ARIS — Start chilling the Champagne.
Despite the macroeconomic gloom casting a long shadow over the euro zone, most of the region’s beauty sellers seem poised to close this year with revenue gains.
Growth is anticipated for retailers such as Italy’s La Rinascente and the U.K.’s Harrods.
The beauty market generally has seen modest increases in most countries this year. According to The NPD Group, sales from the prestige segment in France increased 1.8 percent between Jan. 1 and Nov. 30 versus the same prior-year period. Meanwhile, in Italy, revenues gained 1.3 percent; in the U.K., they were up 7.8 percent, and in Spain, sales dipped 0.7 percent.
“It’s really fragrance that carried the market in the four European countries,” said Mathilde Puszka, beauty industry specialist at NPD Europe in France. She explained part of the business was driven by new campaigns for women’s classics — such as Miss Dior Chérie, Chanel’s Coco Mademoiselle and J’Adore from Christian Dior — and strong men’s scent launches were among contributors, too.
“Skin care is the [category] that remains the most difficult today, especially in France and Spain,” continued Puszka, adding that color cosmetics remains on a positive trend. “Last year, it was really the most dynamic, while this year it’s a little less so. In makeup, more accessible products — like nail polish — were the most dynamic.”
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Meanwhile, on Wednesday, the European Commission released preliminary results of its monthly consumer confidence indicator, estimating there was a decline to minus 21.2 in the euro zone in December from minus 20.4 in November.
It could be the European beauty buyer remains largely impervious to such news, though. Richard Perks, director of retail research at Mintel in the U.K., noted such consumers tend to be more influenced by their own financial situation than the economic climate.
“Yes, general gloom is going to have a bit of an impact, [but] I think for people who are feeling very relaxed about their finances, and their job’s secure, I don’t think it really affects their spending too much,” he said.
Since the bulk of gift purchases historically are made in the week running up to Christmas, the jury’s still out how the holiday season will fare, exactly.
“For us, it’s rather difficult to estimate today how Christmas will be,” said Puszka, echoing the sentiment of numerous industry executives.
But still, if the market continues to grow at the same rate as in prior months, it looks promising.
Here’s an overview of the beauty business in some of Europe’s leading markets:
The U.K. economy, like that of most of Europe, is said to be teetering on the edge of another recession. Britain’s Office of National Statistics reported Thursday that the economy grew just 0.6 percent in the three months to September, while a poll released by GfK NOP UK on Wednesday showed consumer confidence in the U.K. in December fell to its lowest level since February 2009. But while the overall picture might be gloomy, Mintel’s Perks expects consumers to “go out and spend” during the holiday period, nevertheless.
“It’s not going to be a bumper Christmas, but it isn’t really going to be that bad,” he said. “I think that there will be a bit of late rush.”
Perks also noted that in terms of the beauty market specifically, the high-end segment continues performing well.
“The premium beauty end of things really does seem to stand out as one of the exceptions, one of the brighter spots,” said Perks.
Indeed, Harrods’ beauty hall has registered double-digit growth in 2011, according to Annalise Quest, its general merchandise manager for beauty.
“We see a vast majority of our customers buying investment items that are truly covetable pieces that they can keep for years to come,” she explained.
Quest said Swarovski Elements-embellished pieces created for Harrods as part of a Christmas tie-in have performed particularly well. These include a limited edition Crème de la Mer moisturizing cream and Clinique Aromatics Elixir, both with packaging adorned with Swarovski crystal elements. She said the store has benefitted from overseas customers, as well.
“We are experiencing a larger footfall of Asian customers…[who] are very focused on luxury brands and products and who are not necessarily affected by the current European difficulties,” said Quest. As a result, Harrods has begun to tailor its beauty offer — with the addition of whitening and brightening skin care items, plus BB creams — to accommodate such clients.
Fragrance has been a strong performer at Harrods during the end-of-year period, too. “Star players,” according to Quest, include Bond No. 9 New York Oud, Chanel No.5 and Coco Mademoiselle eau de parfum. Scents exclusive to Harrods also performed well, such as the Dolce & Gabbana Velvet Collection and two new Tom Ford Private Blend fragrances, Jasmin Rouge and Santal Blush. Quest said the exclusive U.K. launch of Elie Saab Le Parfum stood out as a success during 2011.
