NEW YORK – A surge of bargain hunters armed with gift cards the week after Christmas was just enough to redeem a lackluster holiday season for mass retail.
Early sales estimates indicate that the post-holiday flurry helped push holiday beauty sales 2 to 3 percent over last year’s results, according to a survey of retailers. A parade of celebrity scents from the prestige market added some sparkle to the fragrance department, but perhaps not enough to reap decent sales gains. Nevertheless, mass-market shoppers were on the lookout for famous names and lower prices.
Most importantly, it appears mass merchants have finally enticed an audience they started marketing to five years ago: young girls. Perhaps the availability of products from Jessica Simpson Dessert Treats and Sweet Kisses at Wal-Mart, coupled with Curious by Britney Spears, has finally convinced girls that the local drugstore or discount store can be a “cool” place to shop.
Indeed, celebrity scents and whimsical cosmetics proved to have the most impressive gains, according to surveys conducted with buyers and suppliers for chains such as Rite Aid, Walgreens, Wal-Mart, Meijer and Target. Curious may have been the best-selling scent at mass this year, according to many sources, but sales didn’t necessarily come during the Christmas selling period. Retailers reported that girls who wanted the fragrance rushed to their stores in September to get it rather than wait for the holiday.
The South Dakota-based drugstore chain Lewis Drug reaped the spoils of the season by getting aggressive with seasonal merchandise and gift-worthy health and beauty items.
“It’s probably the best Christmas we’ve seen in 10 years,” said Lewis Drug chief executive officer Mark Griffin, adding that snowstorms early in November put shoppers in the holiday spirit and fueled sales.
Lewis Drug saw that early sales momentum continue through this past week, with consumers redeeming gift cards. In the beauty department, gift sets of body care items with an organic or natural bent, such as The Healing Garden, did well over the holiday. Fragrance gift sets bearing the name of a celebrity, such as Celine Dion and Shania Twain, also moved briskly, according to Griffin.
With competition from Wal-Mart top of mind, the regional chain joined with local businesses to host “shopping days,” during which consumers were handed coupons – redeemable that day only – to participating stores.
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“The momentum is still there,” said Griffin.
Despite bargains driving foot traffic, some retailers’ sales fell below expectations.
“We had a rush, but it wasn’t enough for me to make my numbers,” lamented one buyer for a major discount retailer.
At Walgreens, no one beauty item stood out as a huge hit, according to a company spokeswoman.
Americans’ tendency to watch pennies made it easier for them to rein in spending to cover day-to-day expenses, like gasoline. This caution pushed some retailers’ results down. Even Wal-Mart found that its December sales at stores open at least a year produced gains at the low end of its forecast, coming in at 2.2 percent.
Several buyers complained that they just couldn’t figure out why their sell-through was not as clean as they had hoped – especially considering that most said they had bought for a lean year.
Particularly soft was specialty bath, a category that is traditionally a go-to gift choice. The category fared better in value retailers, such as Five Below. Tom Vellios, president of Five Below, said bath, body and lip products were the chain’s bestsellers.
“We are a different business,” said Vellios. “We really are a destination for gifts, stocking stuffers or ‘I’ve gotta have this’ items.” The Philadelphia-based company plans to open locations in Virginia and Delaware later this year.
In fragrance, stores benefited from prestige hand-me-downs. Mounting concerns in the department store arena, particularly over store closures, have compressed the new product launch cycle, noted industry analyst and management consultant Allan Mottus. He added that in the fragrance category, the faster new entries hit beauty counters, the faster they cycle into the mass channel. Mottus said that to prepare for the deluge, Wal-Mart allotted several more feet to designer fragrances this holiday.
“We trained people to wait three or four months to buy prestige fragrances at discounted prices,” said Mottus. Mass retailers’ discounts on prestige scents, according to Mottus, are also getting more aggressive, moving from 10 percent off to 25 percent.
“People weren’t protecting brands this year,” he said.
Mottus expects holiday fragrance sales across all retail channels to be flat, with unit sales increasing 4 percent.
Coty Beauty is out to shatter that grim prediction. John Galantic, president of Coty Beauty U.S., said he expects celebrity scents, such as its Shania by Stetson, to drive category growth.
“In 2006, retailers that are committed to launching new brands, devoting significant prime space and advertising to big news will continue to gain share of the fragrance market,” said Galantic.
But bright spots emerged amid the sour news.
Youth-inspired items sold successfully. Bonne Bell, buyers said, made a huge comeback this year. Licensed items, as well as gift sets from Added Extras, were also singled out as strong performers. “We launched a line of Aquafina lip care that is just smoking,” said Michael Kaplan, vice president of Added Extras. Other licenses did well, too, he said, including Mountain Dew, Sierra Mist and Pepsi.
