What do you do if you’re a mass-market retailer looking for the next trendy, niche brand? Make one yourself — just don’t call it a private label.
The term tends to conjure up visions of generic knock-offs of popular brand-name products — but those days are over. Mass retailers from Target Corp. and Wal-Mart Stores Inc. to CVS and Walgreens Boots Alliance are unleashing a slew of house brands that look more like power labels than generic house lines.
Earlier this month, Walgreens Boots Alliance announced its new color line, CYO Cosmetics — all 160 products, which are largely inspired by Instagram makeup trends and include contour sticks, metallic eyeshadow pots and ombré lipsticks, cost less than $8 each. Also in September, Wal-Mart introduced its new natural skin care and makeup line, called Found. The 133-item collection is formulated with active botanical ingredients. And CVS is ramping up its Makeup Academy line to deliver YouTube beauty trends to shoppers at warp speed — this month, the brand is expanding into the face category with items such as mattifying primers, color correcting crayons and contour palettes.
“I don’t use the term ‘private label’ anymore, because what [retailers are] trying to do is create a level of exclusivity,” said Wendy Liebmann, chief executive officer of WSL Strategic Retail. “The big brands are everywhere, and that doesn’t enable differentiation for a beauty shopper who is looking for what’s new and trending. The ability to create something that’s unique that will drive somebody into your stores and only your stores is the latest retail dream.”
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“Brick-and-mortar needs a rhyme or reason to drive business to their doors,” agrees Scott Oshry, chief marketing officer and partner at Maesa Group, which is behind Flower Beauty by Drew Barrymore and P2 nail polishes at Wal-Mart and Kristin Ess hair care at Target. “People can buy the same beauty brands at nine other touchpoints these days. The best ways to [to drive them to stores] is to offer them something they can’t buy elsewhere and if buying online, it is still only from that retailer.”
There’s another factor driving the private label boon too. In today’s mass market, smaller, more nimble brands like NYX and E.l.f are driving growth across categories and eating up market share — and retailers want in on the action.
“There’s growth in small bites coming from these niche brands bubbling up in a variety of categories — they’re quick to market and on-trend,” said Liebmann. “It’s been hard for some of the big brands to respond quickly. The infrastructure doesn’t always enable them to turn around a trend in three to six months like these small niche brands [can].”
Jeanine Recckio, beauty futurologist at Mirror Mirror Imagination Group, a trend forecasting firm that also connects retailers with manufacturers, said, “It’s all about speed to market. With big brands, the timeline to incubate from concept to counter can be 18 to 24 months, and in today’s fast trend [environment], no one has time for that. Now as soon as Karlie Kloss is wearing whatever lip shade, consumers are not waiting 18 to 24 months to wear that color.”
House brands can be a sales boon for retailers as well — private labels often yield hefty gross margins estimated to be in the 50 percent to 60 percent range, according to industry sources. According to Euromonitor, private label beauty and personal care products in the U.S. had a 4 percent market share in 2016 — up from 2.5 percent in 2007.
“A lot of retailers are looking for better margins,” said Recckio. “It’s not like private label didn’t exist before, but it was only on certain sku’s and it was more down market. Now, [the brands] are just as good, and consumers may not even know they’re owned by CVS or Wal-Mart.”
For Wal-Mart, it took more than a year and a half to build Found, its new natural beauty line. “We wanted to make sure we could communicate the transparency of the product — what’s in it — and make sure we could deliver it in a high-trend way,” said Jody Pinson, vice president of beauty at Wal-Mart.
Like most of the trends dominating today’s beauty landscape, e-commerce and digital is at the heart of the private label matter.
A decade ago, chains harnessed the power of an exclusive beauty line to compete with the drug or discount store across the street, especially since shelves all had the same assortment of L’Oréal, Maybelline or Revlon Inc. Now, house brands are weapons against burgeoning online competitors.
Lauren Brindley, group vice president and general merchandise manager at Walgreens, hinted that the exclusive aspect of CYO — the full range is available online as well as in-store — gives beauty shoppers one more reason to stay loyal to Walgreens. “We are especially proud that Walgreens Boots Alliance created and developed a vibrant, on-trend, amazing quality makeup line that is accessible to all customers and is another step towards providing an elevated beauty experience at Walgreens. Offering CYO exclusively to our customers brings them a new and exciting brand to mix, layer and hack with.”