Meanwhile at Selfridges, which has four U.K. doors, beauty buyer Mark Tranter called Tom Ford’s makeup collection launch “huge. It had a limited distribution, and I think a mixture of advertising coupled with an already incredibly strong brand made this a success for us.”
He further noted that at more accessible price points, Selfridges’ introduction of the first limited edition Vaseline Lip Therapy in Crème Brûlée flavor was also a hit.
“We sold out of the initial stock within 24 hours,” said Tranter. To promote the launch during its two-week exclusive, Selfridges set up a photo booth, and some customers purchased up to 30 pots at a time of the product, which sells for 2.99 pounds, or $4.69 at current exchange.
He said Selfridges’ Christmas-themed exclusive products, created by brands such as Lancôme, have been performing well.
Tranter added that consumers tend to buy fragrances in smaller sizes, “especially for new launches.” However, sizes aside, Selfridges’ customers remain focused on luxury.
“Consumers are still trading up and buying into those more aspirational brands, such as Tom Ford, as beauty is still the easiest price point to buy into that exclusively,” he said.
Despite the Italian government’s recent austerity package proposal to save the country’s economy from financial disaster, the year-end prognosis for its domestic beauty retailers remains positive, stoked mainly by strong women’s fragrance sales.
Unipro, the Italian association of cosmetics companies, estimated the country’s beauty market will close 2011 up 1 percent year-on-year to 9.3 billion euros, or $12.14 billion. It projects business growth in first-half 2012 will rely heavily on exports while the domestic market remains cautious.
At La Rinascente department store, with 11 Italian doors, beauty sales are expected to post gains.
“In the first semester, we improved our performance with very important results,” explained Monica Marsilli, La Rinascente’s buying and merchandising director. “Since September, the cosmetics market in Italy has reduced its growth, but we expect to close the year up versus 2010.”
However, the unpredictability of Italy’s economy is unfavorably impacting sales and cutting into end-of-year revenues at Douglas in Italy, which counts 135 doors countrywide.
“The close of 2011 will certainly be in decline with respect to the previous year,” said Jörg Minger, president of Douglas in Italy. “The global crisis determines a sharp drop in consumers.”
At retailers such as La Rinascente and Coin, a focus has been increasingly on service.
“Customers are changing their way of spending for beauty and looking for value-for-money products,” said La Rinascente’s Marsilli. “To reach this goal, customers are even more interested in beauty consulting because they need to be assured of what they’re looking for.”
In Italy, fragrance — particularly for women — sells the best among the various beauty product categories.
At La Rinascente, Douglas and Coin, Fendi’s Fan di Fendi is a top seller. Other hits for women at Coin and Douglas include Prada Candy, Valentino’s Valentina, Cartier’s Baiser Volé and Elie Saab Le Parfum. At Douglas, Versace Yellow Diamond is a bestseller among recently launched scents.
Also at Douglas, sales of Thierry Mugler’s Alien are up 18 percent year-on-year; revenues from J’Adore have risen 15 percent, and Untitled Maison Martin Margiela has registered a 3 percent gain. Among men’s fragrances, L’Homme Libre Yves Saint Laurent is a standout seller among recent introductions, and Paco Rabanne 1 Million revenues are up 26 percent year-on-year. Meanwhile, at La Rinascente, Bleu de Chanel is popular.
Cosmeticswise, Tom Ford’s makeup is a top seller at La Rinascente, while a bestseller at Douglas is Lancôme Teint Idole foundation.
At Coin, with 87 Italian doors, eye makeup is particularly popular, with Yves Saint Laurent Shocking mascara plus Chanel Illusion d’Ombre and Lancôme Hypnôse Doll Eyes eye shadows ringing up robust sales. Nail polish is a favorite among budget-conscious consumers, and Chanel lacquers are always sell-outs at the department store.
Lancôme Visionnaire is the number-one skin care item at Douglas, Coin and La Rinascente.