As always, value sets from Markwins blew out of stores, especially during the last few days. One of the best sets, according to Jim Koeppl, president of Markwins North America, was Stylin’, a new color cosmetics collection. Key price points were under $6.
“We also had a great year with Bratz,” said Koeppl, lending further truth to the notion that young girls are finding drugstores and mass merchants a new haven for shopping.
Buyers said traditional beauty lines were soft during the holidays, although they expect these brands to pick up in the next few months. Such beauty brands do not typically offer the bargains needed to lure people in.
“Gift products sold well, but customers were looking for bargains. I had a closeout set that I used as my big feature item, and it sold extremely well because it was such a great value,” said one buyer.
Another piece of good news was that many retailers tried to reduce the amount of products sold on promotion to float more profits to the bottom line. Rite Aid, for example, eliminated the common practice of marking down products 50 percent three days prior to Christmas.
Last-minute sales surges did materialize for several mid-tier chains. Kohl’s Department Store saw beauty sales spike the weeks leading up to Christmas. The season marked the retailer’s first chainwide holiday program with the Estée Lauder Cos.’ BeautyBank division.
“The last 10 days were extremely important this holiday season,” said Jane Hudis, president of BeautyBank. Hudis added that in addition to an assortment of gift sets, Kohl’s shoppers also purchased a “tremendous amount” of items from the brands’ basic business.
Over the last year, BeautyBank has rolled out four brands, including Flirt, Good Skin, Grassroots and American Beauty – the last trumpeted by actress Ashley Judd – to more than 600 Kohl’s stores. American Beauty’s $45 Wonderful gift set, which spotlights the brand’s first fragrance, emerged as a winner this holiday, reported Hudis.
“We are seeing some buoyancy is the fragrance business, which we haven’t seen in several years,” said Hudis, referring to industry trends. Hudis said Kohl’s shoppers can expect to see more fragrances from BeautyBank in 2006.
Value-laden specialty stores also fared better than their mass-market counterparts.
Missha, the South Korean-based retailer that opened its first U.S. door last spring, reported that retail sales tripled during December. The results exceeded Missha’s initial holiday sales forecast of a 30 to 35 percent increase, said Mike Hong, director of retail development for Missha. Hong added that the New York area’s transit strike somewhat derailed sales growth at Missha’s store at Fifth Avenue and 43rd Street, but tourists kept cash registers ringing. The store’s bestseller was a gift set of body care items, which included a body cream, shower gel, body mist, body scrub, slippers and table mirror for $21.96. The week before Christmas Missha opened a store in Queens Center mall, and has plans to open its “U.S. flagship” in SoHo by February.
The Manhattan-based specialty chain Ricky’s Urban Groove typically generates the bulk of its holiday sales during the two weeks before Christmas. Ricky’s owner Ricky Kenig said that this year candles, colorful rain boots, Uglydolls – creepy-looking plush figures – and gift cards sold briskly, fueling a 5 percent sales increase over last holiday. The specialty shop also did well with pricy appliances, such as $200 straightening irons.
“I imagine that without the strike it would have been our best holiday season,” said Kenig, referring to the three-day mass transit strike that gripped the New York metro area the week before Christmas. He said that stores in Midtown were affected most by the mass transit shutdown. Given that Ricky’s novelty goods are meant to cater to year-round gift-giving, the store’s holiday merchandising consists mainly of a small assortment of gift sets and rolls of wrapping paper.
Droves of shoppers, particularly those in search for hard-to-find beauty items, turned to online retailers.
Drugstore.com/Beauty.com consumers’ interest in skin care items, makeup and fragrance during the holiday season foreshadows what are likely to emerge as the hottest trends in 2006. In the skin care category, pricy appliances such as the $195 Clairsonic Skin Care Brush and the $225 Zeno Acne Clearing Device, a device that uses heat to treat blemishes, garnered shoppers attention, said Sarah Munson, general manager of both Drugstore.com and Beauty.com. Perhaps in a bid to make good on New Year’s resolutions, shoppers also fueled sales of hair loss products, such as Rogaine.
“Consumers are taking advantage of the technology and the at-home remedies that are out there,” said Munson. In the gift sets, Philosophy items that were featured on Oprah Winfrey’s “favorite things” episode did well. While Munson admitted that many are surprised that the online retailer has had success in fragrance and makeup, the two categories continue to emerge as important businesses. “Fragrance always does well for us,” said Munson, naming niche brands, such as Annick Goutal, as standouts. Beauty.com plans to add Bond No. 9 to its mix this spring.
“Consumers look to us for high-end, niche brands,” said Munson. “Our consumers love things that are hard to find.”