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Nail Polish’s Meteoric Rise Begins to Stall

Still, the category continues to grow at a robust double-digit clip.

Nail polish has added a shiny gloss to beauty sales in recent years, and the category continues to grow at a robust double-digit clip.

But its meteoric rate of growth has begun to slow somewhat, showing a slight fissure in the category’s lacquer, despite a horde of new entrants into the business across both mass and prestige. Sales of prestige nail products gained 19 percent in the year-to-date period ended in May, compared with an increase of 42 percent growth for full-year 2012 and 67 percent the prior year, according to The NPD Group Inc. In the mass market, nail polish sales rose 19 percent for the 52-week period ended May 19, compared with gains of 24.8 percent for full-year 2012 and 35.7 percent in 2011, according to SymphonyIRI Group.

“Growth overall is strong, and it continues to be strong. The momentum is still there,” said Karen Grant, vice president and global industry analyst at NPD, adding that an influx of new brands and a flurry of new finishes and textures continue to spark consumer interest. And companies continue to create new technology to expand the category. For instance, at the Cosmoprof North America trade show, held earlier this month in Las Vegas, a company called Tat’z Nail’z created a stir with its imaging machine that allows users to select from a host of designs or upload their own digital image (say, the pattern of their dress or their boyfriend’s photo), which is then printed on each nail.

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The whirl of activity has created a billion-dollar industry in the U.S.: Retail sales reached $1 billion in 2012, up 26 percent from $793.8 million in the prior year, according to Euromonitor International.

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But for any category, maintaining double-digit growth is a tall order.

“Not everything can grow at 40 percent a year, but if it grows at 5 or 6 percent, that’s pretty good. Growth invites a lot of people to jump in, but when you invite a lot of people, not everyone qualifies,” David Greenberg, president of Maybelline New York, Garnier and Essie at L’Oréal, told attendees at a recent panel hosted by Cosmetic Executive Women.

Industry consultant Allan Mottus forecasted that gains may settle in the mid-single-digit range, but added, “It’s a good spot to be in.” Mottus noted texting — which puts hands front and center — has served as a boon to nail grooming. “Nail is a heavy-use product business — frequent application means you can sell a lot [of bottles],” said Mottus.

The category’s jaw-dropping growth has prompted a slew of acquisitions in recent years: Essie is now owned by L’Oréal, OPI by Coty Inc., and Sinful Colors and Pure Ice are part of Revlon’s portfolio. As large beauty companies have increased their presence in nail care, they’ve also increased their exposure to swiftly changing trends and potential sales fluctuations. For instance, Stifel analyst Mark Astrachan estimates that OPI currently accounts for 6 percent of Coty’s sales and 20 percent of the firm’s color cosmetics segment.

With increased exposure to the nail category, retailers and beauty firms are determined to encourage the category’s growth spurt. Retailers — including CVS Pharmacy with Nail HQ and Sephora with its Nail Studio — have carved out generous display space for nail polish. The Sephora in New York’s Times Square expanded its Nail Studio area with seven “nail play” stations, outfitting each with an iPad and a host of nail polishes and tools to allow shoppers to try the latest nail effects, such as ombré, neons and brights, studded leather, and chalkboard. The Ciaté brand has created a microsite for its Chalkboard Manicure Kit that allows visitors to share their designs in the “Doodle Gallery.” The prestige channel, in particular, is awash with niche nail polish ranges, including Ciaté, JinSoon, Deborah Lippmann, Julep, Nails Inc. and Butter London.

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Walgreens and its regional chain Duane Reade have cleared additional space and created dedicated displays for a rainbow of nail polish shades.

“The nail polish category continues to flourish, and we know it’s very popular among our customers,” said Shannon Curtin, divisional vice president and general merchandising manager for beauty, personal care and seasonal at Walgreens. “There are new trends developing daily, and we have expanded our assortment to reflect a variety of brands and nail accessories.”

A number of stores, including Wal-Mart, have placed assortments in secondary locations as well to entice more impulse sales.

“Secondary location plays a big role in fueling sales growth,” said Annette DeVita, vice president of marketing for the Coty Inc.-owned Sally Hansen brand. “High-impact displays, promotions and dedicated large self-service nail color units bring focus, excitement and attention to the category. Digital and social media as conduits for education, incentive and engagement with customers is also an area in which we have partnered with retailers to highlight the category.” DeVita said consumers continue to experiment with color — blue and green hues have been strong performers this year — and dabble in nail art and special effects. Sally Hansen Fuzzy Coat, which imparts a woven-fiber effect, is a strong seller, she said.

Like Sally Hansen, a host of nail polish brands continue to launch new colors and finishes to excite consumers. Their interest in decals, art effects and 3-D textures have inspired a host of dedicated nail blogs, Instagram photos — and of course more products. Upcoming launches for fall include OPI’s Designer Series Raw Granite collection comprised of two matte shades with minerallike effects, namely DS Pewter (deep silver) and DS Lapis (sapphire blue). Coming to salons this October is Essie Gel, the brand’s first LED Gel System. Essie Gel will be available in 36 shades, and the manicure is said to last for 14 days.

But some wonder if the increasingly bold trends in nail may soon prompt consumer preference to swing the other direction toward cleaner, more traditional looks.

“I feel a little bit tired for all the gimmicks,” said Jin Soon Choi, a highly sought after editorial manicurist who oversees three eponymous nail spas in New York and a nail polish collection that was launched in late 2012. Choi forecasted that a simple nail color — with a slight twist — will be favored for fall. Choi is fond of a matte blue nail with a smooth finish and a subtle hint of shimmer. The shade Blue Iris (a deep electric blue) is a best seller in the JinSoon Nail collection, which is sold at Sephora, Henri Bendel, Space NK and Nordstrom. While interest in over-the-top textures may fade, clean nail art has staying power, said Choi, referencing the “Skinny V” in gold on olive green nails that she created for Prabal Gurung’s show during fashion week in February.