As department stores and apparel sales struggle, beauty retailers are popping up in mall and street locations, and capturing the interest of young consumers with experiential, digital-fueled playgrounds. And though specialty retailers such as Sephora and Ulta Beauty have made headlines recently for their advancements in technology-backed offerings and real estate expansions, it is the beauty brands themselves who are driving one of the biggest beauty retail trends today — the monobrand store.
New research from Kline & Co. found that, in 2016, monobrand beauty doors in the U.S. were up 2 percent and revenue from these stores was up 7 percent. And it’s a global trend — Kline & Co. found New York, Paris, London and South Korea all to be hot markets with monobrand beauty stores are on the rise.
Not just marketing vehicles, these stores have the potential to be sales drivers as well, capturing not just the attention, but the dollars from consumers — particularly the younger generations. Plus, these vertical beauty stores are filling empty spaces in shopping center malls, not to mention popular urban shopping destinations. Covent Garden in London and NoLIta in New York, for instance, are bonafide beauty hubs. And brands such as Lush, NYX, L’Occitane, Kneipp, Rituals and Philosophy are cornering big-ticket real estate in shopping malls.
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“It [the shopping mall] used to be all about fashion and now it is all about beauty,” said Wendy Liebmann, chief executive officer of WSL Strategic Retail.
“[Our beauty business] was a lot more centralized five years ago,” said David Ruddick, executive director of leasing at Westfield. “We’d partner with major beauty houses that would represent a number of brands…now those brands are wanting their own presence and creating their own brand experience for customers.” He ticked off L’Oréal’s NYX, Urban Decay and Kiehl’s and Estée Lauder’s MAC, Jo Malone and Aveda as stores that are expanding their reach within the Westfield portfolio.
Lucie Greene, worldwide director of the innovation group at J. Walter Thompson, related monobrand beauty stores to luxury fashion flagships, offering consumers a way to emotionally connect with the brand through experience. “It’s a way to control the experience and make it inspirational, storytelling and a destination — like a luxury flagship temple. Luxury brands such as Dior and Chanel are making stand-alone beauty stores to completely celebritize [their beauty offerings],” Greene said. Dior Beauty opened up its first makeup concept store at Westfield World Trade Center in New York last November in a bid to recruit cosmetics-crazed Millennial shoppers.
Greene noted that the rise of the monobrand store is linked to the direct-to-consumer trend — digital-first brands such as Warby Parker, she noted, have seen success by slowly expanding into physical stores, siphoning share from traditional retail. “Everything is less reliant on the multibrand department store retailer,” Greene said. “Every single counter [in a department store] feels like a very old-fashioned spaceship. These monobrand stores have a distinct personality and it’s something consumers might be more loyal to on an emotive level.”
Lush, the U.K.-based beauty brand knows something about getting emotional.
“Stores are the heartbeat of our brand, and it all comes back to the customer experience, said Brandi Halls, the director of brand communications for Lush in North America. Best known for its glittery bath bombs available in every color of the rainbow, Lush has always emphasized its brick-and-mortar strategy. That strategy has been working — in 2016, the brand reached $445 million sales in North America, and is projecting a 25 percent increase for 2017. Halls noted the brand has been growing from 25 percent to 30 percent each year for the past three years. And depending on the time of year, 85 percent to 90 percent of Lush sales come from its stores.
Social media is often what drives customers into the stores, Halls said. “Two years ago we saw a 50 percent increase in bath bomb [sales] — we attribute that to a significant uptick in product features on social media.”
And this year, Lush is going bigger with its store strategy in North America this year. Following the 2015 opening of its London flagship — a 10,000-square-foot, multilevel beauty playground complete with an underground spa — the brand is now relocating and expanding 20 of its U.S. stores to bigger locations. The bigger stores — up to 2,000 to 4,000 square feet from 500 to 800 square feet — will have more room for product demonstrations and consultation stations. “The appeal is the fun factor — our sales floors are more like a theater stage. Our staff is really encouraged to be play themselves, have fun and energy and put on smiles,” Halls said. “You cant necessarily always get that through a digital experience.”
Some categories perform better than others when it comes to monobrand stores — Kline & Co.’s research found that skin care in particular is the fastest-growing category of monobrand beauty stores, up 11 percent in 2016.
