Shift in spend patterns marks changes for US cosmetics
volumes in a mature market, the retail sector has been equally
challenged as traditional outlets such as department stores and
super markets see their sales margins eroded by newer outlets that
are dedicated to personal care products.
According to a newly published study from Kline & Company, Beauty Retailing USA 2004, this shift has had the biggest effect on food retailers, who have seen their sales of cosmetic and toiletry products slip by 3 per cent over the past five years.
"While food stores could once count on one-stop shoppers to buy theirbeauty products along with the groceries, they're now conceding these sales tobig-box stores like Wal-Mart and Target," said Lenka Contreras, vice presidentand head of the Consumer Products practice for Kline's research division.
Meanwhile both drug and department stores have also seen small declines in sales of cosmetics and toiletries, which is spurring the industry to look for other outlets.
One of the winners in this scenario has been discount retailers, with Kline's research showing that dollar stores have increased their sales by 16 per cent during the review period, albeit from a small base.
"The sheer number of dollar stores opened over the last five years is amajor factor, but the bargain-hunting mentality in a slower economy is drivingconsumers to try to find their favorite products at lower prices," Contrerassaid.
Still in the discount channel, Contreras also noted a similar trend is developing in the warehouse clubchannel, but on a smaller scale. While the large unit sizes in stores like Costcoand BJ's mean higher price points than in dollar stores, shoppers stillbelieve they are getting a bargain, and out-of-pocket spending is higher,contributing to overall growth of nearly 7 per cent for beauty products in this channel, the report says.
Another trend is the loss of fragrance sale dollars from department stores to big-box retailers such as Wal-Mart. This follows an increasing trend for the larger stores to stock and promote leading luxury fragrances, the report says. This is also follows the huge increase in sales of luxury fragrances, which now account for more than half of all fragrance sales.
"Consumers are finding that they can buy many of the same higher-endfragrances at Wal-Mart for less than they would pay at a department store,"Contreras said. "Mass retailers know that offering luxury brands helps toboost their quality image among consumers, and selling them at a discountcreates a greater perceived value in the shopper's mind."
But it hasn't all been losses for the department stores. One redeeming element has been sales of high-end facial treatments, marking a consumer trend towards increased expense on often increasingly expensive skin care products.
The report says that high-endprofessional skin care brands like N.V. Perricone MD, Dr. Brandt, and DDF havebeen a significant factor in helping department stores avoid an overall lossin cosmetic and toiletry sales in recent years.
This trend that has also been mirrored by increased sales for anti-aging products, which have grown by 7 per cent annually since 1999.
Although the report outlines no major changes in the US cosmetics and toiletries retail sector, the areas it does highlight could be crucial to marketers wanting to target their products in the right channels, the authors claim.
"Especially with slow overall market growth, and with consumersincreasingly shopping across channels, the opportunity for marketers is todiversify the distribution channels for their beauty products," said DavidVladyka, head of Kline's Consumer Products consulting practice. "Rather thantrying to lure customers back to the traditional channels that worked for themin the past, they should be looking to reach them in the channels that areshowing the most promise for the near term."
