With the prestige beauty industry beginning to find its footing, guardedly positive reports of the January business are drifting in from the U.S. department-store sector. That sounds cheery. But the good news is being generated by a market that represents a sum of lesser parts.
“The big categories are shaky,” says Karen Grant, senior global beauty industry analyst at The NPD Group. “The consumer is going after certain very specific things — it’s not a regular eyeliner: it’s a gel eyeliner,” she says, citing the success of Benefit Cosmetics’ They’re Real Push-Up Liner as an example. Also masks, peels, eye shadow palettes and brow products — all made the difference last year. As John Demsey, group president of the Estée Lauder Cos., points out, in both makeup and skin care, “the subcategories are becoming as important as the main categories.”
In other words, it’s the underdeveloped bit players of the market that are now doing the happy dance.
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What has made skin care the leader for the last few years have been hero launches in the pillars — facial moisturizers, antiage serums and eye products. Of those, only the age specialists managed a gain last year — 2 percent — while the other two categories declined. “It was the weakest female category,” says Carol Hamilton, president of the Luxe division of L’Oréal USA. “The industry needs to rebuild its trust in skin care. There have been a lot of very big high-percentage promises.”
Referring to analyses by people like Grant and others, Hamilton says, “Some people say it’s a lack of innovation. I feel it’s deeper than that. The consumer is wanting again to trust us more and to understand what results are being given. As you come out with the next great serum, what are you saying about the serum that you launched two years ago?”
She notes that it is important to add more textural and sensual elements to serious products because “we are seeing a desire to play in the skin-care area. Masks, peels and oils — all are introducing new textures of this pleasurable aspect.”
So, she says, “how do we marry the sensorial with the deepening of her trust?”
There are bright spots. “The luxury consumer has a big appetite for beauty and, especially, makeup,” says Hamilton. “The strength of women’s fragrances is notable,” she adds, although “not nearly at the level of cosmetics.” After a slippery 2014 at retail, December sales were up 7.1 percent, more than L’Oréal had expected. It was the biggest increase in the most important month, and Hamilton thinks that 2015 will be a slight improvement over the 4.9 percent overall market gain, taking into account a calendar adjustment, that NPD reported for 2014.
“We just wrapped up a pretty good January,” says Howard Kreitzman, vice president and divisional merchandise manager of cosmetics and fragrances at Bloomingdale’s. “We had momentum coming out [of the holidays],” he says, while admitting that the comparisons were easier this year considering the horrid weather of 2014.
“A happy surprise” was how Demsey described the January sales figures, not only in the U.S. but across travel retail, pockets throughout Asia and in the U.K. He also says there’s a trading-up trend as women are drawn to higher-priced treatment and fragrance.
Makeup—the star of 2014 with a 6 percent sales increase — was powered by makeup artistry and alternative brands, including Urban Decay, MAC Cosmetics and Benefit. Hamilton says that the category received a push from the vlogger experts on YouTube.
Adding fuel to the triumph of makeup is a renaissance in lipstick. “Lips, lips, lips,” Demsey says, referring to the brands he oversees, including MAC, Smashbox, Tom Ford, Bobbi Brown and Estée Lauder. “We have never seen a lipstick business growing like this, probably in my entire career,” he says. “I’ve seen double-digit increases in lipsticks across every brand that I’m responsible for. We are talking transformational lipstick numbers in general,” he continues. “It’s a very good makeup moment; you see a lot of interest in experiences — makeup lessons, makeovers, palettes of eye shadows, contouring kits — a whole item driven business. People want results now; they want to live in the moment. This idea of makeup looks and trends — the Mod eye, pale lip, the red lip — and contouring and Sixties and Seventies fashion inspiration is a big thing right now. Because the look has changed, women are buying more makeup.”
In discussing the dynamics of the women’s fragrance market, Hamilton observes, the launches “are much more strategic and thought-through than in the past when it was just launch it and see if it sticks.”
The driving forces in fragrance have been designer and artisanal brands. In a recent presentation, Grant made the point that between 2010 and 2014, artisanal, alternative, natural and skin-care brands added more than $1 billion to the $11.2 billion U.S. prestige market, roughly 40 percent of the growth for that four-year period.
There’s a lesson in all this. As Grant asks, “How do you create some kind of dynamic like that [of the smaller upstarts] within your big brand?” Although neither she nor anyone else has talked about it publicly, there have been reports of sluggishness of the big three — Clinique, Estée Lauder and Lancôme. The gift-with-purchase season is said to be particularly rough. While acknowledging, “It was a challenging year,” Demsey says alternatives are being found to update the traditional GWP. One such move is to inject fashion into what was a price-value equation. “We have a collaboration this spring with Lisa Perry,” he says. “People are looking at new ways to establish immediacy and a reason to buy.”
He also indicates that the product pipeline is being loaded for the Lauder brand. “Today you need to launch more products,” he says. “More is more right now; it is not a less-is-more moment.”