David Ritter

Sitting at the intersection of retail and health care, 2020 and 2021 have been profoundly challenging years for the retail drug store channel. The onset of the COVID-19 pandemic had once-in-a-generation impacts across the full business — both pharmacy and retail. On the pharmacy side, there were shifts in chronic versus acute prescription volumes, channel growth in mail-order and delivery, large-scale rollout of COVID-19 testing capabilities, and most recently, a heroic effort to deploy COVID-19 vaccines at scale. On the retail side, we saw store traffic decreases, customer stockpiling pressuring supply chains, explosive e-commerce growth, and highly variable category-level performance driven by changes in consumer behavior.

According to CVS and Walgreens Boots Alliance reporting, consumer health/health and wellness and general merchandise categories were big winners, while mainstays — cough-cold and beauty — struggled. Given the importance of the beauty category to the drug store channel, the A&M Consumer and Retail Group set out to understand customer preferences and behaviors and the impact to drug stores.

Patricia Hong

In the A&M Consumer and Retail Group Beauty Survey issued December 2020 to about 1,000 female beauty consumers in the U.S., the majority of respondents indicated that, since COVID they have either completely stopped or purchased fewer beauty products, including skin care and makeup.

70% of respondents shopped for less makeup last year.

18% stopped buying makeup.

In skin care, 40% of respondents bought less.

Only two out of every 10 consumers in the U.S. said their beauty routines remained unchanged.

As we begin to emerge from the pandemic this year, many will return to work in-person, social gatherings will ramp up, and some usage occasions will return. But will consumer routines and behavior return to pre-COVID days or continue on their current trajectory?

Four in 10 respondents do not expect to return to pre-COVID makeup purchase levels.

20% of respondents who stopped buying makeup do not plan to start again after the pandemic.

While the trend is not as dramatic in skin care, almost three in 10 respondents plan to shop less.

Digging deeper, the survey highlighted several other profound changes in beauty during 2020 that could shift major paradigms and dramatically benefit the retail drug store channel.

Brand loyalty continued to erode — 47% of the 18 to 29 age range did not have a go-to brand in makeup or skin care.

Ingredients became increasingly important — searches for “hyaluronic acid skincare” and “vitamin C skincare” increased five times and three times, respectively, in the last 12 months.

Discovery and shopping experiences went digital — in makeup 34% of their pre-COVID shopping was done online; during COVID, this number increased to 47%; post-COVID, they anticipate 42% of shopping to remain online.

Shared testers could no longer anchor discovery — Only 15% of respondents feel comfortable using shared beauty testers now, and about 25% would be willing to use them again once a vaccine is widely available.

The newness drumbeat slowed down — only about 10% of respondents actively look for what’s new in makeup and skin care.

Consumers embraced high/low in beauty — while most prestige categories saw pressure in 2020, mass categories like nails and hair color saw double-digit growth.

While it is hard to truly grasp what the “new normal” will look like for beauty, evolving to meet the changing customer is table stakes.

With 90% of customers indicating that they plan to shop across multiple channels, creating a seamless and meaningful customer experience across all channels is critical. Drug stores that understand this and re-imagine their beauty operations will succeed. We suggest the following actions:

Build an in-store beauty destination worth visiting: Allocate more space to beauty, invest in the look-and-feel, and feature in-store contactless personalization experiences.

Stop pretending and start executing an omnichannel strategy: Today, 90% of customers expect to shop across multiple channels. “Leveling up” search capabilities against features/benefits and amplifying websites to highlight key product differentiators are just a start.

Wreck and rebuild new product strategies: With traditional vendors, sharpen assortments and rationalize SKU mix — gone are the days of following their launch calendar. Use customer insights to target innovative brands that resonate with younger, less-brand-loyal consumers for “customer acquisition” newness.

Leverage AI to transform demand-based planning: Move away from the traditional planning calendar and create an agile supply chain supported by AI-enabled tools that respond to shifts in demand in a volatile environment.

Celebrate your heritage in health and wellness: Now more than ever, consumers are paying attention to their health — no channel is better positioned to differentiate on this dimension but capturing consumers’ attention will require coordinated effort.

David Ritter and Patricia Hong are managing directors in Alvarez & Marsal Consumer and Retail Group, a global consultancy specializing in business transformation. They can be reached respectively at [email protected] and [email protected].