Mass Retail Comes Into Focus

Late last year, mass-market beauty retailers were dealt a one-two punch. The first blow came from Ulta Beauty, which in November announced a deal to open 100 shops-in-shop in Target Stores; less than a month later, Sephora unveiled a long-term deal with Kohl’s that calls for up to 850 stores over the next three years.

For the other key contenders in the mass market ring — Walmart, CVS, Rite Aid and Walgreens among them — the questions raised by the deal are many and monumental.

How best to penetrate the elusive prestige market and meet prevailing consumer demands? Stay the course or seek a partner? Compounding the challenge is another question: Are there any remaining beauty concepts that can fit snugly into a mass-market giant?

The latest two blockbuster partnerships aren’t expected to be the final story.

“This a trend that is here to stay — store within store. Even more important is partnering up to invent on behalf of the consumer,” said Sunny Jain, president of beauty and personal care at Unilever, during the Beauty Inc Awards in December. “When you have your shoppers winning you can’t go wrong.”

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Forging beauty partnerships between class and mass is not new — CVS flexed its muscles with a partnership with Glamsquad, which serves as a centerpiece of its Beauty in Real Life format, while Birchbox inked a symbiotic deal for stores under Walgreens’ roofs.

But with Sephora and Ulta Beauty — the two heaviest hitters in specialty beauty retail — accounted for, who is left for other mass marketers to lasso?

“QVC does a phenomenal job in beauty; they have beautiful brands. There is an opportunity to bring it to stores and do shops within a shop that would make sense and create a win for consumers,” said Alexandra McClay, a beauty industry consultant at Next Level Strategy. QVC has partnered with Sephora to promote brands on the channel, but McClay thinks Walmart could be a viable option, especially since the two retailers have different enough demographics to encourage incremental sales.

Other ideas bandied about the industry include reviving the pared-down Beauty Brands retailer (which filed Chapter 11 in 2019 and sliced store count to 22 plus online) and serving up a physical space for online beauty e-commerce businesses like Dermstore.

But not everyone is convinced that large mass retailers need to partner up to develop a prestige strategy. “I think it would be interesting for retailers to develop their own personalities,” said Stephanie Wissink, managing director of Jefferies. “CVS can further develop a niche as a ‘clean, good for you’ retailer to dovetail with its already strong skin-care position. Walgreens can leverage the Boots’ European reputation in beauty.”

Bruce Teitelbaum, CEO and founder of RPG, agreed that Walmart has the most potential out of the mass retailers that haven’t engaged a beauty powerhouse, but believes that the nation’s largest beauty purveyor can build its own concept.

“Walmart does sell better and exclusive brands and can create a self-contained shop within the store,” Teitelbaum said. “Its large stores and captive audience make it ripe for further elevating the beauty experience.”

Noting that Walmart stores are visited by 150 million shoppers per week, he continued, “There is a huge opportunity to create a beauty space [rather than team up with a beauty retailer] and do it in a way that hasn’t been seen in mass.”

While many pinpoint Walmart as ripe for a relationship, the chain is opting to pursue its own path for now, according to Musab Balbale, vice president and general manager for Walmart U.S. Beauty.

“We are focused on expanding our assortment to offer the trending products consumers are looking for,” he said. “Following social media trends and working directly with our brand partners, we have been able to bring our customers great products, including offerings from The Lip Bar [now TLB], Wild Primrose and Hairitage. We’re excited about upcoming launches as we focus on wow-worthy products that we know our customers want,” he said in a statement.

Other retailers are looking to pursue a more health-based approach, capitalizing on the proximity of the in-store pharmacy and the boom in wellness and self-care.

The clinical positioning of mass doors with pharmacies puts them in position to benefit from the wellness boom in particular, noted Tracy Holland, executive chairman and cofounder of HatchBeauty Brands. “Fifty percent of the products we are launching this year are something you put in your mouth,” she said.

Rite Aid, the nation’s third largest drug chain, is doing just that.

“We are doubling down on beauty in our Store of the Future,” said Erik Keptner, chief merchandising and marketing officer.

Rite Aid opened its first Store of the Future prototype in Newberry Township, Pa., last October, designed to interweave wellness and beauty. Beauty executives who have seen the concept say it resembles a “Sephora for the mass market.”

Rite Aid currently has three such stores, with more scheduled this year as part of a $700 million store overhaul that was fine-tuned during the pandemic. The format also serves as testing ground for concepts that can be replicated chainwide.

Efforts to elevate the beauty experience include a high impact discovery zone in the department, a bevy of new brands, a “play” table for sampling (currently limited in scope) and access to trained beauty advisers. Plans call for building out greater use of technology to help with product discovery.

“What we are doing in beauty ties directly to our new brand mission to fuse traditional medicine and alternative remedies providing people with products for a healthy mind, spirit and body,” Keptner said.

Pharmacists have been freed up to spend more time consulting with patients — even about personal care. In beauty, the assortment is focused on cleaner formulations, vitamins and supplements, and cosmetics that help consumer express themselves.

Rather than partner with a prestige retailer to secure brands, Rite Aid is putting its muscle behind building brands. One example is Doll Face, a makeup and skin-care brand, which is a brick-and-mortar exclusive to Rite Aid.

“Doll Face is aligned with our target customer,” Keptner said, describing the retailer’s core consumers as women 25 to 49 with “children, parents and pets, who are looking for attributes such as organic, cruelty free, fair trade and chemical free.”

Tom Winarick, CEO of Doll Face Beauty, said Rite Aid has been proactive in changing the mass market status quo. “They have allowed us to break some traditional chain drug ‘rules’ to offer a truly indie brand approach to their mix,” he said.

