Shopping for beauty items isn’t like it used to be, and you have specialty retailers dedicated solely to beauty to thank.
The shift to beauty retail has been happening for three decades since Sephora and Ulta Beauty first emerged in the 1990s and disrupted the department store dynamic. But over time, the influence of specialty retail has seeped into other business spheres, such as e-commerce and mass retail. A key driver for this development is the chicken-and-egg dynamic of where and how customers shop and how specialty retail has influenced and responded to it.
Take, for example, Lumene, a Nordic mass skincare brand that sells through CVS and Target. Johanna Paavilainen, general manager of North America for Lumene, said she is tasked with expanding the brand’s distribution beyond the aforementioned stores to new specialty retailers, to align the North American market with Lumene’s massive international positioning and ” be where the customer is. She targets specialty online retailers, while she also considers one or two physical retailers.
Being available where the customer is has become a key talking point within the beauty industry, on par with the phrase “surprise and delight” and building communities. These terms have a tendency to be used to the point of becoming cliché, and people stop questioning what they really mean, let alone how they work. In the case of being where the customer is, the increased fragmentation of product assortments based on use cases, clean positioning and diversity, for example, has required retailers to offer dedicated shelf space dedicated to this. type of products. The result is that mass beauty retailing, as we know it, is fading and having a renaissance.
Kohl’s, JCPenney, Walmart and Target have all opted for retail partnerships with specialty retailers such as Sephora, Thirteen Lune, SpaceNK and Ulta Beauty, respectively, to develop their stores within stores, or expanded terminals, in Walmart’s case. CVS opted to build its own dedicated prestige beauty specialty counters without a retail partner, launching the most recent version in August called the Skin Care Center. It’s an elevated store-to-store concept with fewer brand names and more shelf space. CVS previously launched an experiential concept called BeautyIRL, which partnered with Glamsquad in 2018 to offer express beauty services; that association is currently in 160 stores. Andrea Harrison, vice president of beauty and personal care at CVS, said BeautyIRL led to attracting a younger demographic, larger basket size and more frequent trips to stores.
Paavilainen said Lumene’s clients fall into three segments. There are people looking for affordable products, people looking for clean products, and people looking for products that shine. Clean beauty is especially responsible for the fragmentation of retail and the emphasis on specialty retail. Clean beauty retailers such as The Detox Market, Follain and Credo Beauty have sprung up to cater to the category, while Sephora, Ulta Beauty and Bluemercury have introduced clean beauty standards and special in-store merchandising programs for clean brands. Ulta Beauty even partnered with clean beauty retailer Follain in February 2020, underscoring just how niche clean beauty is.
“This is about changes in consumer buying behaviors, and Lumene needs to go where these consumers prefer to shop,” said Paavilainen. “Big box [retailers] they definitely play a role in visibility and credibility, while specialty stores and online marketplaces cater to the immediate and specific needs of consumers.”
But as the confusion between luxury, prestige and mass beauty brands grows, the question arises as to why mass retailers need the help of specialty retailers.
“These segmentation schemes between department stores and mass marketers have been so strong for so long that [a retailer like] The target could have [had] credibility problems. People don’t necessarily trust them to be makeup experts,” said Barbara Kahn, a marketing professor at the Wharton School of Business.
So far, these partnerships have proven to be successful. On his second-quarter earnings call in August, Target CEO Brian Cornell said Ulta Beauty’s in-store purchases generated “incremental traffic and sales,” and that Target was responding by trying to quickly expand the program to additional doors. Target has a goal of operating 800 locations by the end of 2022. Overall beauty product sales at Target grew in single digits year over year in the second quarter. Sephora, which has nearly 600 in-store stores at Kohl’s, will expand to another 850 locations by 2023. This partnership is generating “high single-digit sales growth,” compared to Kohl’s doors without Sephora, according to Michelle Gass. , CEO of Kohl’s, during the company’s second-quarter earnings in August. In addition, Kohl’s has acquired more than 1 million new customers since the partnership began in August 2021. They are younger, more diverse, and shop more often than the average Kohl’s customer.
Another dimension of being where the customer is literally refers to where they live. This explains the appeal of specialty retailers and their prestige brand partners to delve into the mass space. Laurie Tessier, director of prestige beauty merchandising at Walmart, explained that it’s not always convenient for many Walmart customers to access prestige brands in the physical space. Retailers like Bluemercury and Sephora have traditionally focused on urban areas with high foot traffic, as opposed to rural locations and small towns. However, most customers buy through prestige and mass. With more than 10,000 stores, 90% of Americans live within 10 miles of a Walmart store, according to the company. Walmart and SpaceNK’s partnership, called Beautyspace, began in March, initially at 250 doors.
“We were looking to provide our customers with access and convenience,” said Tessier. “What we’ve done now is create a one-stop shop for them within Walmart’s existing infrastructure.”
Beautyscape specialty caps feature a variety of prestigious brands, including Mario Badescu and Lancer, spanning body care, hair care, skin care and makeup. This differs from the usual category-based aisle demarcation. End cap reboots are likely to be more frequent than traditional beauty aisles, Tessier said, adding that prestige brands have a great opportunity to showcase holiday gift sets in this environment.
“This became more about giving brands a special place within the Walmart aisle that felt different from the rest. [rest of] the department,” Tessier said.
Convenience was also a factor for CVS with its Skin Care Centers, especially for newer beauty enthusiasts. Skin Care Center is more about experience and curation than BeautyIRL, which was built on creating a more enjoyable beauty shopping experience through independent brands and services. There are fewer brands and products on the shelves, and each center has an esthetician to help shoppers analyze their skin with a Skinscope diagnostic tool.
“Every customer experience influences their expectations,” said Harrison. “Customers are now looking for certain brands and experiences, and they are looking for a [higher] service level. Since the retailers around us offer those things, we have to be mindful of offering an environment where someone wants to shop.”
Lumene is not part of the newer CVS Skin Care Centers, which are only in three stores nationwide, but it is part of the CVS Healthy Skin Care concept. Healthy Skin Care units highlight the best for you products at more than 2,000 CVS stores nationwide, and Lumene is in most of them. He said Lumene has doubled its sales per store in the last two years due to its better positioning on CVS shelves. Sitting next to similarly priced, prestigious household names like La Roche-Posay and Dermalogica helps draw more attention to the shelf. More better looking shelf space also helps Lumene stand out and communicate more.
“This has been helpful and matches what [am trying to do] with the repositioning of the brand away from being a pure pharmacy brand. What CVS started doing is wonderful [because] recognize the same [specialty] need for brands,” Paavilainen said.
The success of the CVS Skin Care Center effort is based on customer feedback and increased brand sales. Where and when it will expand is yet to be determined, but even a small test can inform the advancement of CVS’s overall beauty strategy, Harrison said. As fragmentation in beauty categories continues, mass brands will sideline specialty retail, further removing the single focus of mass retail as it has been. For example, Harrison said there is also a greater opportunity for assortments for melanized skin. Diversity and inclusion is poised to be another rich area for specialty retail, with various retailers exploring how to address the needs of these customers. JCPenney notably partnered with Thirteen Lune, an e-retailer focused on Black and Brown-owned brands. Ulta Beauty, Sephora, Credo and Bluemercury signed the 15 Percent Pledge and featured BIPOC voices and beauty perspectives in various campaigns.
“People, especially the younger generation, are really demanding that brands talk to DE&I,” Kahn said. “That is an important trend in beauty. And we will see more and more of that in retail.”
Source: news.google.com