It is Western Europe’s largest market for fragrance and cosmetics, generating $18.64 billion in 2017, up 3.4 percent on-year, according to Euromonitor International. That’s compared to the U.K.’s $16.44 billion and France’s $14.55 billion.
“The drugstores along with perfumeries are still the dominant players in the personal-care market, though online retailers are growing rapidly,” said Andrew McDougall, associate director of beauty and personal care at Mintel Group, who listed Dm-Drogerie Markt, Rossmann, Müller and Douglas as the first to fourth leading players in the space.
“The structure of German retailing is unlike that of any other European country because of the dominance of the hard discounters,” he continued. “Their limited range and low prices have made it very difficult for large supermarkets to prosper, but have opened the way for a thriving drugstore sector.”
Despite such structural hurdles and chronic promotional activity, Germany is representing a big opportunity for prestige beauty sellers, as the penetration of premium products remains low. In 2017, beauty specialist retailers made just 14.9 percent of the country’s beauty sales, versus the 41.4 percent commanded by drugstores and parapharmacies, Euromonitor numbers show.
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Industry sources noted a trading-up among consumers and department stores’ current struggles, which can help further lay the groundwork for prestige beauty sellers’ arrival.
Sephora is helping lead the charge in Germany. After returning to the country in late June, 16 years after exiting the market, the retailer inaugurated its new flagship there, in Frankfurt Zeil, on Thursday.
The 7,200-square-foot store is touted to be a next-generation Sephora, featuring a BeautyHub area with beauty exports can give advice or give a free, 15-minute flash makeup, the Virtual Artist digital application allowing customers to virtually try out looks, the Gift Factory for personalized gift-wrapping and the Beauty Wall interactive screen that informs people about services and brands in-store.
There’s also a Skincare Bar, a Hairstyle Bar, a bar for temporary tattoos, plus Beauty to Go products, K-beauty brands, a Super Ingredients section and a selection of brands otherwise only online at Sephora, under the #WantedAtSephora banner.
Labels exclusive to the German market here include Huda Beauty, Marc Jacobs Beauty, Fenty Beauty and Farsáli. The product mix also includes homegrown German brands such as Mawi Love, Rosental Organics and Birkenstock Natural Care.
Sephora executives said that like the beauty business, the retailer has transformed dramatically since its first foray into Germany.
“What we are now offering in terms of brands, experience in-store, education of our staff in-store — the overall Sephora has changed,” said Guillaume Motte, president of Sephora Europe and Middle East. “We have been successful, and we are successful, in the U.S., in Canada, in many countries across Europe, in Asia. Why not in Germany?”
Sephora first dipped back into the country with a shop-in-shop in Galeria Kaufhof in Munich in late June 2017, following a successful, similar tie-in with Manor in Switzerland.
“We were bringing some of our expertise, some of the exclusive brands that were not in the market,” he said, adding that then-Kaufhof reached out to Sephora. “The fit was good. The intentions were shared, and so we moved ahead. The reaction of customers was amazing. You are talking about queues of people for the opening of Sephora.”
The well-received partnership, which includes kaufhof.de, continues developing, now with 14 shops-in-shop running in the department store.
On Sept. 7, Sephora debuted a 3,900-square-foot freestanding store in the MTZ mall in Frankfurt featuring its full beauty experience. And five days later sephora.de was inaugurated. “We are very happy in terms of performance, in terms of customer reaction,” Motte said.
The excitement among employees was palpable, too, not least as they set — and met — the goal of breaking the “Guinness World Records” record for the number of makeovers done by five artists in one hour — 148 in all. “The biggest store we have in terms of reach of our consumer is sephora.de,” Motte continued. “The best way to reach more German customers is through digital. There is definitely a big drive from our side to fuel the growth of our digital platform.”
More store openings are expected in Germany’s largest cities.
Meanwhile, Douglas has been undergoing some significant changes over the past year, since it signed on Tina Müller as chief executive officer in September 2017. She was mandated to help strategically position and strengthen the Douglas brand, and digitize its sales and marketing channels.
It’s been all systems go with her at the helm. In a little over a year, the perfumery completed the acquisitions of the Limoni and Gardenia chains in Italy, plus purchased Perfume Dreams to strengthen Douglas’ German and European e-commerce activity.
The retailer — the largest beauty seller in Germany and Europe, with about 450 domestic doors and 2,500 abroad — reworked its management structure and launched its campaign to strengthen the self-image of women. It rolled out a new brand strategy, called #ForwardBeauty.
“The biggest thing that Douglas has done is really shift its positioning,” said Lucas van Eeghen, chief marketing officer at Douglas. “[We have] moved the Douglas brand up in terms of modernity and our value proposition. Where we used to be playing along the lines between mass and premium, now we are really shifting between the lines of premium and luxury.”
That’s back to its heritage positioning. “We’re going to our old, proven proposition where we have been able to win in the past,” van Eeghen said.
Douglas’ new look is not least reflected through retail. In Hamburg on Sept. 26, it launched the 1,110-square-foot Douglas Pro store that sells care for skin. The dynamic skin-care segment was already a focus in its other stores, but the Pro concept taps into the intersection of beauty and health with a focus on skin care. The different segments carried there include pharma beauty, beauty food, skin expert brands and nature brands.
