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Spain a Bright Spot in European Beauty Market

As Spanish fashion retailers see generally declining sales, beauty chains register strong growth driven by fragrances and color cosmetics.

MADRID – While fashion retailers in Spain have battled declining sales in recent months, international beauty brands haven’t seen a similar downturn — and many are opening concept stores and actively looking to expand.

In May, the clothing sales in Spain fell by 6.2 percent, marking five consecutive months of decline. The impact was seen across major retailers like H&M, which during its second quarter suffered one of the largest drops in sales since the brand arrived in the country in 2000.

Though sales picked up slightly during the summer holidays, numbers from the Spanish National Association of Textile, Accessories and Leather Trade show that sales for the year are still down by 3.6 percent, a number which if maintained through December would make this the worst year since 2012, one of the low points of Spain’s economic crisis years.

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While fashion retail finds itself in a delicate moment, the country’s cosmetics industry is experiencing growth both in sales and size. According to Spain’s National Association of Perfumery and Cosmetics, the sector grew by 2.15 percent in 2017, reaching 6.83 billion euros and marking the third consecutive year of growth. The country is the fifth biggest consumer of cosmetic and personal care products in Europe, with the average Spaniard spending 147 euros annually versus the European average of 137 euros.

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“The [Spanish] beauty personal care market is set to grow over the next five years,” said Clotilde Drapé, beauty and fashion analyst at Euromonitor International.

Drapé said that there are a few key social and economic reasons why Spanish consumers are increasingly spending more on beauty, citing Euromonitor research that “during 2018 the Spanish economy consolidated its recovery and with it the unemployment rate went down to 16 percent [making many Spaniards] more willing (and able) to spend extra money on splurges.”

Along with increasing employment, Drapé pointed out that Spaniards are among the EU consumers with the highest possession of smartphones and, according to industry sources, take more selfies compared to many of their European counterparts. “Looking thin, young and fashionable has increasingly become a social value in Spain,” exacerbated by the global rise of selfie culture, and cosmetics play an important part in achieving selfie-ready looks, sources said.

Fragrances and color cosmetics are the fastest growing categories, with many attributing the rise of fragrance sales to increasing interest among male consumers and color cosmetics to the popularity of beauty influencers and selfie culture.

In the last year international beauty brands like Sephora, The Body Shop, Kiko Milano, L’Oréal and Lush have responded to the growing Spanish market by expanding their number of brick-and-mortar locations and finding ways to create unique customer experiences.

Last year, Sephora opened two flagships focused on digital experiences and technology. The Barcelona flagship, reportedly the company’s largest point of sale in Europe, includes a giant slide at the entrance and boasts four distinct experience spaces where customers can create personalized perfumes, enjoy free mini makeovers, and use the Virtual Artist app to try on products.

Neither Sephora nor El Corte Inglés, the Spanish department store group with which the beauty brand has formed a joint venture, responded to requests for comment. But it has been reported that Sephora is planning to expand beyond its current 137 locations in Spain and has begun incorporating elements from its flagships into other existing stores.

Even retailers like Kiko Milano, which this past year scaled back its operations in the U.K. and the U.S., are expanding in Spain. Kiko Milano opened its 160th location in the country at the end of 2017 just months before the announced closure of a quarter of the company’s 48 U.K. stores. And in a January statement about the closure of 25 of its 30 U.S. locations, the company revealed a desire to grow in “countries where the cosmetics industry is experiencing higher rates of development.”

Though Spain was not specifically named, and Kiko Milano declined requests for comment, Drapé said a focus on the Spanish market makes sense given the retailer’s target audience of Millennial and Gen Z shoppers looking for “cheap, Instagram-material makeup.”

“The competition in the mass market [in Spain] is less fierce than in countries such as the U.K. where online sales are strong and mass ‘indie’ brands such as NYX or E.L.F. are easily accessible in beauty retailers,” Drapé explained. In a market with fewer competing mass brands, expanding now could help Kiko Milano achieve greater market penetration.

Kiko Milano’s Madrid concept store, opened last year and outfitted with iPads that give shoppers customized recommendations as they shop, is evidence not only of how cosmetics brands are expanding but also how they are trying to create unique and personalized shopping experiences.

“Generally, concept stores and flagships are easier to open for cosmetic brands as the products offered can lead to different consumer experiences,” said Drapé, since “products can be tried, tested and appear playful to consumers by using digital and technological innovations.”

One reason for the focus on creating interesting retail spaces could be a bid to create relevant and memorable brick-and-mortar stores in a country where consumers are increasingly embracing online shopping.

Whether virtually trying on makeup or customizing the scent of perfume or shade of foundation, shoppers have the opportunity to interact with products in ways they often can’t at traditional fashion retailers, and because cosmetics are typically compact, stores can offer a wider range of products. This encourages mixing and matching, and Drapé said these factors make it easier for consumers to indulge in purchasing small beauty items.

According to Miguel Solera, Lush’s property manager in Spain and Portugal, this emphasis on customizing both the shopping experience and the product recommendations is a direct response to the demands made by Spanish consumers and their desire for personalized advice. He credits his company’s recent successes in Spain to a focus on relationship building through staff training and personalizable products.

In 2017, the brand opened four new locations in the country, reaching a total of 16, and sales hit 13.5 million euros, growing 39.8 percent compared to the previous year. Solera confirmed that Lush intends to expand in Spain and a company report also states that in the uncertainty surrounding Brexit, Lush is increasingly focusing on continental European markets, specifically naming Germany the EU’s top consumer of cosmetics and personal-care products.

Though Spain’s cosmetics market remains roughly half the size of Germany’s, the industry’s promising profits and continued innovation, especially as other retail sectors face shaky sales, are a signal of potentially even more growth to come.