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Hair Accessories, Niche Scents Fueling Italy’s Beauty Business

Millennials, e-commerce and high-touch experience are expected to be key sales drivers.

MILAN — After two years of a shy recovery, Italy’s beauty market got a slight case of the jitters and softened a bit in the first quarter of this year, industry executives said.

Consumer confidence was negatively impacted at home by factors like political instability, and from abroad came phenomena such as Brexit, exchange-rate fluctuations and terrorist attacks.

Yet Italian executives remain optimistic when polled about the resilience of the Italian beauty market overall. “It is always tough, with low single-digit [gains],” said Luciano Bertinelli, chief executive officer of Ferragamo Parfums, who pointed to Millennials and the e-commerce business as examples of growth drivers. “These can be an opportunity for everybody.”

La Rinascente executives agreed. In the department store’s Milan flagship, for instance, Millennials have recently been targeted with a dedicated area. Alongside beauty, the three-floor annex also offers women’s and men’s apparel, accessories, stationery and tech products targeting a younger clientele.

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On the first floor up, a 540-square-foot corner showcases a selection of niche beauty labels, including hair-care brands Ouai Haircare, R+Co, Gum and Amika; skin-care labels This Works, Sister & Co. Skin Food, Mizon and Egyptian Magic, plus tools such as Beauty Blender’s sponges. There’s also a NYX stand there.

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According to Cinzia Baldelli, La Rinascente’s head of home, media and travel, beauty and children’s wear, the brand selection will be changed frequently to provide the most on-trend products and meet consumers’ new demands.

“There will be a lot of editing from our side,” she said. “It’s important to have something special for Millennials because they will be our future customers.”

La Rinascente is due to open a second flagship, in Rome, in September. There, the cosmetic area will be on the second floor of the building, just steps away from the Trevi Fountain.

“For the first year, we’re expecting to achieve [sales of] 17 million euros,” said Baldelli, who added the store would have a different selection than La Rinascente in Milan, including Nars and Louboutin’s beauty brand, among others.

Meanwhile, La Rinascente’s Milan beauty floor generated 39 million euros in revenues last year, up 3 million euros versus 2015.

Baldelli remains bullish about business in upcoming months, saying: “Chinese customers are increasing and buying a lot, but also Russians are coming back for the first time in five years.”

Augusto Mazzolari, owner of the eponymous perfumery in central Milan, also noted the return of Russian consumers. Mazzolari’s revenues gained 3.5 percent in 2016, 11.2 percent in January and 19.2 percent in February of this year.

“We hadn’t had such an increase in several years,” said the executive, explaining that his private-label perfume and cosmetics line also contributed to the gains, with 24,784 units sold and a 12 percent sales rise in 2016.

Mazzolari also believes Italian consumers are increasingly turning to artisanal perfumeries to “find everything that they can’t find elsewhere.”

At Mazzolari, the hottest category — representing 10 to 12 percent of the perfumery’s revenues — is hair accessories, including high-end headbands, hairpins and brushes. These items are primarily showcased in a new area of the store, opened in August. Located in the basement, it leads upstairs to a corner dedicated to niche fragrances — another segment customer are after nowadays, Mazzolari said.

“Many big names lost their value as they increased distribution and their products are everywhere,” he explained, adding the most sought-after labels at his store include Creed, By Kilian, Amouage, Byredo, Maison Francis Kurkdjian, Gritti and Merchant of Venice.

Dario Ferarri, founder, chairman and chief executive officer of Intercos, the industry’s dominant color cosmetics supplier, is already on to the next demographic wave.

“Forget the Millennials,” he declared, speaking at his headquarters outside of Milan, in Agrate Brianza. He dismissed the otherwise sought-after generation as lacking the necessary aggression and determination.

“But take the Gen Z. They have seen 9/11; they have seen the recession; they have seen their father losing his job; they have seen their father [going bankrupt]. Those young people, they know they have to do everything by themselves,” continued Ferrari. “They are all connected. They are very determined. They know what they want, and today all those brands have to really consider them as the new [consumers]. Altogether they are really the strongest ones today. It’s a different generation.”

While Intercos has been recruiting recent college graduates to increase its marketing teams’ innovation, the company is going a step further in to education. The supplier will open a school in China, dubbed Cosmetic Intercos University, in Shanghai late this year or in 2018.

Celso Fadelli, president and fragrance curator of the Intertrade Group, is focused on consumer experiences.

“What people like more and more is to discover and experience perfumes [rather] than look at advertising,” said the executive, noting that he is organizing events that impart the “experience and emotions in a perfume,” rather than communicate “the very important brand name.”

One event he had in mind was a sensorial experience of a young woman giving a talking tour through a darkened room for visitors who also first experience the smell of raw fragrance materials and then of finished perfumes.

Fadelli has been building up his string of Avery Perfume Gallery shops to nearly 20, with more on the drawing board.

After taking into account the huge number of new perfumes flooding the marketplace, Giovanni Sgariboldi, president of Euroitalia, consolidated the company’s offer in 2016.

“We don’t have the urge to make new products, as the ones we have are already strong,” he said, referring to, for instance, Versace’s bestsellers Crystal Noir, Eros and Dylan Blue.

Some recent product initiatives include the Moschino Pink Fresh Couture floral fragrance, contained in a pink flacon shaped like a house-cleaning product, and the first Missoni men’s scent.

Sgariboldi said the Missoni fragrance brand — already sold in 52 markets since its launch two years ago — would soon be expanded in China and elsewhere in the Far East.

Euroitalia, which closed 2016 with sales up 9.2 percent on-year to 785.5 million euros, is eyeing Africa as a new market to build.

“We already work in Tunisia, Morocco, Algeria and Egypt, but we’re looking to the rest of Africa with more and more attention,” said Sgariboldi.

Roberto Martone, chairman and president of ICR, said his company’s business is expanding at home. “We made another important step — we built a new building of 10,000 square meters [or 111,110 square feet], so now the factory is 52,000 square meters [or 577,775 square feet],” he said.

Meanwhile, business remains difficult in the professional hair-care trade.

“A lot of the salons are struggling to survive,” said Fabio Franchina, president of the Framesi Group, among the most prestigious professional hair-care product manufacturers worldwide. He noted that within the last decade, the frequency of salon visits per year by customer dropped to six from 11.

“We see everywhere a major difference between whoever is doing very well and a lot, sad to say, are doing very poorly,” he said, highlighting the importance of service, products and education.

“Education is a big thing. [Hairdressers] need to be updated on new techniques, the best performance, great ways of managing people, money, communication — everything,” he outlined. “There is no place for amateurs; you need to be professional. It is important that you understand your market and that you are going to answer properly to the need of that market.”

The Italian beauty industry overall has historically been resilient. Last year, it registered sales of 10.5 billion euros, up 5 percent versus 2015. Of that, exports, which climbed 12 percent, contributed 4.2 billion euros, with Germany, France and the U.S. the top-three markets abroad. Sales to those countries advanced 18.9 percent, 5.6 percent and 25.3 percent, respectively.

“In the last 25 years, the beauty industry has continued to grow every year, on average by 4 percent. Even in the Nineties,” said Bertinelli. “So we are anticyclical. There are a few clouds here and there, but we don’t believe this can stop the growth.”