Ciao, bella! (Hello, beautiful!) The Italian phrase known the world over reveals the cult of beauty that emanates from each and every one of Italy’s sun-kissed pores. The artfully disheveled, bare-faced look is not for this Southern European population that prides itself on la bella figura, or putting one’s best face forward at all times, both figuratively and literally.
Translated into beauty and personal care retail sales, Italy’s love of preening has garnered this nation of 60 million the number-four ranking in Western Europe after Germany, France and the U.K., according to Euromonitor International, making it a key target for potential growth. Euromonitor International says that last year, Italians spent to the tune of $12.5 billion on cosmetics and toiletries compared with front-runner Germany, which registered retail sales of $17.37 billion.
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Despite the effects of the global economic crisis, Italian cosmetics consumption grew in 2009 in all distribution channels, with the exception of beauty and hairdressing salons, down 4.5 percent and 5.1 percent, respectively, according to Unipro, the Italian Association of Cosmetic Industries, highlighting a fundamental shift in consumers’ buying patterns and a swing toward new distribution models.
“The Italian cosmetics and toiletries market is a stable one. It grew around 1 percent despite a global recession and drop in [gross domestic product],” says Gloria Segreto, senior research analyst for Italy at Euromonitor International. Italian GDP fell 5 percent last year compared with 2008, and unemployment stands at 8 percent as of March, according to Istat, the National Institute of Statistics. Despite the economic odds, however, the domestic market has managed to sustain growth, albeit small, in key areas such as hair care and skin care. Hair care grew 2.3 percent in 2009 to $1.8 billion, highlighting not only a newfound value-conscious outlook, but a fast-growing prestige retail channel, too.
“The figures prove Italians are not prepared to compromise on their beauty regimes. Cosmetics are no longer perceived as a luxury, but holistic, with a concept of well-being replacing the traditional view of beauty,” says Segreto.
If it’s well-being one is after, you don’t have to look far in Italy to find a source. Pharmacies cover the length and breadth of the country—16,000 in total, according to Unipro—retailing a mixture of pharmaceutical products alongside skin care and cosmetics, with the added bonus of expert advice from white coat–clad sales assistants. Last year, pharmacies’ total group sales touched $1.43 billion, a substantial 3.2 percent increase given the tough circumstances, accounting for 15.7 percent of Italy’s beauty sales. Perfumeries, which traditionally hold the highest share of consumption in Italy (25 percent) after mass market channels, ended the year down 3.5 percent, registering $2.2 billion in sales.
“The growth of pharmacies and mass market distribution channels reflects two major consumer trends,” says Orna Nofarber, managing director of Estée Lauder Italy. “The [first is the] search for authority and credibility in the area of skin care, therefore the pharmacy is seen as a safe environment, and secondly, consumers crossing channels because of convenience and affordability.”
L’Oréal Italia, the country’s market leader with a 16 percent market share in 2008, according to Euromonitor, believes the pharmacy sector is at an interesting period in its development. “[The pharmacy] is a channel used by consumers who are particularly keen on cosmetics, but who are also interested in health care–related aspects. Offering products that meet both these needs is becoming an essential key to having success in this channel,” says Filippo de Caterina, corporate communication director for L’Oréal. Rounding out the top five companies are Procter & Gamble Italy SpA, Beiersdorf SpA, Unilever Italy SpA and The Bolton Group, according to Euromonitor.
The demand for a diverse product mix is driving a fundamental shift in buying habits. An historical and entrenched love of high-end prestige products is now matched at the opposite end of the spectrum with a desire for lower-price products, underpinned by a mass distribution that has increased 1.2 percent year-over-year in the past five years. In 2009, sales grew 2.7 percent to about $5.06 billion, according to Unipro.
Nofarber of Estée Lauder compares the shift in buying habits with that seen in the fashion industry, where consumers continue to buy luxury labels but also enjoy mixing them with lower-price finds. “The borders between mass and prestige are blurring as consumers shop everywhere,” she says, an opinion shared by Gian Andrea Positano, statistics manager for Unipro.
“It’s an interesting time,” says Positano. “Consumers have renounced loyalty to a particular channel and overcome the stigma of purchasing a mass market product.”
The ability of the pharmacy chain to adapt to shifting consumer needs will help drive the direction of the market, experts believe. “Pharmacies have dedicated larger spaces to products and offer good levels of service, but there is still lots of room to improve,” says Positano, noting that Sephora, the LVMH Moët Hennessy Louis Vuitton–owned perfumery, which entered the Italian market at the end of 2004 and now has 101 stores, has updated the traditional face of perfumery formats with its accessible, spacious layouts and upbeat, youth-oriented atmosphere.
“The perfumery chains are increasing their share of market versus traditional perfumeries,” says Carolyn Tastad, vice president of P&G Prestige global marketing operations, highlighting a growing momentum of trade concentration behind international and local chain expansion, as traditional retail flagships continue to invest in ever more glamorous beauty environments.
La Rinascente is one such department store chain to embrace innovative new formats—in particular, podium areas, a central display space that allows selected brands a temporary but high-profile form of expression, which Simone De Stefanis, director of buying for La Rinascente’s beauty and cosmetics division, credits to boosting sellout by at least 400 percent. The podium area in the store’s Milan flagship is about 270 square feet, and was recently utilized by Estée Lauder during Milan Design Week to run an initiative, dubbed Design Your Face, offering shoppers the chance to have a makeover and photo shoot. “The area must be eye-catching and unique. We want our consumer to find something that is exclusive and extraordinary every single week. This effort is rewarded not only in terms of sales, but national press hits,” says De Stefanis.
