PRESTIGE’S GROWTH TRACK

NEW YORK — Over the past few years, prestige beauty sales have shown modest growth in the low single digits, according to analysis by NPD BeautyTrends.
Last year, the business grew by 3 percent. “Treatment was the fastest growing, followed by color cosmetics,” said Timra L. Carlson, vice president of the consumer marketing firm.
“Fragrances once again were hit the hardest. While the growth rates in prestige have certainly not kept pace with the Eighties and early Nineties, the department store remains the primary destination for today’s shopper of prestige beauty products,” she continued.
The beauty sales tracking firm summed up the major developments of 1999 as including more industry consolidation and vertical integration, a shift to “experiential and multipurpose products,” more focus on men’s products and open-sell counters and the continued “blurring between mass and class.”
“The massive consolidation seen in other markets did not pass by the beauty industry,” Carlson noted. “Both LVMH and Estee Lauder acquired smaller niche brands and retailers consolidated to gain a strategic edge. This trend is sure to continue as companies reinvent themselves to round out their product offerings and remain competitive. In addition, vertical integration continued, and we saw many more manufacturers going into retailing and retailers going into manufacturing.
“In 1999, consumers bought much more than traditional beauty products,” continued Carlson. “Most innovation was seen in the skin treatment category; aromatherapy and body products were all the rage. The 5 percent growth in the skin treatment sales was driven by a shift toward products that provide unique experiences, not just simple daily maintenance. Men’s body products were a phenomenal success, and further growth is expected.”
Last year, men’s scents powered the fragrance business, with the category growing by 2 percent and outpacing the women’s side of the aisle for the third year running.
NPD also noted that innovative retailers forced changes in the layout of department store shopping. “Shop-within-shops and open-sell formats, concepts made popular by specialty chains like Sephora, will continue to proliferate in the market,” said Carlson. Meanwhile, prestige color showed a 3 percent gain for 1999, with makeup artist brands grabbing more department store share.
The consumer continues to be the force behind the changes in how cosmetics are marketed and sold. “The challenge is to change as fast as the consumer,” said Carlson.
She predicted that the Internet will become even more accepted. “Total annual Internet sales range in the billions with continued growth expected. And while beauty purchases account for less than 1 percent of total sales, it’s easy to see that even a small slice of the Internet pie could be worth millions of dollars. The Internet will continue to re-shape the way we get product information as well as purchase products.”

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