The mass market product graveyard is filled with private label beauty lines that fizzled over the past decade.
Logos such as Duane Reade’s Apt. 5 (New Yorkers are still seen carrying the Apt. 5 umbrellas that outlasted the cosmetics) and Eckerd Drug’s Mira are gone from shelves. As for the latter, both the chain and the brand are extinct. Although IsaDora cosmetics still exists globally, its proprietary deal with Walgreens flared out in 2008.
But social media has the power to put store brands on par with the big players.
Fifteen years ago, retailers had to hope shoppers picked up their house brands, tried them and liked them. It was hard to standout among the marketing muscled devoted to the L’Oréal’s and CoverGirl’s of the world.
Not so anymore. Take the case of Kristin Ess, the celebrity hairstylist and social influencer who developed a hair-care range for Target. She can reach consumers through social channels as effectively as marketing campaigns of the past.
“You have one influencer with 10 million followers who mentions your brand and you have brand awareness overnight,” Oshry said. The ad spend needed in the past would have been unobtainable. “The landscape has changed dramatically.”
Target melds both owned brands and nationally known names that make lines just for the discounter, and often teams up with an influential partner to help market the line.
“To ensure Target stands out as a beauty destination for our guests, we partner with experts in their field to develop products that are first to market and can be only found at Target” said Christina Hennington, senior vice president of health and beauty at Target, citing examples such as Kristin Ess. “Also, we’ve seen great success in partnering with digital brands, like Harry’s and Glow Recipe, to offer curated collections that are designed especially for our guests and offer convenient access to these exciting brands. Exclusivity is an important part of establishing Target as a beauty destination for our guests, and we will continue to do so in a way that’s meaningful.”
But Liebmann warned that just relying on social media to promote a store brand is not a sustainable strategy. “We’ve seen this experiment before, with Sonia Kashuk and Salma Hayek — you can’t just drop this on the shelf and do some social media and walk away from it. These brands have to be built like brands. The easy part is identifying the trend and manufacturing, the hardest part is developing a marketing strategy to sustain and grow it.”
One company executive who asked not to be named said lines lose luster if chains don’t get behind them. “Anyone can make a private label line. You have to make sure it is filling white space and priced appropriately. And you can’t get too greedy on margin and not leave some marketing dollars on the table.”
Cannibalization of sales from major brands is another issue retailers face when putting out their own lines.
“[Store brands] are the next big brands to really watch out for, for sure,” said Recckio, who noted that Ulta Beauty and Sephora have been ramping up their private label lines. Even non-beauty retailers are getting in on the action — Forever 21 carries its own robust line of beauty tools, many of them for less than $5.
Wal-Mart’s Pinson acknowledged that concern. This month, the retailer is rolling out Burt’s Bees Beauty — the Clorox-owned brand’s new natural makeup line — within the same timeframe that it is launching Found, its own natural beauty line.
“We’re going to keep it about the customer,” said Pinson about the retailer’s private label brands. “If the customer is looking for certain trends, we’re going to attach ourselves to that.”
Where the big players can win, she said, is in providing a wider range of shade and color options. “Our big brands are doing a better job of shade selection and providing an expanded shade range for our customer.”
Retailers say there is plenty of room for both store brands and their vendors.
“Our customers, including a growing number of Millennials, are savvier than ever. They are less brand focused and more product and ingredient focused, so they are more willing to try new brands,” explained Cia Tucci, vice president of store brands and quality assurance at CVS.
For Tucci, it is about balance — and finding nooks and crannies in the market where the retailer can fill a white space. “We want to be the place where customers go to find the latest innovation at affordable value. That means we will carry her favorite national brand products as well as providing her a choice of exclusive brands within our store.”
Developing owned brands, however, affords CVS an opportunity to be nimble, especially as it must compete with online competitors who rush new items to market at breakneck pace. “Our store brands are where we lead, not follow, and with our exclusive beauty brands, we translate consumer needs and trends into premium, innovative products at an affordable price,” Tucci said.