Its survey, carried out in September to gauge demand for personal care products in 2011, saw one thousand US consumers surveyed for planned spending in five categories: hair care, skin care, oral care, cosmetics and fragrances.
While consumers are predicted to spend roughly the same amount on personal care in total as they did in 2010, AlixPartners predicts consumers will spend more on shampoo, toothpaste, deodorant and shaving cream, whilst cutting back on items like perfume, makeup and lipstick.
“Many retailers and consumer products companies in the personal care market are going to be under increasing pressure in the year ahead, particularly makers of fragrances and cosmetics,” said Jon Hanover, director in AlixPartners’ Consumer Goods Practice.
Almost one in five of the surveyed consumers said they plan to spend less on fragrances while only fifteen per cent said they would cut back spending on cosmetics. Both reduced-spending groups, however, said they predict to cut spending on these product types by more than 25 per cent.
“Ultra price-sensitive consumers”
In response to its survey, AlixPartners emphasises the importance of factoring in demographics, with the prediction that most 18 to 34 year-olds will “ratchet up spending across all five categories in 2011”.
It adds that, despite this promising outlook, the industry dynamic is a ‘double-edged sword’, as this group is ‘ultra price-sensitive and expects to pay less per unit through aggressive promotions and everyday low prices’.
Although 40 per cent of all consumers expressed a potential interest in switching brands to capture meaningful savings, the 18 to 34 age group is thought to be more capable than older consumers of demanding better value via brand switching.
This is why “marketing and trade promotion effectiveness will be the key levers in generating growth”, said Rich Vitaro, director in AlixPartners’ Consumer Products Practice.
Importance of supply chain efficiency
AlixPartners claims the survey provides significant findings in regard to consumer behaviour when an item is out of stock, with 15% to 25% of consumers surveyed admitting to brand switching, depending on product category, when their preferred item is unavailable.
According to Hanover, this stresses the importance of supply chain efficiency as a means of preventingpotential sale losses due to out-of stocks.
David Garfield, a managing director at AlixPartners, concluded that the ‘stagnant demand’ predicted from its survey means that “personal care products companies are facing pressure from customers to drive prices lower” and that this environment is “likely to continue well into 2011”.
“As consumers continue to demand value, companies will need to focus on cost structures,” headded.