What Price Beauty?

A more segmented market gives supermarkets the opportunity to win over beauty care consumers.

Who says beauty is priceless? Beauty on a budget is a fact of life for many shoppers in these times of economic turmoil as they try to save on products in this category.

Just three years ago, the outlook for high-ticket beauty aids was rosy, with aging boomers looking to prolong their good looks and younger consumers getting used to premium products from an early age. The economy may have blown the lid off the upper edge of the middle market for beauty care products. The result is that the market has become more segmented, with the ultra-luxury segment holding its own and the rest of the market rallying around the mass-market brands.

This is good news for supermarkets, as well as mass merchants and drug chains, as shoppers are buying more of their beauty care needs in these outlets. The competition now centers among these channels, and not as much with traditional upper-end beauty care retailers such as department stores and specialty shops.

According to Schaumburg, 111.-based Nielsen, U.S. dollar sales in the beauty care category were flat through July 2010, but have rebounded slightly as many retailers have raised prices to improve margins. The results of a Nielsen online survey of consumers found that mass-market cosmetics could successfully sell against more expensive premium brands, even in such an image-driven category.

This isn't to say that sales of luxury beauty products are tanking; on the contrary, premium brands have started to rebound as well. Port Washington, N.Y.-based The NPD Group reports that during the first half of 2011, total prestige skin care and makeup sales in U.S. department stores surpassed their level from the first half of2008, the period before the economic bottom fell out.

Supermarkets have been holding their own with the rest of the non-luxury beauty care shoppers. “My supermarket business is up from that of the mass,” says Jeffrey Mamiye, VP of New York-based Jean Pierre Cosmetics. “Shoppers are trying not to go to the mass outlets, because they have to go to the supermarket anyway.” In an effort to economize, many shoppers don't want to make a second shopping trip to a mass merchant, especially with gas prices still high.

“The food trade seems to be keeping pace in beauty care sales and is actually a little bit ahead of the nonfoods merchants,” says Grace Talion, SVP marketing at Port Washington, N.Y.-based KissUSA. Kiss' product segment, Nail Art, is the fastest-growing section on beauty care shelves. According to Nielsen, as of July 30, the segment enjoyed a 25 percent sales increase across all classes of retail trade. The vast majority of these sales come from the food, drug and mass channels. This segment is another example of consumers trying to economize by buying a retail nail art product at a fraction of the cost of having their nails done at a salon.

Taking Advantage

The big advantage that food retailers have in the race for beauty care dollars is their captive audience. Shoppers are already in the supermarket, so it's natural to promote these products to them as a part of their routine shopping trips. “Supermarkets should stress their convenience and use the traffic that they have, since shoppers are in the stores every week,” Mamiye says. The problem for many food retailers is that even if they have a good assortment of beauty care products, top-of-mind consumer awareness of these selections isn't always high.

Since shoppers who are looking specifically for cosmetics, fragrances or skin care products don't often think of going first to the supermarket, food retailers need to make these products an impulse buy for those customers who are already in the store for other items. These types of products lend themselves readily to impulse purchasing.

The Nielsen online survey found that the three most important factors influencing the purchase of beauty care products were the allure of the product's promise, price and friends' recommendations. These factors work in favor of the supermarket retailer that can lure the shopper to the products through displays and the products' image and visual appeal, and then capture the sale with the right price point — the perfect ingredients for an impulse sale.

One factor that works to the supermarket's disadvantage is the physical limitations of the store. When it comes to merchandising these products optimally for impulse purchasing, many supermarkets just aren't set up for it. “Merchandising is sometimes a tough area, because supermarkets don't have the space to create the types of displays needed,” notes Ira Adler, VP of Orangeburg, N.Y.-based Fisk Industries. “It is easier to do in new, bigger stores when they are first being planned, rather than trying to make room in an established store.”

KissUSA's Talion believes that the allocation to the beauty care category for most supermarkets is still small, meaning that they have to be careful about what products they bring in. In terms of KissUSA's product segments, supermarket sales are growing faster than those of drug and mass channels. Sales growth, Talion believes, can be enhanced through proper space allocations and better management of the assortment.

According to Talion, working with just a few manufacturers in each product segment will actually help supermarket retailers with limited space for the beauty care category. Instead of having a wide display of different brands and little depth in the variety of type of product, she suggests widening the assortment from a more limited number of manufacturers. This not only offers the shopper a more complete array of ■ the products available within the segment, but also aids the retailer by fostering a closer partnership with the manufacturer. This strategy was echoed Wm SH by a number of manufacturers eager to work with food retailers.

On the Rebound

With a category as diverse as beauty care, certain segments have started to rebound in sales growth sooner than the others. According to Chicago-based Mintel, one of the fastest-growing subcategories is that of color cosmetics (eye shadow, lip color and nail color), which experienced 5.1 percent growth in 2010 and is predicted to increase another 5.9 percent this year. The food, drug and mass channels all benefited from these sales increases, which were fueled by aggressive promotions and the introduction of new products that met the lower-price points demanded by shoppers. To make space for new product introductions, many manufacturers worked with retailers to cull the shelves of poorly performing SKUs and product lines. Facial skin care has also started to increase in sales during 2011.

Mintel reports that the soap, bath and shower segment also showed signed of renewed life, with new products that offer fragrances and moisturizing properties leading the way. Similarly, sales of both men's and women's fragrances showed strong signs of rebounding in early 2011. According to NPD, this was somewhat unexpected, since fragrance sales generally increase when consumer confidence is high, but they've started to come back now despite a still low level of consumer confidence. Traditionally, fragrances haven't been a large segment for the food channel, but supermarkets might decide to bring in a selection of moderately priced Aij| ' popular brands to feed impulse purchasing. One way to make I a new beauty care product into a sales winner through the use of social media. With this category in particular, social media can be an important facilitator of awareness and eventual sales. Manufacturers are increasingly turning to social media, including Facebook and Twitter, as well as bloggers and online magazines to get the word out about their beauty care products, especially those geared to a younger demographic.

KissUSA's Talion recommends that retailers work with manufacturers by sharing information and coordinating messages on their own websites and on social media venues with those of manufacturers to spread the word about products and their availability at retail. “We're all trying to figure the consumer out, especially as they shop across multiple channels,” she says. “Social media is an important part of the mix.”