Specialty stores snagged a great deal of beauty sales from mass market retailers over the past five years, according to research from Kantar Retail’s ShopperScape. But the experts at Kantar said mass marketers, especially drugstore chains, are putting plans in action to halt the market share erosion.
“Drugstores are trying to capture more of their fair share of the specialty [business],” said Brian Owens, the director of retail insights for Kantar Retail. “Beauty is a flagship category. Health is where they own [share] and they understand that equity. But beauty is something where they want to re-brand themselves.”
Mass retailers and brands are making moves before specialty stores siphon off more sales. Tracking historical shopping patterns from 2009 to 2014, Kantar’s research showed that beauty specialists such as Sephora and Ulta Beauty produced a 6.2 percent gain as the channel where shoppers reported spending the most on color cosmetics. Mass declined 2.1 percent with drug dropping 2 percent. That’s not an acceptable trend to the industry, especially for the CVS and Walgreens stores of the world, said Owens, who predicts chains will elevate assortments and ambiance — even going so far as to add services such as Botox under their roofs. That would dovetail with the explosion of in -store medical clinics.
It makes sense for drugstores to leverage the synergies between wellness and beauty, he said. Beauty provides a much needed profit boost to offset gross margin pressure at the pharmacy counter. He foresees further development of beauty consultants who’ll borrow a page from department stores and offer more in-store makeovers. “They are trying to make it a more premium experience as you walk the box,” he said. Examples he cited include the clinical skin-care presentation at CVS as well as recent efforts to burnish beauty starting at 2,000 of the chain’s doors along with the Look Boutiques, which comprise as much as 4,500 square feet at Walgreens’ flagship stores.
Beauty is shifting in mass doors, according to Kantar’s analysis, from a convenience purchase to a more personalized experience mimicking a salon or prestige shopping experience. “The use of more advisers is giving them [mass chains] a more salon look and feel,” he notes. Moreover, consumer data such as that gleaned from CVS’s 17 million-plus beauty club members helps chains better tailor promotions and product information to the right consumers.
Exclusives are on the rise at both department and mass stores, Owens said. Bigger consumer packaged goods companies create special collections for chains to help them stand out from the competition. If that’s not available, retailers are acting as brand managers and creating their own lines such as Boots No7 and Soap and Glory. To keep up with Ulta Beauty, Owens foresees more in-store services such as brow shaping at drugstores.
One of the challenges for drug chains, he acknowledged, is the sheer size of the network. It is a daunting task to elevate the look and selection at thousands of stores. “That’s why they [chains] have laserlike focus on urban environment,” Owens said noting the biggest upgrade service efforts are put to work in high-density shopping markets such as New York or Boston. “In the new world, what we’ll see is more of a leveraging of the virtual experience. You’ll see more and more of that.” Boots in the U.K. already offers more virtual tools, which help the retailer notch 50 percent of its sales in beauty. Traditional American drugstores produce more than 70 percent of their volume in health. “They are going to bring the best of what Europe has to offer here,” he predicted. Already, according to Kantar’s research, efforts at Walgreens have helped attract upscale consumers. Based on “where department store customers spend the most on color cosmetics,” Kantar noted a 1.4 percent increase in Walgreens as a preferred store between 2013 and 2014. Walgreens notched a 2.6 percent increase with drugstore shoppers when it came to cosmetics.
It isn’t only drugstores hungry for bigger beauty baskets. He noted efforts by Target to put a spotlight on emerging nice brands while supermarkets like Kroger tout the link between “what you eat and looking good.”
Looking further into the future, Owens believes physical stores will be more about sampling and services versus purely moving merchandise. Sampling will be a key to getting product into consumers’ hands, he noted. Peer groups will usurp brand advertising as the voice of recommendation. Online platforms will be more important to serve as the replenishment vehicle. Partnerships and stores within stores will be integral to elevating the experience to draw shoppers in. “We don’t know what the beauty landscape is going to be like, but technology will definitely help define it,” he said. “The decision to build beauty has been made because the value it adds to the basket is amazing.”