Beauty aisle bedlam: Companies focus on wellness, shopability in mass

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Beauty aisle bedlam: Companies focus on wellness, shopability in mass

By Seth Mendelson - 07/17/2018
Mass market retailers, seeking to stop the slow-but-steady gains made by specialty retailers and online competitors in the beauty business, are beginning to fight back. In fact, many are focusing on a two-prong game plan of targeting younger consumers and cross merchandising beauty with wellness to regain the domination they had with the category as little as 10 years ago.

It is going to be an uphill battle. Over the last decade, competitors — both traditional and digital — have been better able to appeal to customers, especially younger shoppers who want faster implementation of trendy merchandise they view on social media. Compounding that issue is the fact that millennials and Generation Z shoppers view mass chain outlets as out of touch with their views and appealing to a much older group of shoppers.

On top of that, retailers have given away vital space that could be used to attract these younger shoppers to their high-margin beauty sections. For example, Brian Tanquilut, research analyst at Jefferies, pointed out that the addition of clinics, labs, optical and hearing centers, can mean SKU cutbacks in such front-end categories as cosmetics.

One need look no further than CVS Health and its merger with Aetna or Walgreens and its comprehensive partnership with insurer UnitedHealthcare, which will feature urgent care clinics, to see the possibility for beauty to be overlooked in stores of the future. Jeanine Recckio, CEO of a beauty futurist company called Mirror Imagination Group, said the image of clinics near color cosmetics is not as compelling as the counter at Sephora.

The results: Not very good for mass retailers, which have seen flat sales increases and even some decreases over the last few years, despite a robust increase for the overall beauty category. In fact, NPD Group reported that prestige beauty sales are increasing by about 6%a year, while mass beauty sales are falling slightly.

So, what’s a mass marketer to do? Several retailers said they plan to fight back and turn a negative healthcare image into a positive. That means going after the younger, more socially conscious consumer by making their stores more exciting and inviting.

First, retailers must determine whether beauty is a category worth pursuing. While the overall category is relatively flat at mass retail, IRI data for the 52-week period ended April 22 did isolate a few categories on the upswing. Those included concealers, where sales climbed 4%; lip treatments, where volume perked up 3.6%; and the hotter-than-hot brow category, where sales expanded 20%. Some of the harder hit product areas, however, were lip gloss, down 16%; blush, where dollars were off 7% from the same period last year; and eye shadow, where there was a 10% decline.

Beyond competition from specialty stores, Amazon now has a massive grip on the category. At first, Amazon was slow to crack beauty, but is clicking on all cylinders now. The juggernaut’s luxury beauty sales expanded 47% year-over-year, hitting about $400 million. Almost 40% of all beauty products purchased online are bought through Amazon.

Despite the cloudy mass-market picture, some of the top merchants have a blueprint for growth. They are building off the fact that the Internet cannot reach out and touch customers, and competitors that only sell beauty cannot take advantage of a wide range of product categories — including the presence of a pharmacist, who can boost sales of such products as skin care. Instead of an obstacle, the wellness image is a benefit.

Branching out
For CVS Pharmacy, efforts in beauty include adding hundreds of new brands in cosmetics and hair. “CVS Pharmacy is one of the largest beauty retailers in the country, and we continue to expand and grow the beauty category in-store and online,” said Maly Bernstein, vice president of beauty and personal care at the chain. She said the category at CVS Pharmacy is beating the overall market.

The retail arm of CVS Health recently attracted a great deal of attention, especially from younger consumers, for its announcement on eliminating the altering of images in its beauty department and asking others to do the same. A watermark will designate images that are not Photoshopped. Also, CVS Pharmacy unleashed a campaign linked to the ideas of presenting more realistic images of beauty called Beauty in Real Life. “It is the biggest beauty campaign ever done at CVS,” Norman de Greve, senior vice president and chief marketing officer at CVS Health, said. In the hair category, CVS Pharmacy is the first retailer to team up with formerly direct-to-consumer eSalon, which helps consumers get the perfect hair color shade.

At Walgreens, Lauren Brindley, group vice president of beauty and personal care, sees the synergy with health and wellness as a competitive edge, rather than as a threat to the beauty business. “I think it is important for us as a health and beauty retailer to think about what equity and right to win does having a pharmacist give you in the beauty space.”

Recently, Walgreens put the theory to work. Walgreens and the Skin Cancer Foundation kicked off a multi-city tour to help educate the public about the importance of effective sun protection. In addition to dermatologists who perform skin screenings, Walgreens linked in its beauty consultants.

Also, in Walgreens’ tool box is SkinID Advisor, available on its website and used in stores by consultants, to help shoppers personalize their skin care regimens, especially with products addressing acne. Co-created by Walgreens and Johnson & Johnson, SkinID leverages the beauty brand’s skin care expertise to assess skin conditions based on users’ answers to a series of questions. The queries center on breakouts, dry skin and skin texture, which are among the most common skin issues. Users receive an individualized, three-step daily routine. A top pick is recommended for cleansing, treating and moisturizing, along with other suggestions with varying price points. The product suggestions include both J&J and competitive brands.

The chain also is revamping its stores to show off its own brands and its emphasis on wellness and beauty. Walgreens has about 3,000 stores featuring its elevated beauty concept complete with testers, such premium brands as No7 — now the leading skin care serum in the United States, according to Walgreens — and highly trained beauty consultants. “Those stores, where we have elevated [beauty], are growing faster than the rest of the chain,” Brindley said.

Technology also is coming into play as Target embellishes its beauty offer. Over the past year, Target has spruced up its beauty department, adding more items, lowering gondolas and adding more beauty concierge areas to provide better service. Taking that to the next level, Target launched its Beauty Studio in conjunction with Perfect’s YouCam Makeup AR app. A digital screen is now in about 10 stores, as well as on Target.com and mobile. Customers can virtually try on makeup to help identify the right shade. One of the biggest problems in self-service beauty shopping, according to Christina Hennington, the chain’s senior vice president of merchandising for essentials, beauty, pets and wellness, is picking the wrong shade.

Two other major assortment enhancements at Target include the addition of eight multicultural brands and a white-glove approach to its men’s department. “The world is changing, especially for the millennials and Gen Z,” Hennington said. She added that these more multicultural generations have high expectations, including an array of options. “We carry a breadth [of assortment], and that’s paid off in hair care, and we are confident it will in cosmetics, too.”

Target has more than 100 brands designed to meet diverse shopper beauty needs. The 150 new products are culled from up-and-coming online brands that have caught Target’s eye.

“This is an evolution of a strat