With domestic unemployment at a two-decade low, Germany is showing a strong economic outlook. According to market research institute GfK, the country’s consumer-sentiment index is expected to remain at 5.6 in January against December. In November, it was at 5.4. The index is based on feedback from interviews with approximately 2,000 people in Germany and is part of the GfK Consumer Climate MAXX Survey, conducted monthly.
Regarding business in the run-up to the holidays, Henning Kreke, president and chief executive officer of the Douglas Group, which includes perfumery, confectionery, jewelry and fashion store activities, said, “At the present time, we are still very satisfied with the development of the Christmas business in Germany. Customers are in the mood to shop — both in our stores and in our online retail outlets. In total, sales figures are in the range of what we expected.”
“Currently, we haven’t observed any change in the buying behavior of our customers [in response to the euro zone crisis],” added a spokesman for Douglas Perfumeries, which has 446 domestic doors.
Fragrance is the top-selling category in the chain.
“Classics like Lancôme’s Trésor and Coco Mademoiselle from Chanel are especially noteworthy,” continued the spokesman. “Also, our exclusive brands are doing well — Annayake and Dsquared. The bestsellers in the fragrance category are our women’s and men’s scent gift sets.”
Exclusive to Douglas in Europe has been Tommy Hilfiger Peach Blossom fragrance, which he called “the best launch of the year.” Dsquared’s Golden Light Wood and Silver Wind Wood were also considered very successful in the perfumery.
Meantime, beauty sales have been registering strong gains at Galeries Lafayette Berlin. At the end of November, revenues for the segment were up 10.9 percent year-on-year, and “December is going very well,” said Candemir Ergen, buyer and head of the store’s beauty department. “It should even out to around an 11 percent to 12 percent rise. I’m very satisfied.”
Like Douglas’ spokesman, he noted beauty consumers at Galeries Lafayette Berlin have not tightened their purse strings in response to macroeconomic troubles in the euro zone. Consumers remain drawn by luxury items, exclusive brands and in-store consultation at both retailers.
Overall consumer sentiment keeps dipping in France, as confirmed by the most recent survey conducted by Ipsos/Logica Business Consulting for France Bleu.
“One month before Christmas, the majority of French people estimate that the economic crisis will have an impact on their spending for the holidays,” they stated in a commentary on the findings of their most recent joint study, conducted on Nov. 28 and 29 and taking into account 1,012 individuals’ responses. Half of those questioned thought they’d spend less either by choice or by obligation.
“However, despite the worsening of the crisis, its impact on spending for the holidays doesn’t progress versus last year,” it continued.
Despite the slowdown in consumer spending — traditionally the motor of French growth — overall prestige beauty sales in France rose 6 percent in November against November 2010, according to NPD. In the same period, luxury fragrance revenues increased 8 percent.
This season, consumers are buying rather late — closer to Christmas, noted Fabrice Obenans, marketing director for Marionnaud Parfumeries, which has 572 sales points.
During this holiday period, to help relay the message that the perfumery has gift ideas for everyone, it is highlighting two of its private label makeup palettes retailing for 7.90 euros and 19.90 euros, or $10.30 and $25.97, he explained. Marionnaud also granted its loyalty cardholders 20 percent off fragrance coffrets and then, in a subsequent promotion, 40 percent off the second product purchased.
Fragrance is selling more than any other beauty category at Marionnaud, and Obenans said the most classic brands and franchises dominate the top 10 for both men’s and women’s scents.
He said some of the fall fragrance launches have been successful, due to their strong media visibility and an impactful message for consumers.
Meanwhile, the revamped beauty floor at Printemps’ flagship, called La Belle Perfumerie, is expected to close 2011 “with growth largely positive compared to last year and above the selective market’s performances,” said Eric Allary, who heads up the department store’s beauty collection.
Allary has not noted any trading down by consumers in Printemps’ 17 doors during these days’ difficult economic period. Fragrances remain the best-selling product segment at the department store during the holidays.
Some nail polishes and makeup palettes have shown their colors, while “the skin care category was marked by the dynamism of the serum segment,” said Allary.