Specialty format steals department store beauty dollar

Related tags Department store Macy's Retailing

Sales of Beauty products in the US are mustering only small
increases at the moment. But as the face of US retail changes, it
is the specialty and discount stores that are winning market share
from the more traditional department store format, reports Simon

But with the face of the US department store rapidly changing, new opportunities are afoot if they can be canny enough to tap into what fragrance and beauty consumers want, according to a new report from Kline & Company​, Beauty Retailing USA 2004.

Three major department store mergers in the last six months have coincided with dwindling consumer interest in the department store experience-a trend reflected in a dip in sales at the beauty counter. But these changes could offer the big retailers an opportunity to drag themselves into the new beauty consumer age, the reports authors say.

Beauty product sales through department stores mustered only about 1 per cent growth on average over the last five years, while sales through all channels grew by nearly 3 per cent a year during the same period. This, the report's authors say, has lowered department stores' share of the market by about 2 per cent. A lack of excitement in department store offerings and increasing competition from other channels are cited as the prime factors in the current slump.

"Most of the traditional department stores offer the same merchandise in an atmosphere that's just not as fun or convenient as specialty stores or other outlets,"​ says Lenka Contreras, vice president of Kline & Company and head of the Consumer Products practice for the firm's research division. "Now, with the recent mergers and consolidations, there could be even less variety in the channel."

Target Corp.'s sale of Marshall Fields to May Department Stores in July and K-Mart's purchase of Sears in November of last year kicked off a shopping spree among the major department store chains. With the imminent approval of a merger between the nation's top two department store retailers, Federated and May, long established locations across the country are bracing for consolidations and closures.

Many of Federated's own chains, including Bon-Macy's, Burdines-Macy's, Goldsmith's-Macy's, Lazarus-Macy's, and Rich's-Macy's, have dropped their original names and have been converted to the Macy's or Bloomingdale's name - one of the most established and revered names in the US cosmetic retail market.

Other familiar franchises under the May umbrella, including Filene's, Hecht's, Kaufmann's, and Lord & Taylor, will follow suit and will ultimately be converted or eliminated entirely, especially in areas where May and Federated stores currently co-exist.

In addition, Neiman Marcus recently announced that it is looking for an acquiring partner, and Saks Fifth Avenue is exploring the sale of all or part of its business, the reports authors point out.

Fewer choices within the department store realm, accompanied by consumers' growing tendency to shop across channels and brands, are expected to keep beauty product sales in the department store channel relatively flat through 2009, according to Kline's study.

The convenience factor is said to be another reason for the stiff competition department stores are facing. Susan Babinsky, senior vice president and head of Kline's Consumer Products consulting practice, backs this theory up: "Consumers want an easy in-and-out shopping experience, and they're moving more toward strip malls and freestanding stores where they can pull up, run into the store, and pick up what they need quickly. Most malls and department stores make this impossible."

In line with this, when shoppers do decide to visit the malls, they are increasingly bypassing the big department stores and are favoring specialty stores like Victoria's Secret Beauty and Sephora to buy their lotions or color cosmetics."(Specialty stores) offer a much more trendy and exciting shopping experience, which helps them to attract younger consumers,"​ Babinsky said. "The department stores need to take a more contemporary approach to compete for the teen and young adult demographic."

But there are signs that this message has been received, Kline & Company says. As part of their merger, Federated and May look set to incorporate some changes in customer service and merchandising to make their stores more attractive to a younger crowd. Meanwhile, J.C. Penney has recently hired a new bath and body buyer, which could indicate a move to expand beauty offerings in the future.

"With fewer choices in the department store channel, it's now even more important that the major chains that are left get it right in order to reach consumers,"​ Contreras said. "People aren't as brand-loyal as they used to be when it comes to their beauty products or where they go to get them, and the department stores need to find ways to make shopping fun again."

The report also looks at current retail trends in beauty products sold in both department and specialty stores throughout the US, giving market data on individual retailers. It also examines individual product categories and assesses the impact of promotional activities and private label products.

Related topics Market Trends

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