Too often, nascent brands have been limited to access in chains because of demands for big advertising budgets, large orders and inventory buybacks.

Other brands that are new to Rite Aid include Arches and Halos, W3ll People, Ella + Mila, Fleur and Bee, Essano, Hempz, Clarisma, Purezero and The Seaweed Bath Co.

“We want to work with brands, including digitally native ones, looking for a brick-and-mortar footprint,” said Keptner, citing the retailer’s agility — it has roughly 2,500 stores versus more than 9,000 at CVS or Walgreens — as a key selling point.

CVS continues to elevate its beauty proposition, too. Beyond an alliance with Glamsquad and the Beauty Mark campaign, which promotes and celebrates digitally unaltered photos, the retailer has upgraded its selection with a spotlight on ingredients, exclusives and service.

“We are ahead of the curve,” said Andrea Harrison, the new vice president of beauty and personal care at CVS. “We’ve been a catalyst of change with Glamsquad and bringing a different experience to mass. We’re pleased with the performance and we’ve seen growth among Millennials and Gen Z, even during the pandemic.”

With a robust prescription business, CVS has sizable foot traffic, and the goal of beauty, said Harrison, is to offer access in a “comfortable environment to have guilt and stress-free me time.”

Further leveraging its health positioning, she said CVS is starting to marry the concept of the BeautyIRL format with the HealthHub format, a total wellness destination with expanded health clinics, health screenings and wellness rooms for seminars or yoga classes along with access to dietitians and respiratory specialists. By the end of 2020, CVS had 122 BeautyIRL stores — 69 were stand-alone and 53 combined BeautyIRL/HealthHub stores.

“The boundaries between health and beauty care are blurring. Many aspects of beauty speak to wellness and we have the opportunity to bring that under one roof,” Harrison said.

Skin health has emerged as a huge category for CVS, which continues to add derm brands such as the newly stocked Bioderma. To further differentiate itself, CVS recently launched SkinSafe, a data driven platform developed with the Mayo Clinic that can tell shoppers what is in products at CVS, and whether ingredients are safe based on personal standards, specific allergens and physician recommendations. New “Sensitive Friendly” signage was also introduced to indicate products free from the most common allergy-causing ingredients, reflective of Mayo Clinic research results.

Meanwhile, Walgreens has taken a multipronged approach, including the Birchbox collab, a new loyalty program, more masstige brands like Boscia and 30-minute pick up at store service that includes beauty. The company did not comment on plans to build out more Birchbox concepts, but last year Birchbox CEO Katia Beauchamp said plans call for 500 small shops.

Whether or not that will come to fruition is not certain, but one thing for sure is the continued blurring of the prestige and mass world. Teitelbaum noted that it’s not just mass retailers looking to add a touch of class to their assortments. Higher-end stores have an opportunity to add a more populist touch, as well.

“As the lines continue to blur a Bloomingdale’s or Nordstrom, could add more of a drugstore apothecary that can fill the needs in that category,” he said.

Rose Fernandez, CEO of Algenist, believes that the clinical nature of drugstores, which dispense vaccinations, could open doors for easy access to injections of a different kind.

“With drugstores trusted for flu shots — and perhaps at some point for COVID-19 immunizations — can they serve as convenient spots for Restylane or Botox?” she said. “Imagine you don’t need an appointment and you can go into a drugstore with a licensed staff and be in and out.”

Rather than partner with a retailer, maybe the next frontier includes an aesthetic bar like Alchemy 43, which could conceivably be connected to the mounting number of medical clinics in mass doors.

Nicci Levy, the CEO and founder of Alchemy 43, doesn’t rule out the possibility. “Since our microtreatments are so trust-based, partnering with brands that have worked hard to cultivate loyalty with their customers makes sense for us,” she said.

Sonia Summers, founder and CEO of Beauty Barrage, said the often-overlooked grocery industry including upscale food retailers and wholesale clubs, might be ripe for building specialty shops, too, particularly given the connection between beauty and food.

“Whole Foods already has a customer that spends more, and their beauty department is screaming for help,” Summers said.

Serving the swelling consumer demand for wellness could portend a future for clean beauty retailers such as The Detox Market or Follain to team up with a heavy foot-traffic chain, much like Credo has collaborated with Ulta Beauty.

But while the potential of such collaborations makes perfect sense, hurdles exist. For one, many prestige brands — clean or conventional — are loathe to expand to mass market distribution.

“If we wanted to be in Target, we don’t need Ulta to help us,” said one prestige beauty executive.

And then there’s the difficulty of operating stores-in-store. The Detox Market partnered with Holt Renfrew for a clean beauty presentation in 2014. While founder Romain Gaillard said the concept was successful in generating greater exposure for the participating brands at a time when the sector was in its infancy, the challenges were considerable.

“Clean beauty needs to be explained, it is not self-serve,” he said. “There are also logistical questions such as who owns the inventory. And, there is the question of whether the brands want to be there or not.”

Whether mass merchants build their own or court specialty retailers to better reflect the fast-changing beauty landscape, one thing is certain: Change is here.

“The big takeaway,” said Alicia Grande, CEO of Grande Cosmetics, “is you really have to go where the consumer is now.”

Top Three Takeaways:

 

  1. Wellness will play a huge role as mass retailers look to reinvent the in-store beauty experience.
  2. Beauty’s big specialty players — Sephora and Ulta Beauty — may be spoken for, but other options exist for mass retailers looking to ink prestige partnerships.
  3. Big retailers are looking to smaller brands to help elevate their proposition, and increasingly making it easier for indies to operate in a big box environment.
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