand development at Markwins International, said consumers waited as long as possible to spend in the hope that retailers would offer heavy discounts. “Our items which offered great value saw very strong sales, especially those priced under $10. Specifically, from The Color Workshop, our color collections performed best, outpacing our nail and shimmer sets. In Wet ‘n’ Wild, we experienced tremendous increases the week of Christmas as consumers stocked up on beauty must-haves and stocking stuffers.”
Research from WSL Strategic Retail validated those findings, stating that the drive for sharp pricing created channel shifting. In the firm’s surveys on How America Shops Everyday, the company found that 36 percent of consumers said they’ve changed where they buy. Supermarkets’ revenues were down, while mass merchants’ were up. However, there was another layer: those trading out of mass to an even better value at dollar stores. The study showed one in five people are altering the stores where they buy beauty and personal care.