That’s because skin care is an inherently personal process, said Marie-Pierre Stark-Flora, global senior vice president of Philosophy at Coty Inc. The brand set up shop last year with its first mindfulness-themed concept store in New Jersey’s Westfield Garden State Plaza mall, and is carefully planning to add three to four more stores in the next 18 months. Along with Philosophy’s product assortment, the shop offers virtual-reality-augmented meditation sessions and a gratitude wall in which shoppers can write down the things they’re most grateful for. To do skin care well, you have to create a space of trust and you need human connection,” Stark-Flora said. “We want to make sure women understand what the brand stands for.”
Stark-Flora noted that Philosophy plans to add more digital diagnostic services and tools to help customers understand what products to use to best suit their needs.
While prestige brands such as Philosophy are tentatively adding digital experiences to their stand-alone stores, mass makeup brand — and digital darling — NYX have been serving up technology-fueled experiences full-force as it rapidly expands its fleet of its own stores.
Just recently, NYX opened its 32nd U.S. door, a high-tech showcase at the Miracle Mile Shops at Planet Hollywood in Las Vegas. As has become customary for the L’Oréal-owned brand’s openings, customers lined up hours for special deals and a chance to meet and YouTube and Instagram personalities such as Alyssa Edwards and Nikita Dragun — and attend a pumped up after party.
The NYX stores exist at the intersection of high-tech and personal touch with interactive beauty bars featuring exclusive in-store tutorials. Industry sources estimate NYX units pump out more than $1,000 per square foot. As a comparison, the average drugstore produces less than half of that per square foot.
Liebmann noted that once the monobrands hit critical mass, they can make a dent.
“This is an issue for the CVS’, Walgreens, Rite Aids, Wal-Marts and Targets of the world,” she said. “For no matter how well they [mass market chains] do beauty, it isn’t their specialty and not what shoppers are always in their stores to buy. It is a challenge when a shopper walks into a drugstore or mass store and compares [the beauty department] with what specialty offers.” She said that puts the onus on mass market stores to really “bump up the experience.”
But do monobrand stores pose the same threat to specialty stores like Sephora and Ulta Beauty?
Stark-Flora doesn’t think so. “For us, this is a storytelling opportunity, the image-driver,” she said of Philosophy’s growing concept store business.
But Atelier Cologne founder Christophe Cervasel noted that monobrand stores can in fact be sales drivers, too. Atelier Cologne already operates 10 brick-and-mortar stores in New York, California, Hong Kong, London and Paris, and under new owner L’Oréal is poised to open 20 to 50 more stores in the next two to three years. The Atelier Cologne stores offer custom leather cases and engraving for its products that most of its retail partners do not offer. While sales in-store are less than those of retail partners, Cervasel noted that Atelier Cologne stores are more about quality of purchases than quantity. “Our number-one boutique is our number-one door,” Cervasel said. “The conversion rate is very high. Most people who enter an Atelier Cologne boutique buy a product. You have the traffic in big stores, but out of 100 people who pass your counter, some stop, some try and some buy. But the majority of people at the counter aren’t buying.”
Offering an experience — whether it’s painstakingly trained sales associates at Atelier Cologne or the tech-y toys at NYX — is key to monobrand store success, said Bruce Teitelbaum, ceo of RPG, a firm that designs interiors of retail stores. “If they don’t have the service or the elevated experience beyond the actual store, it’s a challenge being a monobrand store without any of those disciplines. A lot of retailers are suffering because they’re not offering experiences or a unique point-of-view. We need to let shoppers come into the world of the brand, and once they experience the brand — we’ve got a loyal customer.”
“Generation Z really likes the store as leisure,” said Greene, who encouraged brands to “lead with lifestyle.”
Saje Wellness, a Canadian homeopathic brand that is rapidly expanding to the U.S. with stores in California and most recently, this month’s Prince Street opening in Manhattan, operates its stores more as community centers, with space to sit down and read research books on wellness-related topics. The brand also teams with like-minded retailers, such as SoulCycle and Lululemon, for consumer events. And at Denver’s Fig + Yarrow, the store offers a juice bar and DIY classes.
But brands that are winning the social media game still hold the aces in the retail arena, Ruddick said.
He noted that last year, the group did a pop-up with Kylie Cosmetics at its Topanga, Calif., center, and 25,000 people visited the store in two weeks. “Retailers with a strong social footprint at the moment are the ones customers are reacting to [in stores]. And back to beauty, it’s those brands that are able to create a storyline that the customer wants to connect with.”