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Sector Spotlight: Retailers are re-examining what was once the “recession-proof” health, beauty and cosmetics department.
Ulta Salon, Cosmetics & Fragrance, a fast-growing beauty and cosmetics retailer, is building a chain of supersized health and beauty stores around the country. Like rival Sephora stores, they’re brightly lit, sleek and colorful, and they carry thousands of both high-end and middle-market brands of cosmetics, fragrances and skin and hair-care products. But Ulta stores also offer hair salon services, manicures, pedicures, massages, waxing and other beauty and spa treatments. “The more services you offer,” says M.J. Munsell, a principal at Callison in Seattle, “the more reasons you give the shopper to come in and the more opportunity for her to access different brands. And that’s the name of the game in the beauty business.”
There’s a whole range of health and beauty retailers, from department and specialty stores to drugstores and supermarkets, trying to capture the time, tastes and pocketbooks of a nearly $10 billion market. But that market is at a crossroads. Once regarded as “recession-proof,” it’s being challenged by the biggest worldwide economic downturn in 75 years.
Mix and Match
The mass channels – drugstores, supermarkets and discounters – have traditionally depended on brand loyalty to drive their health and beauty business. The products are arranged in aisles of open-sell shelving with a small amount of P-O-S promotion. The supposition is that the woman knows what she wants and appreciates the efficiency of plucking it off the shelf without the need to interact with a hard-selling salesperson.
The department stores, on the other hand, have always thrived on that interaction – makeovers, consultations, advice – as a way to get women in from the mall and into their well-lit, nicely scented, brightly merchandised departments. Samples and gift packs make shoppers feel they’re getting something extra. And sitting down with a “beauty consultant” exposes them to new products and applications. “If you get her into a chair, engaging with a salesperson,” says Munsell, “you make her familiar with a product she didn’t think she needed when she walked into the store.”
Specialty retailers, like Ulta and Sephora, have built their success on blending the prestige and mass brands – the industry calls it “masstige” – and by combining, as well, the open sell of drugstores and supermarkets and the personalized service of department stores. Even as other retailers struggled, Ulta’s fourth quarter net sales increased 10.4 percent and it announced plans to open 35 new stores in 2009. Revenue at rival Sephora, a unit of LVMH, increased, as well.
