The future of the beauty category 2020

The retail landscape for beauty has changed dramatically, and retailers must focus on the customer experience, because that is where the sale is won or lost, where the brand comes to life, and where the seeds of loyalty are planted.

That’s just a few of the key takeaways from a webinar held by the Global Market Development Center this month. The webinar was led by Saba Buser, an analyst for RetailNet Group.

Buser says that in today’s beauty environment, consumers are demanding a high level of in-store service. Beauty shoppers are not relying on Amazon. Cookie cutter beauty doesn’t work, she said, and products and the store experience require personalization. The experience of playing with beauty products is something the digital retailers cannot provide. Some retailers have realized this, and they are starting to upgrade the store experience.

"Formerly the beauty shopper ... walks into a Walgreens, the middle income shopper, she has a certain amount of money to spend,” Buser said. “Now some of the shoppers that were in that category are low income. ... But the majority of the shoppers that are there are being pushed into a higher income bracket. That means she's walking into the store with a bit more discretionary income. So that's really what's driving the trend in beauty sales growth.”

Indeed, according to Mintel, the beauty industry is expected to grow at a rate of 6% annually until 2020. Mintel says the growth in beauty products and services can be attributed to increased discretionary spending among higher-income consumers. That creates an opportunity for a lot of retailers, and not necessarily the Sephoras and the Ultas.

Beauty shoppers are increasingly not brand loyal and instead, they increasingly value product breadth and price, Buser said. Walgreens, for example, is expanding its beauty assortment to satisfy this shopper. If you are not offering a high end experience and a big assortment, you have to offer low price, Buser said.

Masstige continues to develop as a driving trend across beauty segments, but as masstige expands, it is also driving more competition. A lot of apparel stores, for example, are diving into beauty because it’s high sales and high growth. They see beauty as a way to extend their brands. These new entrants into beauty, such as H&M and Athropologie, are also changing consumer expectations for experience, price points and assortment.

This has led to mass retailers stepping up their game when it comes to merchandising and store experience.

Buser cited Target as a good example of “premium” merchandising to get consumers to feel like they are having a prestige experience in-store. Bartell’s is also a great example of creating a beauty space in-store as a way to compete with the beauty-only retailers, she said.

In terms of what’s going on online, Amazon is expanding its beauty assortment and credentials by carrying exclusive products. Buser says subscription beauty boxes address a few different things and have different business models. Some shoppers buy for the element of surprise, some for personalization, and some for brand loyalty. But they are not the future.

The future looks like 3D printing of cosmetics, virtual reality, social media sharing, makeup chats, Buser said.

"Walgreens is doing a great job of in-store digitization," Buser said. It’s another way of offering personalization, relevant products for the shopper that are highly curated and customized. Sephora has debuted a virtual reality app that allows sampling and buying. Social media is key to digital engagement and positioning in beauty.

It’s clear that best-in-class practices bridging digital (curation, personalization, augmented reality) and store-based beauty are key to winning the beauty retail space through 2020.