Price is chief motivator steering consumers to mass beauty retailers
NEW YORK — The secret weapon in the battle for the $62 billion that U.S. customers spend on beauty care and cosmetics just might be something mass retailers had all along — steep values.
While drug, discount and supermarket chains have burnished their image in beauty with illumination, upgraded products and elevated service, it turns out those could be window dressing. What today’s shoppers, especially Millennials, crave are low prices.
Research from Prosper Insights and Analytics reveals Walmart and Target Corp. have grown their numbers of beauty shoppers in the past year.
Admittedly, Sephora and Ulta Beauty have, too, but the survey suggests that Millennials have frugal shopping habits. They often splurge on experiences and save on beauty. The Amazon effect can’t be overlooked in beauty. Amazon has become the fifth-most-popular site for skin care and cosmetics and the top online destination for beauty. Price plays a big role in its swelling shopper base. And the buzz created when Amazon bought Whole Foods — which suggested prices would drop and the retailer would lose its “whole paycheck” moniker — also bears out its value proposition. That further supports the theory that beauty shoppers want keen prices.
Taking a deeper dive into the research, while beauty specialists such as Sephora and Ulta Beauty have made inroads, Walmart and Target actually rank as the No. 1 destinations for skin care and cosmetics.
Price is selected as the strongest motivator directing shoppers to those discount doors. Drug stores are popular, too, but tend to skew older — a fact that chains such as CVS Pharmacy and Walgreens are addressing with more hip selections.
“Neither Sephora nor Ulta feature in the top five retailers named by those asked where they shop most often for skin care and cosmetics, perhaps suggesting that they are a secondary destination for some consumers,” writes Deborah Weinswig, managing director of Fung Group, in a report on channel shifts in U.S. beauty retailing.
Weinswig makes it clear shoppers are not only bargain hunters. In reality, beauty shopping has become polarized, with growth at the low end or specialized beauty with enhanced service.
“A key takeaway for those retailers selling beauty products is a concept that is applicable across categories: Either specialize convincingly or focus on low prices,” states Weinswig. The middle ground is being served by Amazon, she concludes.
However, something interesting is happening. Even the experiential and high-service-level specialty stores are reaching into lower price points.
Sephora is adding online sensation ColourPop to its mix this November. It is big news because the brand had only been digital, but also because prices are on par with drug stores. So ColourPop will be under the same roof as pricier options such as La Mer where entry prices are $70 and some items retail for $785 and up. Sephora executives say ColourPop is one of the most requested lines.
And as Ulta Beauty plans its first Manhattan store and adds luster to its roster with upmarket brands such as MAC, Bumble and bumble hair care and Clinique Fit, the powerhouse also beefed up value with e.l.f. Beauty in 200 doors. Wet n wild also got a foot in the door at Ulta Beauty with its limited-edition Unicorn Glow priced from $2.99 to $5.99.
Department stores, which have lost tremendous market share in cosmetics, are shaking things up, too. Bloomingdale’s just unwrapped a new look slated for five markets called Glowhaus. The decidedly Millennial-charged assortment in the beauty outpost includes lines such as Winky Lux and Lime Crime that sport price points under $10 — making them competitive with drug and discount stores.
Macy’s had already embarked on a program to add lower-price beauty in its Impulse Beauty shops within a shop. Mass market darling NYX is sold in some of the Impulse Beauty installations. Not to be left out, Saks Fifth Avenue will dismantle its second-floor Wellery pop-up and begin recasting the space for a new beauty department.
While prestige merchants add lower-price goods, mass marketers are trying to polish their image with better in-store environments. In some ways, the two channels are meeting in the middle.
*For the full 17-page Beauty Special Report, please see the Sept. 25, 2017, issue of Chain Drug Review.