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September 3, 2009

The Lipstick Effect Spurs Beauty’s Share in Luxury

The lipstick effect still had legs in 2008, according to data released by Unity Marketing. In the Stevens, PA-based company’s new Luxury Beauty Snapshot Report 2009, six of the top 10 fastest growing luxuries purchased by affluent consumers for their personal use and enjoyment were in the beauty category, as measured by the average amount spent on their purchases.

The fastest growing product of all was face care, cleansers, toners and moisturizers, which posted growth of 34% in the share of affluent consumer’s average spending from 2007 to 2008.Other winning beauty-related categories in the personal luxury market included personal care appliances (such as shavers, dermabrasion and massagers), women’s cosmetics and makeup and fragrances/perfumes/ cologne. To see how these items fared against other luxury goods, such as handbags, watches and attire, see the chart at left.

Luxury losers included luggage, women’s pins/brooches and women’s faux or man-made stone jewelry as well as men’s outerwear and teen clothing, according to the company.

The report includes facts and figures taken from Unity Marketing’s Luxury Report 2009:The Ultimate Guide to the Luxury Consumer Market, which is based upon quarterly surveys among 1,000-1,200 affluent consumers (incomes $100,000 and above) conducted throughout 2007 and 2008. Inside the report are details on demographic segments of affluent consumers who are increasing their spending and those who are cutting back, which retailers are hot destinations for beauty shopping and which brands resonate most strongly with affluent consumers in the ultra-affluent segment.

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Wow Customers and Bring Them Back—At Retail

Is your brand in a retail environment that wows consumers and brings them back for more? More than 50% of all shoppers have experienced truly great “wow” shopping experiences, according to “Discovering Wow—A Study of Great Retail Shopping Experiences in North America,” a new study examining the loyalty dynamics of outstandingly positive shopping interactions.

But the study—released by the Jay H. Baker Retail Initiative at the Wharton School, the Verde Group and the Retail Council of Canada—establishes that not all great experiences deliver impact for retailers in terms of shopper loyalty and intent to return. In fact, of the 26 “great shopping experiences” assessed in the study, fewer than half measurably improved loyalty.

The study found that 52% have enjoyed a “wow” shopping experience, and 35% of all shoppers had encountered great shopping within the past six months.

According to the research, on average, more than 10 distinct elements are required to create a single great shopping experience for a customer. Still, not all of these “great shopping” elements drive loyalty.

The study determined that there are five categories of great shopping experiences:

Engagement—being polite, genuinely caring and interested in helping, acknowledging and listening;

Executional Excellence—patiently explaining and advising, checking stock, helping find products, having product knowledge, providing unexpected product quality;

Brand Experience—exciting store design/atmosphere, consistently great product quality, making customers feel they’re special and that they always get a deal;

Expediting—being sensitive to customers’ time and long check-out lines, being proactive in helping speed up the process; and

Problem Recovery—helping resolve and compensate for problems, upgrading quality and ensuring complete satisfaction.

Customers who have enjoyed a “wow” experience are said to be 75% more loyal to a given store than customers who have not enjoyed a similar shopping event. However, only “brand experience” and “engagement” elements measurably build shopper loyalty, according to the study.

“The research makes clear that ‘wow’ shopping is a complicated phenomenon,” said Stephen J. Hoch, director of the Baker Retail Initiative at Wharton. “Retailers that want to deliver great shopping experiences that build loyalty must understand their customers deeply. But the payoff of that understanding can be very large.”

“The good news for retailers is that consistent ‘greatness’ is possible, and can have a significant impact on the loyalty bottom line,” said Paula Courtney, president of the Verde Group. “Our research shows that retailers are excelling at delivering on ‘engagement’ elements. Their biggest challenge is that they deliver significantly fewer ‘brand experience’ elements than elements from the other four categories.”

“Discovering Wow—A Study of Great Retail Shopping Experiences in North America” is the sixth in a series of Wharton/Verde retail experience studies.

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Pacific Has Largest Dollar Share of Prestige Beauty Market

According to NPD Group’s Market View Current Conditions Report, one in five dollars that are spent in the prestige beauty market come from either the Pacific or South Atlantic regions of the U.S. The Pacific region has the largest dollar share at 22%. A total of 80% of total prestige beauty sales came from five regions in the U.S. (see chart below).

The Market View Current Conditions report is based on information gathered from participating retailers on a weekly basis. Market level tracking provides NPD’s clients with a monthly view of this data, aggregated at the regional level as well as the additional capability of viewing other geographies.

“This store level data gives our clients the ability to refine their sell-in strategies, discover regional opportunities, and understand how distribution and sales rates impact market share.Sharpening your view of the marketplace allows for an increased competitive edge and stronger margins—crucial factors particularly in today’s precarious marketplace,” said Diane Nicholson, president, beauty, The NPD Group, Inc. “With more granular sales data, manufacturers and their retail partners can better understand their consumers and develop, monitor and improve marketing and sales efficiencies.”

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