“With the Douglas Pro store, we take a holistic approach to beauty and health, and show the different worlds of skin care,” said van Eeghen, who explained it’s very clearly categorized, and that curation and consultation are at the heart of the concept. A treatment room, with rotating brands providing services, deepens the store’s expertise, he added.
“The first results have been very positive, with thousands of visitors during the first few weeks, because we have not only rolled out the store concretely in Hamburg, but we have also reflected that store on the site,” van Eeghen said.
The retailer revamped — and reopened on Oct. 9 — the top two floors of its Frankfurt flagship, which it calls the largest beauty retail store in Europe at more than 30,000 square feet.
The top floor is now totally devoted to services, with a spa including different skin-care treatments with various brands, in a similar vein to Pro. There’s a makeup school, nail bar, hair salon and coffee bar.
“Service and consultations will be key in the future of retail stores,” van Eeghen said.
The next floor down, floor two, has a skin-care focus, with categories such as those in the Pro shop. “We also added new elements, like a trend selection area,” van Eeghen said. “The result of our flagship has been very positive.”
Douglas is learning from consumer feedback in real time and then can possibly scale elements that work. Up next is a new store concept hinged on a different product category and consumer target, but van Eeghen remained mum on details.
Other ways Douglas is working to upgrade and rejuvenate the brand included signing on photographer Peter Lindbergh for a black-and-white campaign including the likes of Cara Delevingne and Amber Valletta.
“That has more or less laid the foundation of what we see as modern beauty,” said van Eeghen, adding the visual language also appears online and in-store. “That brings it into an iconic premium setting.”
There are now more advertisements signifying what Douglas stands for — take, for instance, for Singles’ Day, there was a playful spot celebrating self-love. The hashtag for all of Douglas’ campaigns reads “#doitforyou.” “We want to help empower women to be and do whatever they want,” van Eeghen said.
“We are also completely changing our visual brand language in line with that positioning, and our new logo is one key element of that,” he said, referring to the logo that’s no longer cursive and has an interlocking “D” and “O.”
Stores are to be about experience rather than transaction, so the retailer is doubling its number of events and services. Another focal point is e-commerce. “We need to offer the best-in-class user experience,” van Eeghen said. “E-commerce is an incredible, important part of the omnichannel customer journey.”
Product mix is key. “We want to focus far more on innovation and exclusivity,” he said.
CRM is important, too. “Having more personalized marketing will be key in the future,” said van Eeghen, explaining that’s true in the digital world as well as in brick-and-mortar.
Douglas takes a “glocal” — or global and local — approach, including local activations and brands, and is also focusing on its more than 20,000 beauty advisers.
Meanwhile, online giant Zalando has gotten into the beauty retail game, as well. In March, starting on its site in Germany, it introduced more than 150 brands and almost 5,000 stockkeeping units across all price points and categories, such as Bioeffect, Hej Organic, Weleda, Missha and Nugg.
“While the total Western European market for beauty and personal-care products is 83 billion euros, only 4 billion euros [worth] is being sold online. We aim to tap into the unique opportunity for beauty online shopping in Europe, offering a wide assortment across all price points and along the full product range [with] an inspiring experience,” said Claudia Reth, vice president category specialties, premium, beauty and kids, at Zalando.
“The beauty market is a sizable opportunity for us, with attractive market trends that enable us to leverage our strengths in brand, customer [experience], technology and logistics,” she continued. “With Zalando Beauty, we are eager to push into new areas and expand our proposition in order to compliment our current assortment and strengthen our position as a one-stop destination for fashion and lifestyle.”
Zalando delved even deeper into the category, with a brick-and-mortar door, called Beauty Station, in Berlin’s Mitte neighborhood in July. The 1,780-square-foot boutique sells 53 brands, and its opening marked the launch of Estée Lauder Cos.’ MAC Cosmetics, Estée Lauder, Clinique and Origins both online and off-line by the retailer.
Inside Zalando’s Beauty Station has, as well, service areas for makeup and nail treatments. “For us, the Beauty Station is an important channel to engage directly with beauty-savvy customers,” Reth said. “We want to get to know them by heart and emphasize digital experiences. We can also test digital use cases in an offline shopping environment and create a lot of content.”
In Beauty Station, she noted: “We can already see that our customers appreciate the high-to-low approach.”
Beauty for men, a subcategory on Zalando’s site, was introduced in early October and includes 25 brands, such as House 99 by David Beckham, Hanz de Fuko, Baxters of California, American Crew and Anthony, with 1,500 sku’s.
Beauty is part of Zalando’s ecosystem, with 70 percent of the site’s fashion customers shopping for beauty products to complete their look, according to Reth.
“Brands like MAC create a high brand awareness, but also our exclusive brands, natural brands and beauty products from [South] Korea are going really well,” she said.
The executive would not discuss numbers, but said the beauty opportunity will be further built on with the segment’s expansion to Poland and Austria at the end of this year.
“As we also do in fashion, we always aim for a very localized assortment with local-hero brands,” said Reth, who explained such beauty items will be added to each country’s mix on a step-by-step basis.
The executive noted a recent shift in consumer behavior, saying: “While a number of customers still like to shop beauty in a bricks-and-mortar environment where they can try and test the products before buying, we are starting to see a shift to customers shopping solely online, where they are gaining information from unbiased sources on social media.”