Coin, an Italian chain of department stores, is in the midst of revamping its beauty halls, and recently revealed proposals for its first beauty concept store, dubbed Excelsior, on the site of a former cinema in the heart of Milan’s shopping district on Corso Vittorio Emanuele. The 3,000-square-meter, or 32,292-square-foot, space is set to open in September 2011 and will showcase a mixed assortment of niche and high-end products.
Still, capturing Italy’s increasingly mobile consumer is an ongoing challenge. Forget stereotypes of Italians whiling away the hours sipping cappuccinos. The country’s highspeed train line inaugurated in 2008 and called Frecciarossa (Red Arrow) carries a million passengers every month, according to Trenitalia, the national railway company, and shortens the distance between Milan and Rome to just less than three hours, with 72 daily services. Connecting Turin to Salerno, northern with southern Italy, the train has attracted an increased number of high-income business commuters and, more importantly for the beauty business, the opportunity for additional revenue. MAC is considering opening a store in the Rome station in the foreseeable future according to Norfarber. Sephora opened a 3,767-square-foot, store in December 1999 inside Rome’s train terminal and plans another in Turin’s Porta Nuova station later this year.
Seasonal temporary stores and special events are additional retail alternatives to capture the wanderlust Italians, many of whom opt to flee the city for the beach or the mountains on weekends, depending on the season. Lauder opened a Jo Malone pop-up store last year on Capri during the summer months, and will do so again this year, while MAC has invested in pop-up corners within prominent fashion boutiques such as Gio Moretti in Milan and Eleonora in Rome.
Given the country’s global status as a fashion frontrunner, it is no surprise la moda heavily influences the beauty industry here. “Italian women are very fashion conscious, not only in what they wear, but how they wear it. They’re aware of the latest must-haves, such as a new Tom Ford lipstick, a dream for our consumers. Italian women relate to fashion icons such as Tom Ford and his presence offers our store a special allure,” says De Stefanis, who cites Dolce & Gabbana as an example of fashion influencing beauty and increasing in-store traffiic. La Rinascente exclusively launched the brand’s makeup collection at its Milan flagship last year.
Deborah Group, a successful cosmetics line manufactured here, has carved out its identity as a brand with strong links to the fashion and design world to great success—the company registered $133.9 million in sales in 2008. “The young consumers are attracted to innovation and very attentive to fashion, but they’re also the ones to demonstrate a lack of brand loyalty,” says Alessia Mulè, marketing manager for Deborah Italy, highlighting that the points of sale that work well for the brand are those that offer promotions alongside exclusive products.
Fashion may turn an Italian’s head, but translating this into a purchase requires service of the highest levels. Walk into most beauty stores and within a moment, the words “mi dica” (“tell me”) will be directed at you. Customers left on their own to browse is not a common sight here, and has ensured Italian shoppers expect serious levels of one-on-one service.
To this end, a vendor’s continual challenge is to stimulate customers in a retail environment. De Stefanis of La Rinascente points to its Milan store’s LAB format—a large selection of natural and biotechnological products—as offering a captivating buying experience. “The consumer is free to touch, read about, smell and try all of our products. They can even eat [if they want to] some of our new organic brands, but they also have the possibility to consult our expert beauty specialists who are on hand for any questions they may have,” she says.
Lauder has also developed a specific service retail model called High Touch in Italy. Based on rotating service events and makeup artistry services, it aims to offer a specialized degree of information in outlets that traditionally rely on generic staff in perfumeries, rather than the U.S. model, which offers specific brand advisers.
This said, Italian consumers are gradually adapting their in-store service expectations. Sephora provides a greater degree of independence, and, as Mulè highlights, the retail formats that are working well for its products are those with a “free level of service,” where the consumer is independent to make a selection from a wide product assortment.
Attractive retail environments, high levels of service and an innate appreciation for the industry all may play their part in wooing Italians, but it’s skin care that is la dolce vita for the Italian beauty industry. The category continues to fuel growth, increasing 0.4 percent last year compared with 2008 to $2.6 billion, and is mainly dominated by antiaging products. “Our skin care business is growing, due to a high level of service and average ticket. It has been our focus in the last few years and will continue to be,” says De Stefanis, who launched Crème de la Mer in La Rinascente in April.
Given Italians’ love of the beach, sunscreens are playing an increasing role in this sector, experiencing an increase of 3 percent to $445 million last year, according to Unipro.
As the country’s obsession for youthful skin builds, fragrances saw a drop-off in 2009, slipping 1.2 percent to $1.4 billion compared with 2008, according to Euromonitor. Despite the decrease, Euromonitor notes the market remains upbeat about the category’s future, an opinion shared by P&G Prestige Products. “After a slight decline in 2009, the overall fragrance market started this year with a strong performance, increasing by 8 percent in the first quarter, mainly driven by key luxury players,” says Tastad. Given the innate Italian love for beauty, it’s a good bet those numbers will continue to grow.
GDP Growth +0.5 percent (Q1 2010/Q4 2009)
GDP per Inhabitant $38,492 (2009)
Inflation 1.6 percent (April 2010/April 2009)
Unemployment 2,100,000 (8.6 percent)
Interest Rate 1.00 percent
Sources: Bank of Italy, World Bank, Istat