Companies producing prestige beauty products have been hard hit as many consumers have shunned high-end products in favor of cheaper, private-label products.
This year has seen Estée Lauder post large Q4 losses and announce its intention to cease distribution of its unprofitable Prescriptives brand.
Decline in sales
The prestige beauty sector generated $6 billion in sales between January and October this year, a decrease of 7 per cent when compared to the same period last year, according to market research company NPD.
All three categories in the sector (skincare, make-up and fragrance) have witnessed a decline in sales, with sales of fragrance showing the biggest decline.
Fragrance sales fell by 15 per cent in October alone, with an overall decrease of 12 per cent when compared to the ten-month period in 2008.
However, it is expected that sales will increase in the run up to the holiday season, as this is traditionally seen as the best selling period for fragrances.
Estée Lauder announced recently that the fall in sales in the North American market has shifted its focus to key high-margin fragrance brands, including the Donna Karen-branded fragrance, in preparation of the holiday season.
Make-up accounted for the highest proportion of sales in the prestige sector generating $2.5bn, yet this was still 6 per cent less compared to the same January through to October period in 2008.
Although October 2009 marked the twelfth straight month in the decline of prestige skincare sales, skincare was actually the best performer in the prestige category despite a 5 per cent decrease in sales.
October represented the shallowest decline in sales, with both dollars and units down by one percent, compared to the three per cent fall that make-up experienced during the same month.
Although the market for prestige cosmetics has been hard hit in the first nine months of the year, all the indications are that the final quarter of 2009 should see an ‘up tick’ for the category, as improving economic conditions translate into a more optimistic consumer with improved spending power.